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[1993] HCA 45
High Court of Australia
1976-10-01
Gaudron JJ, Rowland J, Brennan J
Original judgment source is linked above.
High Court of Australia Brennan, Deane, Dawson, Toohey and Gaudron JJ. Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45
[*] (2) Set aside the orders of the Full Court of the Supreme Court of Western Australia and in lieu thereof order that:
A. The orders of Rowland J. be varied to read as follows:
The land referred to in the Statement of Claim being all Perth Town Lots L5 and L6 and being Lot 15 and part of Lot 14 on Plan 44 and being the whole of the land comprised in Certificate of Title 425 Folio 185A ("the land") be sold.
Either party have liberty on 48 hours prior notice to apply to the Supreme Court of Western Australia for further directions as it thinks fit for the purpose of effecting the sale, including directions -
(a) appointing the party or person who is to have the conduct of the sale;
(d) requiring payment of the purchase money into court or to trustees or other persons;
(e) for settling the particulars and conditions of sale;
(g) fixing the remuneration to be allowed to any auctioneer, real estate agent, or other person;
(h) fixing an amount which a party which buys the land may set off against the purchase price (other than the deposit) from its share of the proceeds of the sale.
Each party have liberty to bid at the auction, or to offer to purchase at any other form of sale.
The net proceeds of sale after payment of what shall be due to any encumbrancer or encumbrancers according to their priorities and of all other proper costs charges and expenses of the sale, be paid into court to the credit of this action to abide further order.
The defendant pay the plaintiff's costs of the action to be taxed. For the purposes of taxation the value of the subject matter be fixed at $1,000,000 and the plaintiff have a certificate for second counsel.
B. Subject to par. A of this order, the appeal to the Full Court of the Supreme Court of Western Australia be dismissed with costs and that, for the purpose of taxation of costs, the value of the subject matter be fixed at $1,000,000 and a certificate for second counsel be issued.
The circumstances out of which this appeal arises are stated in other judgments. The result of the appeal turns on the operation and effect of cl. 4(b) of a deed dated 1 October 1976 between the respondent ("the Club") and a group of companies ("the Nullagine group") of which the appellant ("Nullagine") was one, governing the terms on which the Club and the Nullagine group should occupy premises at 18 The Esplanade, Perth ("the Property"). This deed ("the occupation deed") was executed in consequence of a sale agreement made between the Club and Nullagine on the same day. By the sale agreement, the Club sold and Nullagine purchased one undivided half share in the Property together with certain other assets for a price of $751,600. It appears to be common ground that the Club and Nullagine each became the registered proprietor of an estate in fee simple as tenant in common of the Property.
Nullagine sought from the Supreme Court of Western Australia an order under s. 126(1) of the Property Law Act 1969 WA that the Property be sold and the proceeds of the sale be divided between the Club and Nullagine. Section 126(1) reads as follows:
Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly. The Club defended the proceedings on the ground that the making of an order under s. 126(1) was precluded by cl. 4(b) of the occupation deed. I must set out cl. 4(b) in order to divide it into parts for ease of reference: The parties hereto Mutually Covenant and Agree as follows:
[Pt 1] Neither party shall sell, transfer assign or otherwise dispose of its share or interest in the Land and the fixed improvements thereon unless as a condition precedent thereto it first offers its share and interest in the Land to the other of them at such price as may be mutually agreed
[Pt 2] and in default of agreement at a price equal to Fifty per cent of the value of the Land at that date such value shall be determined by arbitration under the provisions of the Arbitration Act 1895 Provided That the arbitrators shall be three members of the Australian Institute of Valuers nominated by the President for the time being of such Institute and upon such terms as may be mutually agreed and in default of agreement within 28 days of the determination of the purchase price then the purchase price shall be paid by a deposit of Ten per cent of the purchase price within 28 days of such determination and the balance shall be paid 120 days after such determination against delivery of possession and a registrable transfer of the interest in the Land to the transferee.
[Pt 3] If the offer to sell is not accepted within 28 days of the determination of the purchase price as aforesaid then the party desiring to sell or transfer its interest in the Land shall be at liberty within twelve months from the original offer to sell to the other party [to sell, transfer assign or otherwise dispose of] [1] its interest in the Land to any other person at such price and upon such terms as it shall see fit without making a further offer to the other party pursuant to the terms of this clause
[Pt 4] Provided However no party shall sell, transfer assign or otherwise dispose of its interest in the Land unless its proposed successor in title enters into a deed of covenant with the other party for the time being to be bound by and comply with the terms and conditions herein contained as amended from time to time and subject thereto such successor shall be entitled to all the benefits but subject to all the duties and obligations created and imposed by this deed in substitution for his or its predecessor
[Pt 5] Provided Further neither party shall sell or dispose of its interest in the Land for a period of three years from the first day of October One thousand nine hundred and seventy six.
The first question is whether the first four parts of cl. 4(b) are effective after the expiry of the ten-year period during which the occupation deed provides for Nullagine and the Club to occupy separate parts of the Property. Obviously Pt 5 of cl. 4(b) is not. The validity of Pt 5 may be questioned but, even if it be valid, it has expired. It is unnecessary to refer to it further. The terms of Pts 1-4 are such that those parts could have effect for so long as the Property is held by the Club and Nullagine or their respective successors in title as tenants in common. It is clear that other covenants in the occupation deed are intended to operate at least for so long as the Club and Nullagine remain tenants in common of the Property. All of the succeeding sub-clauses of cl. 4 (that is, sub-clauses (c), (d), (e), (f), (g), (h) and (i)) and cl. 5 are covenants which are intended to have effect so long as the tenancy in common remains. Indeed, the purpose of cl. 4(b) itself seems to be the preservation of the tenancy in common unless it is terminated by one co-tenant buying out the other. The purpose of the occupation deed, stated in recital (e), is to evidence "the terms and conditions upon which [the parties] shall mutually use and occupy the Land and the fixed improvements thereon upon Nullagine entering into possession of the Land and the fixed improvements thereon pursuant to the terms of the said agreement for sale". The period during which the occupation deed remains in effect is thus declared to be the period during which the Club and Nullagine will "use and occupy the Land", that is to say, the period during which they remain as tenants in common. That period is to be contrasted with the period of ten years prescribed by cl. 1 as the period of exclusive occupancy of different parts of the building by the Club and by the Nullagine group. In my opinion, cl. 4(b) is intended to have effect for so long as the Club and Nullagine remain as tenants in common of the Property and, having regard to Pt 4, it is intended to have effect thereafter as a covenant between either the Club or Nullagine and any successors in title of the other of them, so long as the Property should be held by tenants in common. The temporal limitation affecting the occupancy provisions in cl. 1 of the deed does not place a temporal limitation on the provisions in cl. 4(b) relating to disposition of title. 1. The words in brackets are supplied: see the prohibition in Pt 1.
That being so, it is necessary to consider the operation of the covenant in the first part of cl. 4(b). It will assist analysis to identify the "share or interest in the Land" to which the Club and Nullagine are respectively entitled. The share or interest which a tenant in common has in land is an "undivided" share, that is to say, "a distinct share in property which has not yet been divided among the co-tenants" [2] . A division of the property is repugnant to the nature of a tenancy in common [3] , for it is an essential characteristic of a tenancy in common that each of the tenants has the right to occupy the whole of the property in common with the others. Like joint tenants, tenants in common have a unity of possession; unlike joint tenants, they need not have a unity of interest, nor a unity of title, nor need there be a unity in the time when the interests of the co-owners vest. Each tenant in common has a separate and individual title to the property, limited according to the estate or term granted to or acquired by the tenant [4] . Thus one tenant in common may be seised of an estate in fee simple, another seised of an estate for life, while a third may be a tenant for a term of years, each of their interests being separately acquired at different times. There is no right of survivorship among tenants in common [5] . And thus, at common law, a tenant in common who wished to sell his interest in land was constrained to sell subject to the right of any co-tenant to remain in possession of the whole of the land. The vendor could neither seek a division of the land among the co-tenants nor compel the other co-tenants to join in a sale of the land. In 1539 and in 1540, the first statutes [6] were enacted to authorize the issuing of writs of partition. These statutes were the forerunners of s. 126(1). Presently it will be necessary to consider the effect of that provision, but for the moment it is sufficient to note that the right to seek partition is a right conferred by statute on a tenant in common: it is not a common law incident of a tenancy in common [7] .
The first part of cl. 4(b) restrains each of the Club and Nullagine from disposing of its share or interest in the Property without first offering that share or interest to the other. This part of the clause does not, of course, say anything about a sale of the Property for neither of the tenants in common can sell the entirety: each can sell only its own separate share. The shares of tenants in common are not carved out of, or engrafted onto, some notional tenure of an estate in fee simple in the land amenable to sale by, or on the application of, one tenant. Nor are tenants in common equitable owners of land capable of compelling a sale of the legal title by a bare legal owner. The rights of ownership are exhausted by the shares of two tenants in common, each seised of and holding on his own behalf an estate in fee simple in a one half share in a parcel of land [8] . If tenants in common concur in a sale of a parcel of land to a third party, each must convey his own share to the purchaser who takes a single estate in fee simple in the whole of the land [9] . Or one tenant in common may take a conveyance of the shares of the other co-tenants and acquire sole ownership of the land. But, if tenants in common do not concur in one or other of these courses, the only way in which one of them can secure a sale of the land is by applying for an order for sale under statute - in Western Australia under s. 126(1).
A tenant in common who is entitled to a half share or upwards and who applies to the Court for relief under a statute in the form of s. 126(1) has a right to either an order for partition or an order for sale [10] . The Court's discretion to order partition rather than sale is confined by the statutory direction that sale is the remedy to be afforded to a co-tenant entitled to a half share or upwards "unless [the Court] sees good reason to the contrary" [11] . There may be a wider discretion to deny a remedy reposed in courts exercising a jurisdiction under statutes which permit the appointment of trustees for the sale of land held by co-tenants [12] but, under the Property Law Act, Nullagine has a statutory right to a remedy unless the exercise of that right can be and has been bargained away by Pt 1 of cl. 4(b). That remedy is an order for sale of the Property and a division of the proceeds unless the Court sees good reason why the remedy should be partition. Here, the Property is unsuited to partition.
The right to apply for an order under s. 126(1) is a statutory right. A statutory right is capable of being bargained away provided the right is conferred solely for the benefit of the party abandoning the right and the bargain is otherwise consistent with the policy of the statute. [13] . Halsbury's Laws of England [14] asserts that the "right to partition may be lost by agreement between the parties for disposal of the property in a different manner". Peck v. Cardwell [15] ; Dale v. Hamilton [16] ; Redwood v. Redwood [17] and Dimsdale v. Robertson [18] are cited as supporting authorities. Nullagine challenges the proposition in Halsbury and seeks to restrict the application of the principle to be derived from the cases cited to land which is partnership property. Although the supporting cases with the exception of Peck v. Cardwell related to land which was partnership property, those cases do not depend on partnership law. Thus in Peck v. Cardwell the agreement which the Court held to preclude the making of a partition order [19] was a joint venture agreement for the development, subdivision and sale of land [20] under which each tenant in common during the currency of the scheme retained his respective share beneficially subject to a right of pre-emption granted to the other co-tenants. However, the cases cited in support of Halsbury 's proposition all arose from agreements which provided for a sale of the land, not from agreements governing the sale of a share in the land. The distinction, as we shall see, is of importance. Agreements for the sale of land held by tenants in common are manifestly inconsistent with the exercise of a right to apply for an order for partition or for a sale on terms other than those contained in the parties' agreement: partition or sale under court order would preclude performance of an antecedent agreement by all tenants in common for the sale of the entirety. Here, there is no agreement governing the sale of the Property. To the contrary, the provisions of cl. 4(b) are calculated to protect a party wishing to retain its share in the Property. Therefore, the questions are whether Nullagine and the Club impliedly covenanted with each other not to exercise the right to apply for partition or sale of the Property and, if they did so covenant, whether the covenant is valid.
Part 1 of cl. 4(b) expressly prohibits either party from disposing of "its share or interest" in the Property unless it has first offered to sell that share or interest to the other on the terms contained in cl. 4(b). The mutual right of pre-emption conferred by cl. 4(b) would necessarily imply, even in the absence of the express prohibition, a negative covenant not to dispose of the covenantor's share or interest without giving the covenantee an opportunity to refuse to buy: Manchester Ship Canal Co. v. Manchester Racecourse Co. [21] . The position is stated clearly by Street J. in Mackay v. Wilson [22] :
[A]n agreement to give "the first refusal" or "a right of pre-emption" confers no immediate right upon the prospective purchaser. It imposes a negative obligation on the possible vendor requiring him to refrain from selling the land to any other person without giving to the holder of the right of first refusal the opportunity of purchasing in preference to any other buyer. An exercise by Nullagine of the statutory right to apply for and to obtain an order for sale of the Property would not only prevent Nullagine from performing its promise to allow the Club a right of pre-emption - and be inconsistent with Nullagine's covenant on that account [23] - it would require Nullagine to breach the express prohibition against transferring its share. That is because completion of a sale of the Property would require a conveyance of Nullagine's share or interest to the purchaser [24] . I would reject Nullagine's argument that an agreement conferring on one tenant in common a right of pre-emption on the sale of a co-tenant's share does not impliedly preclude an exercise of a right to apply for and thus to obtain an order for sale of the land of which the co-tenants are seised [25] . If that argument were correct, one co-tenant, having promised the other co-tenant (in this case, the party from whom the former purchased its half share) that it would not dispose of its share without giving the other an opportunity to become the sole owner of the land, could at any time have the land sold on the open market. The agreement to allow the other party a right of pre-emption would be worthless. 1. [1901] 2 Ch. 37, at p. 51; and see Woodroffe v. Box (1954), 92 C.L.R. 245, at pp. 256-258. 2. (1947) 47 S.R. (N.S.W.) 315, at p. 325; see also Woodroffe v. Box (1954), 92 C.L.R., at p. 254; Pritchard v. Briggs , [1980] Ch. 338, at pp. 389-390. 3. O'Keefe v. Williams (1910), 11 C.L.R. 171, at p. 191, per Griffith C.J.; Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. (1979), 144 C.L.R. 596, at p. 607, per Mason J. An apposite example of the principle is Tramontano v. Catalano (1965), 260 N.Y.S. 2d 269 where a right of pre-emption was held to defeat an action for partition and sale "because partition would result in a sale to a third party and would thus, by indirection, emasculate the protection against sales to outsiders which the agreement was intended to provide". 4. Decrees in equity for partition (Halsbury's Laws of England, 1st ed. (1912), vol. 21, par. 1566n; Miller v. Warmington (1820), 1 Jac. & W. 484, at p. 493 [37 E.R. 452, at p. 456]) and orders for sale (Prideaux's Precedents in Conveyancing, op. cit., pp. 325, 326) are carried out by conveyance of the shares of the co-tenants. In the case of conveyance on sale, the shares merge in the hands of the conveyee. 5. American authority has held that partition is denied "where the agreement between the co-tenants provided, in substance, that if a co-tenant desired to sell, he must offer the property to the other co-tenants": Habeeb, "Contractual Provisions as Affecting Right to Judicial Partition", American Law Reports, vol. 37 (3d) 962, at p. 1006.
Of course, an agreement giving a right of pre-emption must be sufficiently certain in its terms to be the basis of an enforceable contract of sale, else the apparent right of pre-emption will fail [26] . In this case, the mutual covenants to allow the co-tenant a right of pre-emption are sufficiently certain in their terms to be effective, for Pts 2 supplies the standard by reference to which the price is to be fixed and the mechanism for fixing it [27] as well as the terms of sale. The price at which the selling co-tenant is to offer its share to the other co-tenant is, in default of agreement, to be fixed at "the value of the Land" determined by arbitration. In argument there seemed to be an assumption that the arbitrated price would be less than market value but that assumption is without textual support [28] .
It follows that Pts 1 and 2 of cl. 4(b), considered by themselves, are valid. Further, if Pt 3, severed from Pt 4, is taken together with Pts 1 and 2, no invalidity appears. Part 3, taken by itself and in the circumstances to which it applies, simply confers on the offeror party a right to sell its share on the open market on whatever terms it can get. If Pts 1, 2 and 3 are severed from Pts 4, they create a valid right of pre-emption in the offeree, imposing no restraint on alienation of the offeror's share once the offeree refuses the offer [29] . Once an offer to sell the covenantor's share is made in conformity with Pts 1 but is not accepted, the covenant not to sell that share to a third party expires. Nor would Pts 1, 2 and 3 purport to deny to the offeror its statutory right under s. 126(1) to apply for an order by which the shares of both parties would be sold and the profits divided between them, provided the offeree has not accepted the offer within the time limited by cl. 4(b). But Pt 4 makes it clear that the parties intended that the offeror should not be at liberty to bring the tenancy in common to an end by applying for an order for sale under s. 126(1). If it sells its share, it must sell on terms that the purchaser bargains away the statutory right to apply for an order for sale of the Property under s. 126(1) and undertakes to obtain the same covenant from any successive purchasers. The purpose and effect of Pts 4 is to ensure that a tenant in common who wishes to retain its share in the Property cannot be forced to dispose of that share by an order for sale of the Property under s. 126(1). If a co-tenant purports to bargain away its right to dispose of its share on sale under s. 126(1), is the bargain void either because it is an invalid restraint on alienation or because it is contrary to the policy of s. 126(1)?
In this country a court may hold invalid restraints on alienation imposed not only by conditions annexed to a gift or grant of an estate in land but also by covenants and agreements [30] . But the grounds on which a condition subsequent to the gift or grant of an estate of freehold may be held invalid are not necessarily the same as the grounds on which invalidity strikes a covenant or agreement in an instrument which does not itself give or grant the estate the alienation of which is restrained. In the former case, as Dixon C.J. said in Hall v. Busst [31] , "[t]he invalidity may be put on the ground of repugnancy to the grant or upon public policy or for that matter it may conceivably be attributed to an indirect effect of Quia Emptores". In the latter case, the only basis for holding the covenant or agreement invalid is public policy. How does public policy view a covenant by a tenant in common interested to the extent of one-half in a parcel of land not to apply for an order for sale?
In Hall v. Busst [32] , Dixon C.J. stated the ground for denying the validity of a contractual restriction upon alienation to be "a principle of the law that private property should be fully alienable". A covenant not to apply for an order for sale under s. 126(1) does not affect the common law capacity of a tenant in common to alienate his share, but it precludes a tenant in common from realizing his share by sale of the land in which he holds the share. Unless tenants in common agree to terminate the co-tenancy (either by purchase of shares, sale of the land or partition) such a covenant would maintain the land as the subject of a continuing co-tenancy. But does such a covenant offend public policy?
The purpose of the first Partition Act in 1539 [33] and of every subsequent Partition Act was the provision of a remedy for one co-tenant who, in the event of a dispute with another co-tenant, was without an adequate remedy to protect his share or interest in the land. The remedy of sale was first provided for by The Partition Act 1868 UK [34] . Both remedies terminate the co-ownership of land. The consequence of an order for either partition or sale is the termination of the existing co-ownership and the passing of full title to an owner who, without requiring the concurrence of a co-owner, can occupy and use the land as he sees fit or determine its further disposition. Sometimes this is effected by partition of the parcel of land, sometimes by purchase by continuing co-owners of the share or interest of a retiring co-owner [35] , sometimes by sale of the entirety either to a third party or to one or more of the co-owners. However the consequence is effected, the remedies afforded by the Partition Acts to a co-owner of land terminate the co-ownership and break any deadlock affecting its occupation and use or its disposition. That being the effect of the modern Partition Acts, their purpose can be stated. The purpose of such Acts is to provide a statutory mechanism for terminating the co-ownership of land when the co-owners fail themselves to agree on the manner in which the co-ownership shall be terminated. By affording the remedies provided by the Partition Acts, the legislature has facilitated the alienability of the land itself and alienability of land is a policy which the law supports except where inalienability is required for the protection of a disadvantaged class [36] . Co-owners having the capacity to deal with their respective shares or interests are at liberty to agree the terms on which the land will be disposed of or the terms on which the shares or interests of one or more co-owners will be acquired by another or others or the manner in which the land in co-ownership shall be divided. When a term bargaining away the statutory right to apply for an order for partition or sale is part of an agreement which itself provides for the termination of the tenancy in common, the bargain is consistent with the policy of the Partition Acts. Thus joint venture or partnership agreements which govern the development and sale of land or otherwise provide for its disposition when the joint venture or partnership is wound up may validly exclude, expressly or impliedly, the right of a co-owner to apply for an order for partition or sale [37] . Similarly, the right to apply may be excluded by the terms of a grant of an option or right of pre-emption over the share or interest of a co-owner. But where there is no agreement between or among co-owners which provides for the termination of the co-ownership or where an agreement between or among co-owners would prevent the termination of the co-ownership, it would be contrary to the policy of the Partition Acts to deny the remedies they afford. To deny those remedies would be to leave the land in the hands of the co-owners who may be unable or unwilling to agree on its management and use and who have made no agreement for its disposition [38] . To leave the land in that situation is wholly inconsistent with the policy of facilitating alienability which, in my opinion, is one of the chief purposes of the Partition Acts.
In the United States, public policy results in a somewhat different application of the Partition Acts, namely, that the remedies of partition and sale should not be bargained away for a period longer than that fixed by the rule against perpetuities. In Roberts v. Jones [39] the agreement between the two tenants in common was relevantly indistinguishable in effect from cl. 4(b). They conferred on each other mutual rights of pre-emption and required any third party purchaser to "be willing to purchase subject to the obligations of the agreement". Ronan J., speaking for the Court, said [40] :
The agreement unduly restricts the alienation of the property for an unreasonable length of time. Accordingly, it does not come within the general rule that an agreement postponing partition for a reasonable time will bar partition, and as the operation of the agreement may result in restricting the alienation of the property for years, contingent in substance upon a sale being made with the consent of both parties, the agreement imposing such a restraint upon the alienation of an estate in fee simple for a period beyond that fixed by the rule against perpetuities is contrary to public policy and cannot be enforced. Such a rule, though supportable as an instance of a general rule against restraints on alienation, fastens on the perpetuity period as the yardstick of unreasonableness [41] . But I would place the rule on the basis that one of the purposes of the Partition Acts is to provide for the termination of co-ownership of land where the co-owners are unable to provide for it or have failed to do so. The remedies afforded by the Partition Acts are created to serve that purpose in the public interest as well as in the interests of the co-owners. On that basis, the co-owners are incapable of bargaining away their right to apply for an order for partition or sale except where the bargain is made as part of an agreement which itself provides for the termination of the co-ownership. 1. (1940) 30 N.E. 2d 392 (Mass.). 2. ibid., at pp. 393-394. 3. Following, it might be said, the approach of the Chancery judges: see In re Ridley (1879), 11 Ch. D., at pp. 648-649, per Jessel M.R.
I would therefore hold that Pt 4 of cl. 4(b) is void and that Nullagine, provided it has complied with its obligations under Pts 1 and 2, is at liberty to apply for and to obtain an order for sale under s. 126(1). Nullagine, without the restriction purportedly imposed by Pt 4 of cl. 4(b), may, if it wishes, sell its share on the open market. Part 4 is clearly severable from Pts 1 and 2. It may be severable from Pts 3 but it is immaterial whether Pt 3 falls with Pts 4 or not. Parts 3 and 4 relate to a covenantor's right to sell its share after a covenantee's failure to buy and, if Pts 3 and 4 are construed as a single covenant so that both parts fall, the covenantor's common law right to sell its share on the open market and its statutory right to apply for and to obtain an order for sale under s. 126(1) are left untrammelled.
However, Nullagine has not made an offer of its share to the Club in accordance with Pts 1 and 2 of cl. 4(b). The discussions between Nullagine and the Club about Nullagine's sale of its share failed to produce an agreement. To satisfy cl. 4(b), the price of any offer must therefore be determined by arbitration in accordance with Pts 2. If the price is so determined and Nullagine offers its share to the Club at that price and on terms agreed or on the terms contained in Pts 2 and if the offer is not accepted within the time prescribed by Pts 3, Nullagine may either sell its share on the open market without the restriction prescribed by Pts 4 or it may proceed with its application for an order for sale under s. 126(1).
I would therefore dismiss the appeal generally but I would vary the Full Court's order of 30 March 1992. In lieu of par. 3 of that order, I would substitute an order in the terms following:
(a) Declare that the plaintiff may not dispose of its share or interest in the land at 18 The Esplanade, Perth, held by the plaintiff and the defendant as tenants in common unless it first offers its share or interest to the defendant in conformity with cl. 4(b) of the Occupation Deed and the defendant within the time thereby limited does not accept the offer.
(b) The plaintiff's claim be stayed until it has made an offer in accordance with the preceding subparagraph and the defendant has failed to accept that offer within the time therein mentioned.
On 1 October 1976, the respondent, The Western Australian Club Incorporated ("the Club"), of the one part and the appellant, Nullagine Investments Pty. Ltd. ("Nullagine"), and five associated companies of Nullagine ("the associated Companies") of the other part entered into a deed of occupation ("the Deed") with respect to a parcel of land in Perth ("the Land"). The Club and Nullagine are the registered proprietors of an estate in fee simple in the Land as tenants in common. The primary question in this appeal is whether the provisions of the Deed preclude Nullagine from obtaining an order for the partition or sale of the Land from the Supreme Court of Western Australia. If, as a matter of construction, the Deed does have that effect, further questions arise about its validity in that regard. The background facts and the critical provisions of the Deed and a number of associated instruments are set out in the judgment of Toohey J. in this Court and, in somewhat more detail, in the reported judgment of Malcolm C.J. in the Supreme Court of Western Australia [42] . We refrain from unnecessary repetition of them and turn at once to consider the effect of the Deed.
The recitals to the Deed record that, at the time of its execution, the Club was "the registered proprietor of the [L]and" on which a "multi level building" had been erected. They also record that, by a contemporaneous agreement, the Club had agreed to sell and Nullagine had agreed to purchase an "undivided half share in the Land and the fixed improvements thereon". There follows recital (e) which is the most important of the recitals for present purposes. It records that the parties to the Deed have agreed to enter into it "for the purpose of evidencing the terms and conditions upon which they shall mutually use and occupy the Land and the fixed improvements thereon upon Nullagine entering into possession of the Land and the fixed improvements thereon pursuant to the terms of the said agreement for sale".
In fulfilment of recital (e), the first three clauses of the Deed deal with the respective entitlements of the parties to the use and occupation of different parts of the building erected on the Land. Clause 1 provides that, during a period of ten years "expiring on the Second day of October 1986" and subject to a qualification in relation to the use of the foyer on the ground floor, the Club and the Nullagine Group (i.e. Nullagine and the associated Companies) will each have "sole and exclusive use and occupation" of different designated areas of the building, and the Club and the Nullagine Group will have common usage of other areas and of functional improvements such as lifts and air-conditioning plant. Clauses 2 and 3 contain covenants by the Club and by the Nullagine Group respectively in relation to the manner of occupation and use. Clearly enough, cll. 2 and 3 are subsidiary to cl. 1 and were intended to operate during the stipulated period of ten years during which it was agreed that the entitlement to use and occupation of the building was to be governed by the Deed. Clause 4 contains a number of additional covenants. Among them is that contained in the provisions of cl. 4(b) which are of critical importance for the purposes of the present case.
The Deed is structured as a bipartite instrument between the Club of "the one part" and the six companies constituting the Nullagine Group of "the other part". The Deed makes clear that those six companies were parties to it both jointly and severally in that it expressly states that they are therein "separately and collectively called "The Nullagine Group" ". The prima facie effect of that is that the Club's covenants were for the joint and several benefit of the six companies of the Nullagine Group and the covenants by those six companies were both joint and several. The introductory words of the various covenants contained in cl. 4 of the Deed are: "The parties hereto Mutually Covenant and Agree as follows." In the Full Court, Malcolm C.J. expressed the view that the phrase "the parties" in that provision referred only to the Club and Nullagine. We respectfully disagree with his Honour's conclusion in that regard. The phrase, in our view, clearly encompasses both Nullagine and the five associated Companies which were all parties to the Deed. It is true that direct performance of some of the covenants in cl. 4 on the part of the Nullagine Group would necessarily be by Nullagine since that company alone was the owner of a share or interest in the Land or a party to the lease of the car park. There is, however, nothing unusual in a number of associated companies which are parties to a deed in the same interests all joining in a covenant which is intended to be directly performed by one only of them. Indeed, it would be extraordinary if it were intended that breach on the Nullagine Group side of the covenants contained in cl. 4, no matter how serious, should be a breach by Nullagine alone leaving the other five companies unexposed. In that regard, it is significant that the five associated Companies were all required to become guaranteeing parties to the contemporaneous Sale Agreement pursuant to which Nullagine acquired its interest in the Land. Moreover, cl. 4 of the Deed contains a number of specific references to "the Nullagine Group" in contrast to specific references to "Nullagine" in four places (cl. 4(a), (d)(iv), (g)(iii), and (i)) where it was intended to refer to that company alone. On the other hand, the fact that Nullagine was the only company of the Nullagine Group with a share or interest in the land means that the phrase "[n]either party" in the body of cl. 4 should be construed as a reference to the Club and Nullagine alone. In the result, cl. 4(b) comprises a covenant by the six companies of the Nullagine Group that Nullagine will not dispose of "its share or interest" without first offering it to the Club and a covenant by the Club with those six companies that it will not dispose of "its share or interest" without first offering it to Nullagine.
The learned primary judge (Rowland J.) construed cl. 4(b) as operating only during the ten-year period designated by cl. 1 of the Deed. The Full Court (Malcolm C.J., Pidgeon and Franklyn JJ.) disagreed and concluded that cl. 4(b) operated for so long as the Club and Nullagine remained tenants in common of the Land. There is dispute between the parties about whether any challenge to the Full Court's conclusion in that regard is precluded by the appellant's conduct of the application for special leave to appeal and the restriction placed upon the grant of special leave. It is, however, unnecessary for us to resolve that dispute as we consider that, for the reasons set out below, the appeal must, in any event, succeed on the first of the grounds of appeal in respect of which special leave to appeal was specifically granted. That ground, in terms, denies the correctness of the Full Court's decision that: the contractual right of pre-emption of cl. 4(b) in respect of a co-owner's half interest in land prevailed over the co-owner's right to seek a partition or sale of the whole of the land. In these circumstances, we are prepared to assume, in the respondent's favour, that the appeal to this Court is to be determined on the basis of the Full Court's conclusion that the provisions of cl. 4(b) remain operative. Even on that assumption, the plain fact remains that the primary concern of the Deed was to define the respective entitlements of the Club and the Nullagine Group to use and occupy the building during the ten-year period designated by cl. 1 of the Deed.
The Full Court also differed from Rowland J. on the nature of the occupancy of the building by the Club and the Nullagine Group both during the ten-year period and after its expiry. Rowland J. concluded that the Deed "created no more than a licence to each for the stated period of time" and that, with the expiry of that period, "each now is entitled to occupy the whole simply as co-owner". The Full Court concluded that the occupancy of each party during the ten-year period had been under a tenancy which continued, after that period, as "a tenancy at will" terminable on one month's notice pursuant to s. 72(1) of the Property Law Act 1969 WA. Such notice terminating the Club's tenancy at will could be given by Nullagine acting unilaterally. Those conclusions of the Full Court are not challenged on the appeal to this Court.
Clause 4(b) contains no reference at all either to partition of the Land or to an application to a court for an order for partition. Nor does it contain any express reference to a sale of the freehold of the Land either by the Club and Nullagine acting jointly or pursuant to an order for sale made by a court under a statutory provision such as that contained in s. 126 of the Property Law Act. In terms, cl. 4(b) is concerned only with the disposition "by" a party of " its share or interest " in the Land (emphasis added).
As a matter of both law and language, there is a clear distinction between the individual "interest or share" owned by one of two or more tenants in common of a freehold estate in land and the freehold estate itself. While the theory of our land law is that the radical title of the Crown lies between the physical land and a freehold estate in it, the ownership of the freehold estate has long been, for almost all practical purposes, the equivalent of full ownership of the land. As a result, the freehold estate is, as a matter of legal and popular language, commonly treated as the land itself [43] . On the other hand, the distinct "interest or share" of one of two or more tenants in common of a freehold estate cannot, on any approach, be equated with the land itself. Indeed, an essential feature of the "interest or share" of a tenant in common, and a condition precedent of its existence or survival, is that the tenant in common does not own the freehold estate and is unable alone to deal with "the land" [44] . It is that very distinction between the "interest or share" of a joint tenant or tenant in common and the freehold estate which underlies the enactment of the long series of partition statutes directed towards facilitating or enabling a joint tenant or tenant in common to obtain an effective order for the partition or sale of the land itself. For more than four centuries, the words of such statutes have consistently observed the distinction between the "part", "portion", "share" or "interest" of the joint tenant or the tenant in common and the "land" itself in the sense of the estate in fee in it [45] . Indeed, the common law writ of partition [46] , which underlay proceedings for partition, "operated by the judgment of a Court of Law, and delivering up possession in pursuance of it; which concluded all the parties to it" [47] . The writ itself effected partition of the freehold without any need for the parties to execute a conveyance of their share or interest in the land. A consequence of the abolition of the writ of partition and equity's acquisition of exclusive jurisdiction in partition proceedings was that orders for partition necessarily acquired an in personam character: the decree for partition itself only vested equitable rights and directed "the execution of mutual conveyances by the parties to effect a transfer of the legal estate" [48] . Nonetheless, the individual conveyances executed pursuant to such an order are properly to be seen as no more than the means adopted by equity to carry into effect its decree that the freehold itself be partitioned. And that is also the case where, in a partition suit, equity decrees sale as an alternative to partition. Where sale is decreed, the single conveyance in fee simple [49] by the tenants in common or joint tenants pursuant to a court order does not involve the sale or disposition of the individual share or interest of the individual tenant. The court order directing the sale of "the land" is an order for the sale of the fee simple in the whole of the land [50] . It follows that the conveyance in such a case extinguishes the share or interest of the individual tenant and effects the sale or disposition of the freehold itself. Indeed, there is strong support for the view that the making of the order for sale extinguishes the equitable interests of the co-tenants in the land itself even before a sale is effected [51] .
Once one takes account of the clear distinction between a sale or other disposition "by" an individual tenant in common of "its share or interest in the land" and the sale (or partition) of the Land (ie a freehold estate), it becomes reasonably plain that cl. 4(b) is simply not directed to the sale or disposition of the Land itself. What cl. 4(b) is directed to is a separate sale by one of the two tenants in common of its distinct share or interest. Indeed, that is all that the procedure required by cl. 4(b) allows in a case which falls within its terms. That means that, if the reference in cl. 4(b) to a sale or other disposition "by" one tenant in common of "its share or interest in the Land" were construed as extending to a sale or partition of the freehold, cl. 4(b) would purport to preclude completely, for so long as the tenancy in common persists, any sale or partition of the Land itself. On that construction, the clause would, unless waived or rescinded, preclude even a sale of the unrestricted freehold by joint action of the Club and Nullagine. The most that it would permit would be an offer by each of the Club and Nullagine of its "share or interest" to the other followed by a sale by each of its share or interest to a purchaser who went through the probably pointless exercise of entering into the "deed of covenant" which cl. 4(b) requires. It is true that, if both the Club and Nullagine wished jointly to sell the Land itself, the requirements of cl. 4(b) could be rescinded by a new agreement or waived. Nonetheless, the ordinary principles of construction of instruments scarcely favour a loose and expansive construction of the words of a clause restricting the ordinary rights of a tenant in common on the basis that the somewhat bizarre consequences of that construction could be avoided by a waiver or rescission of the clause. In that regard, it is relevant to note that, in the event of a falling out between Nullagine and one of its five associated Companies, it would, on such a construction of cl. 4(b), be arguable that the associated company, being a party to the Deed and severally entitled to a performance by the Club of its covenants, could insist upon compliance by the Club with cl. 4(b) and thereby preclude its requirements being waived or rescinded by Nullagine and the Club even long after the expiry of the period of ten years during which it was intended that the associated company would have an interest in the occupancy of the premises.
It follows that, in our view, the provisions of cl. 4(b) are not, as a matter of construction, applicable to a sale, transfer, assignment or other disposition of the Land itself, in the sense of the complete freehold estate in the Land, whether by joint action of the Club and Nullagine or by a court order "in an action for partition" [1] . As a matter of both language and context, the actual words of cl. 4(b) apply only to a sale, transfer, assignment or other disposition "by" one of the two tenants in common of "its" distinct "share or interest in the Land". That being so, the express words of cl. 4(b) do not apply to preclude application by Nullagine to the Supreme Court of Western Australia for an order for the partition or sale of the Land in the present case.
The conclusion that the actual words of cl. 4(b) of the Deed do not apply to an application by Nullagine or the Club under s. 126 of the Property Law Act for an order for the partition or sale of the Land does not, however, suffice to dispose of the appeal. The question arises whether the Deed imposes some implied restriction or obligation on the parties in relation to such an application. The basis of any implication of such a restriction or obligation would be the "general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract" [2] . It can be argued that the protection which cl. 4(b) was intended to provide to the Club or the Nullagine Group in the event that either Nullagine or the Club wished to dispose of its share or interest would be seriously undermined if Nullagine and the Club each remained free to apply at any time to a court for an order for sale. That argument derives support from the fact that cl. 4(b) apparently contemplates that a purchaser of the share or interest of one of the tenants in common would step into the shoes of either the Club or the Nullagine Group under the Deed since cl. 4(b) expressly provides that, after execution of the "deed of covenant" which it required, the purchaser "shall be entitled to all the benefits but subject to all the duties and obligations created and imposed by this deed in substitution for his or its predecessor". On the other hand, it is at least arguable that it is impossible to discern in cl. 4(b) any underlying purpose beyond that of preventing one of the two tenants in common from selling its share or interest to a third party without first giving to the other party the opportunity of purchasing, at a fair market valuation, the first party's share or interest in the Land. If cl. 4(b) were intended to achieve no more than that, there would be no need for the implication of a term precluding or restricting an application for an order for partition or sale since the other party, being "interested to the extent of a half share", would almost certainly be able to ensure that an order for sale, and not partition, was made with the result that it would have the opportunity to purchase at market value [3] . Ultimately, however, it is unnecessary to determine whether some term should be implied in the provisions of the Deed which would have the effect of restricting an application to the Supreme Court by Nullagine for an order for sale of the Land. The reason why that is so is that the operation of any such implied term would, in our view, plainly be restricted to the period of ten years during which the Deed was intended to govern the use and occupation by the Club and the Nullagine Group of the building erected on the Land. As recital (e) makes clear, that was the primary purpose of the Deed. As indicated by the requirement in cl. 4(b) that a purchaser of the Club's or Nullagine's share or interest enter "into a deed of covenant to be bound by and comply with the terms and conditions" therein, cl. 4(b) itself was largely concerned with protecting the position of the parties to the Deed during the agreed period of operation of its main provisions. In that context, it is not, in our view, open to imply a term which would preclude or restrict an application to the Supreme Court for an order for the sale of the Land after the expiry of the period during which it had been agreed that the terms of the Deed governing the use and occupation of the building would operate.
It should be mentioned that, in the Full Court, Malcolm C.J. was of the view that, while the Club and Nullagine remained as tenants in common of the Land, the Club's tenancy under the associated lease of the Car Park could not be terminated by Nullagine acting alone. That lease was for a period of ten years corresponding with the occupation period under the Deed. The ten-year period having expired, the Club had continued in occupation under "a quarterly tenancy determinable at the expiration of one quarter's notice by either party to the other at any time". The Chief Justice considered that the necessary quarter's notice could only be given by both the Club and Nullagine as lessors or, presumably, by the Club alone as lessee. If that be so, it would seem to us to provide an additional consideration for refusing to read into the Deed an implied term precluding Nullagine, for so long as the tenancy in common continued, from applying for a court order for sale or partition. We have, however, not placed any reliance upon that consideration for the reason that, in the absence of full argument on the question, we have refrained from reaching a conclusion about whether Nullagine could alone give the necessary notice to terminate the holding over [4] .
It follows that Rowland J. was, in our view, correct in concluding that the provisions of cl. 4(b) of the Deed did not preclude the making of an order for the sale of the Land. It is unnecessary that we consider whether the provisions of cl. 4(b) would, if they had the effect for which the Club contends, be invalid on public policy grounds for the reason that they would be contrary to the policy to be discerned in partition statutes such as s. 126 of the Property Law Act or for the reason that they would purport to impose an unreasonable and unjustifiable restraint on alienation. It was not argued on behalf of the respondent Club that, if neither cl. 4(b) nor some implied term constituted a contractual preclusion of an application for an order for sale, the order for sale made by Rowland J. should nonetheless not be restored.
We would allow the appeal, set aside the judgment and orders of the Full Court of the Supreme Court and restore the judgment and orders of Rowland J.
This is an appeal from the judgment of the Full Court of the Supreme Court of Western Australia delivered on 20 February 1992 [5] allowing an appeal from the judgment of Rowland J. in favour of the present appellant. The grant of special leave to appeal to this Court was restricted; the significance of this will appear later in these reasons. The appeal raises, inter alia, questions as to the operation of s. 126 of the Property Law Act 1969 WA ("the Act") which empowers the Supreme Court of Western Australia to make orders for the sale of property held in co-ownership rather than for the partition of the property.
The dispute between the parties which led to the present litigation concerns land at 18 The Esplanade, Perth on which stands a ten-storey building and a multi-storey car park. The land was formerly owned by the respondent ("the Club") which is an association incorporated under the provisions of the Associations Incorporation Act 1895 WA [6] . The present building and car park were completed in about 1972, from which time the Club has operated from those premises. The building incorporated a hotel and a restaurant. In 1976 the Club was constrained by financial circumstances and its preferred option was to find a buyer for a half-interest in the land who would conduct the hotel and restaurant business. On 1 October 1976 the Club entered into three agreements with the appellant ("Nullagine") in relation to the land: The first was an agreement for the sale by the Club to Nullagine of an undivided half-share in the land. The second was an agreement whereby the parties, as owners of the land, leased the car park to the Club for a term expiring on 2 October 1986. Clause 4(c) of the lease reads:
That if the Lessee shall upon the expiration of the said term or any extended term hold over the said premises a tenancy from year to year shall not thereby be presumed but the tenancy shall in such event be and continue a quarterly tenancy at the rental payable under the last extension thereof and otherwise upon the same terms as are hereinbefore set forth insofar as they are applicable and shall be determinable at the expiration of one quarter's notice by either party to the other at any time. The third was an occupation deed made between the Club of the one part and six companies (of which Nullagine was one), referred to as "the Nullagine Group", of the other part. 1. That Act has been repealed but Sch. 2 of the Associations Incorporation Act 1987 WA provides that associations incorporated under the earlier legislation at the time it was repealed are deemed to have been incorporated under the 1987 Act.
The occupation deed provided that for a term commencing on 3 October 1976 and expiring on 2 October 1986 the Club would have "sole and exclusive use and occupation" of the eighth, ninth and a portion of the tenth floors of the building together with a right of access to the foyer on the ground floor in order to make use of the lift facilities. For the same term the Nullagine Group would have "sole and exclusive use and occupation of the ground floor and floors one to seven inclusive of the Residential Building".
Clause 4(b) of the occupation deed is critical to the appeal; it is therefore necessary to reproduce it verbatim:
Neither party shall sell, transfer assign or otherwise dispose of its share or interest in the Land and the fixed improvements thereon unless as a condition precedent thereto it first offers its share and interest in the Land to the other of them at such price as may be mutually agreed and in default of agreement at a price equal to Fifty per cent of the value of the Land at that date such value shall be determined by arbitration under the provisions of the Arbitration Act 1895 Provided That the arbitrators shall be three members of the Australian Institute of Valuers nominated by the President for the time being of such Institute and upon such terms as may be mutually agreed and in default of agreement within 28 days of the determination of the purchase price then the purchase price shall be paid by a deposit of Ten per cent of the purchase price within 28 days of such determination and the balance shall be paid 120 days after such determination against delivery of possession and a registrable transfer of the interest in the Land to the transferee. If the offer to sell is not accepted within 28 days of the determination of the purchase price as aforesaid then the party desiring to sell or transfer its interest in the Land shall be at liberty within twelve months from the original offer to sell to the other party its interest in the Land to sell to any other person at such price and upon such terms as it shall see fit without making a further offer to the other party pursuant to the terms of this clause Provided However no party shall sell, transfer assign or otherwise dispose of its interest in the Land unless its proposed successor in title enters into a deed of covenant with the other party for the time being to be bound by and comply with the terms and conditions herein contained as amended from time to time and subject thereto such successor shall be entitled to all the benefits but subject to all the duties and obligations created and imposed by this deed in substitution for his or its predecessor Provided Further neither party shall sell or dispose of its interest in the Land for a period of three years from the first day of October One thousand nine hundred and seventy six.
It may be asked: why did the lease and occupation deed fix terms of ten years? The answer did not emerge with certainty on the appeal and is not vital to its outcome. But counsel drew attention to the provisions of the Town Planning and Development Act 1928 WA, s. 20 of which, at the relevant time, prohibited a lease of land for a term exceeding ten years without the approval of the Town Planning Board, except as a lot or lots [7] . Neither the lease nor the occupation deed dealt with a lot. Be that as it may, the term fixed by the lease and by the occupation deed came to an end on 2 October 1986. Both before and after that date negotiations took place between the parties as to the terms and conditions upon which they would continue to use and occupy the premises. Nullagine wished to sell its interest in the land. The Club wanted to buy that interest so that it could continue to occupy the premises. Unfortunately the parties could not reach agreement on the price to be paid for Nullagine's interest and litigation ensued.
On 14 October 1988 Nullagine issued a writ against the Club. The statement of claim recited the registered proprietorship of the land and claimed an order "directing a sale of the land and a distribution of the net proceeds of sale in equal shares" to the parties in accordance with s. 126 of the Act with leave to Nullagine to bid at the sale. The Club responded with a defence and counterclaim in which it claimed to hold over as a quarterly tenant of the car park. It further pleaded that Nullagine was not entitled to an order for sale as it had not complied with cl. 4(b) of the occupation deed by first offering its share to the Club at either a price agreed to by the Club or at a price determined by arbitration in accordance with the sub-clause. The Club pleaded that, should Nullagine be unable to reach agreement with it as to the sale of Nullagine's interest in the land, Nullagine could sell its interest on the open market, provided the purchaser agreed to be bound by the terms and conditions of the occupation deed. In the alternative, the Club pleaded that if a sale of the land was ordered, it should be subject to the Club's tenancy of the car park. The Club counterclaimed for an order that Nullagine's claim for an order for sale be permanently stayed and for a declaration that Nullagine could only dispose of its interest in the land in accordance with the provisions of cl. 4(b).
Rowland J. held in favour of Nullagine and made an order that the property be sold and the proceeds divided among the parties. The Club appealed to the Full Court which allowed the appeal, set aside the order of Rowland J. and ordered that a sale of the property could only be effected in accordance with cl. 4(b) of the occupation deed. Before turning to the grounds of appeal in this Court it is desirable to examine the nature of the remedies available under s. 126 of the Act.
Nullagine claimed to be entitled as of right to an order for sale, relying on s. 126 of the Act. It is necessary to reproduce the section in part:
(1) Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly.
(2) The Court may, if it thinks fit, on the request of any party interested, and notwithstanding the dissent or disability of any other party, direct a sale in any case where it appears to the Court that, by reason of the nature of the land, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of any of those parties, or of any other circumstance, a sale of the land would be for the benefit of the parties interested.
(3) The Court may also, if it thinks fit, on the request of any party interested, direct that the land be sold, unless the other parties interested, or some of them, undertake to purchase the share of the party requesting a sale; and, on such an undertaking being given, may direct a valuation of the share of the party requesting a sale.
(4) On directing a sale or valuation to be made under subsection (3) the Court may give also all necessary or proper consequential directions.
The Act repealed The Partition Act 1878 WA. There are some differences in the language of the two statutes.
In Nullagine's submission, s. 126 of the Act conferred only a limited discretion on the Supreme Court in that for "good reason" it might direct partition rather than sale. Decisions suggesting a wider discretion to refuse any relief, it was said, are explicable in terms of the language of particular statutes. This argument is persuasive.
In Bray v. Bray [8] , where the language of s. 4(1)(b) of the Partition Act 1900 NSW was virtually identical to s. 126(1) of the Act, Knox C.J. said [9] :
So far as I can see, the object of the Act was to provide an alternative remedy to partition. I think that it is clear that what the Court has to consider is which is the better course for all parties between two alternatives, namely, is it better that there should be a partition or that there should be a sale, and the onus of showing that partition is better, where the owners of more than one half of the property desire a sale, is upon the person opposing a sale. And Higgins J. said [10] : I regard a sale as an alternative to a partition and not to the status quo. 1. (1926) 38 C.L.R. 542. 2. ibid., at p. 545. 3. (1926) 38 C.L.R., at p. 546.
The weight of authority leads inevitably to the conclusion that s. 126 is concerned with the options available to the Court and that the words "unless it sees good reason to the contrary" are directed at the power to order sale as opposed to partition [11] . At common law one co-owner could not insist upon partition of the land. The right to compel partition derived from the statutes of partition of 1539 and 1540 [12] . Partition was often impracticable or inconvenient; nevertheless the courts held that there was no power to refuse that statutory remedy [13] .
In consequence the remedy of sale was introduced by The Partition Act 1868 UK [14] and by comparable legislation in the Australian colonies [15] . But sale was made available as an alternative to partition; the courts were obliged to grant the remedy of sale unless there was good reason not to do so and to direct partition instead [16] . Where a discretion to refuse any relief has been held to exist, it has been because the language of the legislation clearly points to the existence of such a discretion [17] . Section 126 of the Act is substantially similar to provisions contained in The Partition Act 1878 WA and no such discretion may be found in its language. The only discretion is that to which reference has already been made, namely, to refuse sale and to order partition for "good reason".
The grant of special leave to appeal to this Court was confined to grounds which were identified as follows:
2.1 the contractual right of pre-emption of clause 4(b) in respect of a co-owner's half interest in land prevailed over the co-owner's right to seek a partition or sale of the whole of the land, which could only be exercised after the contractual steps of Clause 4(b) had been taken;
2.2 Clause 4(b) was intended to operate as long as the parties remained co-owners of the property;
2.3 the Court had no power or discretion to order a sale or partition in the face of Clause 4(b);
2.4 Clause 4(b) did not constitute an objectionable restraint on alienation despite the obligation of a vendor of a half interest to sell only to a purchaser prepared to enter into a Deed of Covenant to abide by the Occupation Deed.
For that reason some issues which were resolved by the Full Court no longer arise. Thus the issue of whether the Club held over as a quarterly tenant of the car park is not before this Court.
The grant of special leave was expressed to be "subject to the condition that any reliance on the proviso be restricted to an argument which, if successful, would not involve the matter being sent back for further evidence". The "proviso" referred to in the grant of special leave is the requirement that anyone purchasing a co-interest in the land agree to be bound by the terms and conditions contained in cl. 4(b) of the occupation deed. The consequence of the restricted grant of special leave is that were this Court to hold that there was a restraint on alienation arising from the mere existence of the proviso, Nullagine would be free to argue that this brings down cl. 4(b). But, it would not be open to Nullagine to offer as an additional argument that the restraint was unreasonable, that being a matter on which it would be necessary to call evidence, for instance to support a case that the requirement depressed the price which a co-owner might obtain for its interest. In its written outline of submissions Nullagine said that it was common ground at trial that the effect of the proviso was to depress the price that would otherwise be paid for a half-interest in the land. But it became apparent during the hearing of the appeal that this was not common ground, rather that Nullagine had misunderstood the Club's argument in this regard. And it must be recognized that Nullagine appeared to rely upon the existence of the proviso as going both to an argument that the sub-clause purported to oust the jurisdiction of the Supreme Court under the Act and to an argument that the sub-clause constituted a restraint on alienation.
The Full Court (Malcolm C.J., with Pidgeon and Franklyn JJ. concurring on this aspect) took the view that although the occupation deed was made between the Club and the Nullagine Group, the reference in cl. 4 to the "parties hereto" must be taken as a reference to the Club and Nullagine only [18] . This conclusion is supported by the contents of cl. 4, in particular the terms of cl. 4(b) whereby each party undertakes not to dispose of its share or interest in the land, except in accordance with the terms of the sub-clause. That obligation can be assumed only by someone with an interest in the land.
The next step in the Full Court's reasoning was that the confinement of cl. 4 to the Club and Nullagine indicated that the covenants in the clause "were intended to be separate and independent provisions from those in cll. 1 to 3" [19] . Clause 4(b) has no time limit fixed for its operation other than the absolute prohibition against disposal of an interest in the land for a period of three years from 1 October 1976.
I agree with the conclusion of the Full Court that cl. 4 was intended to apply so long as the parties, that is the Club and Nullagine, remained tenants in common of the land. As Malcolm C.J. said [19] :
Clause 4(b) places a restriction on alienation the purpose of which is to preserve the continuing rights of use and occupation of the other party in terms of the deed and the continuing application of provisions such as those relating to finance and management. By "continuing rights" Malcolm C.J. was referring to the provisions of the occupation deed other than those providing for exclusive use and occupation for the term of ten years. The existence of continuing rights is borne out by recital (e) of the occupation deed which reads: The parties have agreed to enter into this Deed for the purpose of evidencing the terms and conditions upon which they shall mutually use and occupy the Land and the fixed improvements thereon upon Nullagine entering into possession of the Land and the fixed improvements thereon pursuant to the terms of the said agreement for sale. 1. ibid. at p. 458.
By reason of cl. 4(b) a co-owner wishing to sell its interest must first offer that interest to the other co-owner. If the parties cannot agree on a price for that interest, the price is fixed at fifty per cent of the value of the land, that value to be determined by arbitration. That means no more and no less than the value of the land and improvements as they then stand, unaffected by anything else in the contractual relationship between the co-owners. The co-owner to whom the offer is made is not bound to buy at the price determined by arbitration but has twenty-eight days from the determination of the price in which to do so. If the offer is not accepted within the period of twenty-eight days, the co-owner wishing to sell may, within twelve months from the original offer to sell to the other party, sell its interest on the open market without making a further offer to the other co-owner. By implication, if no sale takes place within twelve months, the co-owner may not sell its interest thereafter without first offering that interest again to the other co-owner, thereby setting in train the procedure of the sub-clause. There is however a restriction on the right to sell on the open market, namely, that any purchaser must agree to be bound by and to comply with "the terms and conditions herein contained". Effectively this means those terms and conditions that survived the termination of the rights of occupation provided for in cl. 1(A). As a consequence any purchaser of the co-interest may in turn only sell that interest in accordance with the requirements of cl. 4(b). That means going through the procedure of first offering the interest to the other co-owner as already described. The absolute prohibition against sale with which cl. 4(b) concludes is finite in time, expiring after a period of three years from 1 October 1976. That period of time had long since expired when the events giving rise to the litigation occurred and the prohibition has no further operation.
In dealing with the argument that a contractual restraint on invoking the jurisdiction of the Court under the Act will be enforced by the courts, there are a number of relevant authorities. But a useful starting point is one of the most recent, Re Permanent Trustee Nominees (Canberra) Ltd. [20] , which involved an agreement between co-owners of land that neither would (except after twelve months prior notice to the other) make application to the Supreme Court for the appointment of trustees on statutory trusts for sale or partition. The decision of the Full Court of the Supreme Court of Queensland (Kelly S.P.J., Connolly and Moynihan JJ.) was that the agreement was not void as ousting the jurisdiction of the Court; that it was not void as fettering the exercise of the jurisdiction of the Court, being a jurisdiction which involved a proprietary remedy in which the co-owners alone were interested; and (Connolly J. not deciding) that it was not void as amounting to a restraint on alienation. The restriction on approaching the Court was only a restriction that required twelve months notice but it was of a continuing nature.
In the present case there are, as has already been noted, two restrictions. One is an agreement not to sell or dispose of an interest in the land within three years, the operation of which has long since ceased. That is not an issue in the appeal. The other is unlimited in time but is a covenant by each party not to dispose of its interest in the land without first offering that interest to the other party in accordance with cl. 4(b). If the offer is not accepted in the time provided, the balance of the sub-clause comes into operation.
The mere existence of a right of pre-emption between co-owners does not oust the jurisdiction of the Supreme Court of Western Australia to make orders under s. 126 of the Act. It imposes terms on which a co-owner may invoke the exercise of that jurisdiction. Clause 4(b) is concerned with the disposition of a co-owner's interest in the land, not directly with the sale of land held in co-ownership. Nevertheless, on the proper construction of the sub-clause, it operates so as to prevent a co-owner seeking an order for sale of the land without first offering its interest in the land to the other co-owner. A sale of the land necessarily involves a sale of each co-owner's interest and there is considerable unreality in regarding a sale of the land pursuant to an order of the Supreme Court as not touching the rights and obligations of the parties under cl. 4(b).
Although s. 126 of the Act speaks of a sale of "the land", that is clearly a compendious way of referring to the estates or interests of the "parties interested" in the land [21] . What is sold pursuant to an order of the Supreme Court is the estate or interest of each co-owner, not some independent entity. And it is the estate or interest of each co-owner that is transferred, whether the transfer is executed by the co-owners themselves or by someone appointed by the Court to do so [22] . For Nullagine to seek an order for sale, as it has done, is to seek to put it out of its power to offer its "share or interest in the Land" to the Club in accordance with its undertaking in cl. 4(b) of the deed. The very object of cl. 4(b) is to give a co-owner the opportunity to secure the interest of the outgoing co-owner on certain terms. That opportunity is surely lost or seriously diminished if the land is sold by order of the Court, even if the remaining co-owner is given leave to bid at auction.
The sub-clause places a restriction on the ability of the co-owners to approach the Court. But the restriction is one which the parties have agreed to in their own interests [23] and is one which of itself does not adversely affect the party wanting to sell. The reason is simply that if the right of pre-emption is exercised the party wishing to sell would normally receive half the value of the land and the improvements. The restriction might be said to fetter the exercise of the jurisdiction of the Court in the sense that certain steps must be taken before the exercise of that jurisdiction may be invoked. But it does not oust the jurisdiction of the Court or fetter the exercise of that jurisdiction in any unacceptable way [24] . The parties should be free, in their own interests, to qualify the right to have the land sold by order of the Court. And that is so even though a co-owner wishing to sell its interest will have to go through the requisite procedure again if a sale is not effected within twelve months of the original offer to sell to the other co-owner.
Clause 4(b) is awkwardly framed but, as I read it, it is the right of pre-emption to which effect must be given before a co-owner may invoke the jurisdiction of the Court under s. 126 of the Act. The proviso does not of itself stand in the way of an approach to the Court except in so far as it may revive the right of pre-emption after a sale. But this does no more than create a pre-emption provision that may be of continuing operation. Once a co-owner has offered its interest to the other co-owner in accordance with cl. 4(b) and no sale results, it is reading too much into the sub-clause to say that the co-owner wishing to sell may not thereafter apply to the Court for an order for sale.
The aim of cl. 4(b) is to regulate the position of co-owners vis-a-vis each other, notwithstanding changes in their identity from time to time. The Club argued that the effect of cl. 4(b) was to create a self-perpetuating renewal of the right of pre-emption which effectively precluded a co-owner from ever invoking the jurisdiction of the Supreme Court under s. 126 of the Act. If that were the proper construction of the sub-clause, the Club would face substantial hurdles in its argument that there was no restraint on alienation. But I do not read the provision in this way. In effect it creates a continuing right of pre-emption, with "breathing spaces" during periods of twelve months in which a co-owner is free to sell its interest on the open market without going through the procedure of offering that interest to the other co-owner. But, subject to the obligation to first offer its interest to the other co-owner, a co-owner may sell its interest in the land or apply to the Supreme Court for an order for sale of the land.
There are several decisions cited in Halsbury's Laws of England [25] in support of the proposition that "The right to partition may be lost by agreement between the parties for disposal of the property in a different manner". Those decisions are Peck v. Cardwell [26] ; Dale v. Hamilton [27] ; Redwood v. Redwood [28] ; and Dimsdale v. Robertson [29] . To these should be added Fletcher v. Ashburner [30] . Counsel for Nullagine sought to distinguish these cases as relating to partnership agreements. But, as the judgment of Malcolm C.J. demonstrates, the existence of a partnership arrangement was not crucial to the decisions in those cases [31] . There is nothing contrary to public policy in co-owners agreeing on a formula for the disposition of their co-interests in the way in which these co-owners have agreed.
I have spent some time in dealing with the relationship between s. 126 of the Act and cl. 4(b) of the occupation deed to reach the conclusion that the exercise of jurisdiction under s. 126 is qualified by the terms of the sub-clause. This has involved two aspects: the proper construction of cl. 4(b) and the legal implications of a provision which purports to affect the jurisdiction of a court. At the same time I must express serious reservations as to whether, within the scope of the grant of special leave to appeal, it is open to Nullagine to take the construction point. Certainly, counsel for Nullagine did not advance the construction point in support of the application for special leave to appeal. Nevertheless, it might be said that the point is open having regard to par. 2.1 of the grounds authorized by the grant of special leave, set out earlier in these reasons. To this there are two answers. The first is that it would be curious for the Court to give special leave to appeal by reference to an argument which had not been advanced. The second is that the terminology of par. 2.1 is "prevailed". This is the language of priority between competing provisions and does not, to me, evidence an intention to argue that, as a matter of construction, cl. 4(b) of the occupation deed has nothing to say as to the entitlement of Nullagine to seek an order for the sale of the land pursuant to s. 126 of the Act.
The remaining question is whether the existence of cl. 4(b), in particular the requirement that any purchaser of an interest in the land assume the duties and obligations contained in the sub-clause, constitutes of itself a restraint on alienation such that it brings down the whole of the sub-clause. It is at this point that the condition attached to the grant of special leave to appeal becomes important. To the extent that Nullagine might wish to argue that the existence of this requirement depressed the price which it would otherwise get for its interest in the land on the open market and to the extent that this proposition required the production of evidence to substantiate it, the restriction in the grant would preclude Nullagine from arguing that proposition. In other words, to succeed on this point Nullagine must demonstrate that the requirement of itself constitutes a restraint on alienation which renders nugatory the whole of cl. 4(b). The reason for the restriction in the grant of special leave is that, except in the absolute terms stated, the proposition Nullagine might now wish to argue was not before the Full Court. Even in its absolute form it does not seem to have played any substantial part in the judgments of the Full Court, no doubt reflecting the way in which the matter was argued in that Court.
In this regard Nullagine relied primarily upon what was said by Dixon C.J. in Hall v. Busst [32] to the effect that contractual arrangements may constitute an impermissible restraint on alienation. Hall v. Busst was discussed by Needham J. in Reuthlinger v. MacDonald [33] where his Honour said:
If I were free to decide the issue, I would hold that the doctrine does not apply to contractual restraints, unrelated to the grant or transfer of property. But the passage I have set out from the judgment of Dixon C.J. [34] appears, in terms, to state the contrary. 1. (1960) 104 C.L.R. 206, at pp. 217-218. 2. [1976] 1 N.S.W.L.R. 88, at p. 99. 3. (1960) 104 C.L.R., at pp. 217-218.
The Court was not invited to reconsider what was said in Hall v. Busst but, in my view, nothing in the judgments in that case leads to a conclusion that the proviso in cl. 4(b) of the occupation deed constitutes a restraint on alienation that would render the sub-clause ineffective. As Dixon C.J. and Menzies J. construed the indenture in question, the purchaser under a contract for the sale of land could not deal with her interest without the vendor's consent. Although Fullagar J., the other member of the majority, treated the provision as no more than a right of first refusal in the vendor, his Honour was influenced by the fact that the value of the land was fixed in such a way that it was unlikely to reflect its true worth. Even if the proviso in cl. 4(b) constituted a restraint on alienation, there would be a question as to its severability.
However, there is a danger of inflating the proviso beyond its true significance. As between Nullagine and the Club, the right of pre-emption does not in truth constitute a restraint on alienation. If the right is exercised, the co-owner wishing to sell receives one half of the value of the land. If the right is not exercised, the co-owner wishing to sell may do so. The requirement that any purchaser assume the duties and obligations in cl. 4(b) does no more than put the purchaser in the position of an original co-owner. That is, as between the purchaser and the remaining co-owner there is a right of pre-emption which operates to the benefit of both co-owners. It ensures that if the right is exercised, the co-owner wishing to sell will receive half the value of the land, which may be more than the value of a co-owner's interest. If the right is not exercised, the co-owner wishing to sell may do so on the open market or may invoke the jurisdiction of the Supreme Court and seek an order for sale. All that the proviso does is place any purchaser in the position of an original co-owner. That does not constitute a restraint on alienation of a co-owner's interest. It must be remembered that Nullagine has not offered to sell its interest to the Club in accordance with cl. 4(b) of the occupation deed. It eschews any obligation to do so.
It may not be appropriate simply to dismiss the appeal. The order of the Full Court, apart from dismissing Nullagine's claim and making orders as to costs, contains this paragraph:
Nullagine Investments Pty Ltd
Western Australian Club Inc