Pierce Bell Sales Pty Ltd v Frazer

Pierce Bell Sales Pty Ltd v Frazer - [1973] HCA 13 - HCA 1973 case summary — Zoe

[39]

It now becomes necessary to decide whether the title to the land is under the Real Property Act or under the Act, i.e. the Closer Settlement Act, within the meaning and operation of the contract of sale: that is to say, which of the alternatives of cl. 2 should be regarded as relevant to the transaction. In my opinion, the title to the land was under the Real Property Act and not under the Act although the Act contains provisions which restrict the use which the registered proprietors may make of the estate which they have by virtue of that registration. The Crown Lands Act, 1900,N.S.W. as amended, similarly to the Act, contains restrictions on transfer of certain tenures created by the Crown Lands Act. The estate of a registered proprietor thus affected by that Act or by the Act is often referred to as "a conditional fee simple". This is a convenient enough expression to describe a fee simple which under the statutory provisions the proprietor may not transfer without the consent of the Minister or which he may only transfer to a limited class of person. But, in my opinion, the expression is imprecise. The effect of the registration of the Crown grant as a certificate of title must result in the proprietor being seized for an estate in fee simple of the described land subject, of course, to the estates or interests noted in the certificate. Statutory provisions of various kinds may restrict the use he may make of the land or of his title to it. Thus town planning statutes bear on the use which the proprietor may make of the land; but those statutes do not render his fee simple in any proper sense conditional. A statute which prevented the transfer of land to some class of persons, e.g. aliens, would not, in my opinion, reduce the estate of the proprietor in the land though up to the point of registration, a transfer of the land in breach of the statute may well be ineffective, or even illegal. Here the respondents had a fee simple in the land, none the less so in my opinion because of the statutory limitations on transferability. The fee simple in the land derived from their registration as proprietors in fee simple. Their certificate of title was in no sense a qualified certificate. Cf. the Real Estate Act, Pt IVA.

[59]

On the other hand, there being no elements of personal conduct of the respondents which could be classed as reckless or as being the cause of the respondents' present situation, the payment of a substantial sum of money to improve the appellant's situation may well seem to be an unreasonable requirement. There is, to my mind, perhaps no single fact which is definitive in this connexion. One begins with a contractual right to rescind, all the circumstances covered by cl. 14 being present. The onus thereafter of convincing the Court that the respondents ought not to be allowed to exercise their contractual right must rest on the appellant. Bearing this in mind, after due consideration, I am not convinced that it would be unreasonable or unconscionable on the part of the respondents to exercise their right of rescission. I am not convinced that it was unreasonable on the part of the respondents to be unwilling to apply for the Minister's certificate and to pay the amount of money he might demand. I think, to use the words of Turner L.J. in Duddell v. Simpson [1] , the respondents in all the circumstances of the case could reasonably say that to comply with the requisition they "will be involved in expenses far beyond what" they "ever contemplated". Indeed, the respondents could be said to satisfy the elements referred to in In re Jackson and Haden's Contract [2] , as relevant to the question whether a vendor may properly be allowed to exercise his rights under such a clause as cl. 14. They were ignorant of the limitation on their power to transfer their land to a corporation. They were not responsible for the form of the contract in that they did not prepare it, or understand its relevant provisions in the sense which, in my opinion, they bear. Although wisdom would dictate consultation with a solicitor before signing an option to purchase I do not think that a failure to do so, in the circumstances, was a "shortcoming" on their part of which the appellant can take advantage.

[66]

Thus, it has been said that a vendor, in seeking to rescind, must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale "brevi manu", since by doing so he makes a nullity of the whole elaborate and protracted transaction. Above all, perhaps, he must not be guilty of "recklessness" in entering into his contract, a term frequently resorted to in discussions of the legal principle and which their Lordships understand to connote an unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver. In the present case, there was no evidence that the respondents, in exercising their right of rescission, were acting in bad faith. They were not cross-examined upon their affidavit in which they swore that they were unwilling to complete an application under s. 31 of the Closer Settlement Act, 1904 N.S.W., as amended, ("the Act") or to pay the amount payable to obtain the removal from the Crown grant of the indorsement drawing attention to the provisions of the Act, and it would be the merest speculation to say that they availed themselves of the power of rescission not really because they were unwilling to comply with the requisition but as an excuse to enable themselves to get rid of the contract for some ulterior purpose, such as to obtain a higher price for the land from some other purchaser. Further, I do not consider that the respondents were guilty of recklessness in the sense that they failed to satisfy themselves before they signed the contract that they would be in a position to convey what they were contracting to sell. They were in a position to convey a good title to any purchaser qualified to receive it. It is true that the effect of ss. 26, 30 and 31 (4) of the Act was that the appellant, being a company and not qualified to apply for a settlement purchase under s. 26 of the Act, could not acquire the land by transfer unless the Minister gave a certificate under s. 31 (4) of the Act. However, at the time when the contract was made, the respondents, if they had known of the legal effect of the Act, would have been entitled to contemplate either that the Minister might give a certificate or that the appellant might nominate some qualified person to whom the conveyance could be effected (see Norton v. Angus [1] ). 1. [1963] 1 W.L.R. 1415, at pp. 1422-1423. 2. (1926) 38 C.L.R. 523, at pp. 528, 538.

[67]

It remains to consider whether the action of the respondents, in seeking to rescind, can be said to have been arbitrary, capricious or unreasonable. To decide this question it is necessary to consider the correspondence that was exchanged between the solicitors for the parties before and after the requisition in question was made. The solicitors for the appellant, having been informed by the solicitors for the respondents that it was the policy of the Department of Lands that the consent of the Minister for Lands would not be granted in respect of the proposed transfer to a company of land under the Act, wrote on 24th January 1972 saying that the appellant was prepared to bear the cost of an application for a certificate under s. 31 (4) and enclosing a form of application for signature by the respondents. On 1st February 1972 the respondents' solicitors replied that the respondents would not make the application under s. 31 (4), by which they meant, as they later explained by a letter of 7th February 1972, that they "would not make the application to have the restriction under s. 31 (4) of the Closer Settlement Act removed"; they were prepared to apply for the consent of the Minister for Lands under s. 31 (1) although it is obvious that such consent would not have been given, or, if given, would have been futile, since in the absence of a certificate under s. 31 (4) the appellant was forbidden by the Act to acquire the land by transfer. These communications caused the solicitors for the appellant to change their attitude and on 10th February 1972 they wrote saying that the respondents were obliged to make the application under s. 31 (4), and that it was to be made at the respondents' expense. With this letter they forwarded the requisitions. On 14th February 1972 the solicitors for the respondents wrote to inquire whether they were right in assuming that the solicitors for the appellant considered that the respondents should pay the amount required to be paid under s. 31 (4) (viz. $629) and on 16th February 1972 they received the following reply: "We wish to confirm that it is considered that the vendors must bear the cost of the appropriate application under section 31 of the Closer Settlement Act." On 21st February 1972 the respondents replied to the requisitions. On 10th March 1972 their solicitors write a further letter in which they said (inter alia) that the respondents were unwilling to comply with the requisitions that they must complete the appropriate application under s. 31 of the Act and that the memorial on the Crown grant regarding s. 31 must be removed prior to completion, and giving notice of their intention to rescind the agreement unless the appellant waived compliance with the relevant requisitions within fourteen days of receipt of the letter. The appellant did not waive compliance with the requisitions, and the respondents gave notice of rescission.

[68]

In my opinion the respondents were under an obligation, implied in the contract, to take all reasonable steps to render the contract efficacious in accordance with the presumed intention of the parties (Butts v. O'Dwyer [1] ). A transfer to the appellant could only have been completed if the Minister's certificate under s. 31 (4) had been obtained. An application for such a certificate is to be made as prescribed and by r. 52a (a) of the regulations made under the Act the application is required to be in or to the effect of form 143 as prescribed under the Crown Lands Consolidation Act, 1913 N.S.W.. Form 143 provides for the application to be made by "the holder/s of the land". The combined effect of these provisions appears to be that an application under s. 31 (4) can only be made by the holder or holders of the settlement purchase, that is, in the present case by the respondents. To enable the contract to be completed by transfer to the appellant it was therefore necessary that the respondents should make an application under s. 31 (4). Notwithstanding that the appellant might have nominated a qualified person to take the conveyance, it seems to me that the parties must be taken to have intended that the contract would be completed by transfer to the appellant if the latter did not choose to nominate someone else for the purpose. In those circumstances it should be implied that the respondents would do all things reasonably necessary to obtain the certificate without which the transfer could not be made. McFarlane v. Wilkinson [2] , in which Lowe J. [3] expressed the opinion that it was not the vendor's duty to remove a disqualification attaching to the transferee, under legislation similar to that now in question, is distinguishable, for the disqualification was there personal to the transferee and could have been removed by appropriate action on the part of the transferee. Here, as I have said, the appellant's disqualification could have been removed only if application had been made by the respondents for the Minister's certificate. The respondents, in my opinion, acted unreasonably in saying, by the letters of 1st February 1972 and 7th February 1972 that they would not make the application. However, the appellant, in insisting that the respondents should meet the costs of an application, met unreasonableness with unreasonableness. The requisition, read in the light of the letters of 10th February 1972 and 16th February 1972, clearly required the respondents not only to make application to the Minister for his certificate under s. 31 (4) but also to pay the amount of $629 prescribed under that subsection and by r. 52a (d). In my opinion although the respondents were obliged to make the application, their implied obligation did not extend to require them to make the necessary payment out of their own moneys. It was not reasonable that they should have to provide the funds to support an application which was necessitated by the fact that the appellant was disqualified. The respondents were therefore entitled to refuse to make the application at their own expense. The appellant did not, during the fourteen days allowed, change its attitude to the question of the payment of the fee, although it should be added that it was not expressly asked to do so.

At a glance

Court

Decision date

Before

Source

Judgment (73 paragraphs)

Parties