Porters v Cessnock City Council [2005] NSWSC 1275 | Case summary

4578/05 IRIS MARY PORTERS v CESSNOCK CITY COUNCIL JUDGMENT - Ex Tempore (Revised 8 December 2005) 1 HIS HONOUR: 17 Main Road, Heddon Greta is a property, the registered proprietor of which was Veronica Jane Pointer. On 4 April 1974 Mrs Pointer entered into a terms contract to sell the property to Mr and Mrs Porters. The contract stated that the Porters purchased as joint tenants. The price was $7,500 which was payable by a deposit of $1,800, and the balance of $5,700 was to be paid by paying $200 on 1 May 1974, and thereafter making payments at the rate of $10 per week. 2 In 1982 Mrs Pointer died. For a short time after her death payments of instalments continued to be made by Mr and Mrs Porters to Mr Neville Pointer, the son of Mrs Pointer, but a solicitor raised in the Porters' mind a doubt - quite justifiable - about whether Mr Pointer was entitled to receive the payments, and they stopped making them. At that time an amount of $1,416 remained outstanding under the Contract for Sale. 3 In 1983 Mr and Mrs Porters separated, and Mrs Porters moved out of the house. Mr Porters and a daughter of the marriage continued living there. On 6 August 1985 Mr and Mrs Porters were divorced, but no final orders concerning property matters were made in connection with their divorce. 4 In 1988 Mr Porters became concerned about the fact that he and Mrs Porters had been unable to complete the purchase of the house, and consulted a local solicitor. That solicitor made extremely extensive inquiries, seeking to find out who the legal personal representative of Mrs Pointer might be, if there was one at all, and trying to make contact with some of Mrs Pointer's children. Even though the solicitor wrote letters to these children, at what he understood to be their address, saying that all he wanted to do was to pay the money which was owing under the contract, he could get no response. 5 A search of the files of the Probate Registry at this Court in March of 1989 ascertained that there had been no grant of administration in Mrs Pointer's estate. Mr Porters' solicitor, again justifiably, took the view that it may be necessary for Mr Porters to himself obtain, or seek to have someone else obtain, a grant of representation of the estate so that the Contract for Sale could be completed. The solicitor made inquiries of all the other solicitors in the area of Kurri Kurri, Maitland, Cessnock and Green Hills, all of whom replied that they were not aware of any will or probate documentation concerning Mrs Pointer. One thing that the inquiry did reveal is that the members of Mrs Pointer's family had taken so little interest in her estate that the account for her funeral was still not paid by 1989. 6 On 28 May 1995, Mr Porters died. The effect of his death is that all rights which he had in connection with the contract passed to Mrs Porters by survivorship. 7 Various members of Mrs Porters' family continued to live in the house until January of 1997. From January 1997, the house was vacant. No rates were paid on it, and in due course in 2001 the local Council sold the house to recover those unpaid rates. A consequence of that sale is that the Council holds the sum of $29,014.30, the net proceeds of sale. 8 In these proceedings, Mrs Porters sought, in effect, an order that the Council pay the net proceeds of sale to her, subject to them retaining the unpaid amount of the purchase price. 9 The only defendant to the proceedings is the Council, which has put on a submitting appearance. The Council was not prepared to simply pay the money to Mrs Porters, unless it had a clear legal authority entitling it to do so. It did not feel sufficiently comfortable with the facts which I have outlined providing it with sufficient legal authority. Hence, Mrs Porters commenced the present proceedings. 10 Even though the Council is the only defendant in the proceedings, it is apparent that whoever might be entitled to Mrs Pointers' estate has a beneficial interest in the proceeds of sale. This is because she was still the registered proprietor at the time of the Council effecting the sale, and because she had not been paid the entire proceeds of sale under the Contract to sell to Mr and Mrs Porters. Proceedings in the Absence of a Legal Personal Representative 11 There is also listed today a notice of motion seeking an order under Rule 7.10 Uniform Civil Procedure Rules 2005, permitting the proceedings to continue in the absence of a representative of Mrs Pointer's estate. Rule 7.10 says: "(1) This rule applies to any proceedings in which it appears to the court: (a) that a deceased person's estate has an interest in the proceedings, but is not represented in the proceedings, or (b) that the executors or administrators of a deceased person's estate have an interest in the proceedings that is adverse to the interests of the estate. (2) The court: (a) may order that the proceedings continue in the absence of a representative of the deceased person's estate, or (b) may appoint a representative of the deceased person's estate for the purposes of the proceedings, but only with the consent of the person to be appointed. (3) Any order under this rule, and any judgment or order subsequently entered or made in the proceedings, binds the deceased person's estate to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceedings. (4) Before making an order under this rule, the court may order that notice of the application be given to such of the persons having an interest in the estate as it thinks fit." 12 The circumstances in which such an order can be made include where a plaintiff in proceedings has an equitable claim to a fund of money, but the legal personal representative who is entitled to claim that fund from someone else is absent. In those circumstances, the plaintiff can be permitted to enforce its equitable claim directly against that "someone else". For example, the procedure has been used in circumstances where an equitable mortgagee of a policy of life insurance seeks to be paid the proceeds by the life insurance company, once the life insured has died, in circumstances where no grant of representation has been taken out in the estate of the life insured: Webster v British Empire Mutual Life Assurance Company (1880) 15 Ch D 169, Curtius v Caledonian Fire and Life Insurance Co (1881) 19 Ch D 534. Those cases hold that a court can be justified in ordering the whole of the proceeds to be paid over to the mortgagee where the mortgage debt exceeds the policy proceeds, and in ordering the amount of the mortgage debt to be paid to the mortgagee where the policy proceeds exceed the amount of the mortgage debt. 13 The procedure has also been used, in a time before there was a statutory power to sell land to recover rates, to enable a Council to enforce its statutory charge for rates by obtaining a court order for sale when the registered owner of land had died and no representation had been obtained, but the people beneficially entitled to the land were parties to the suit: Borough of Drummoyne v Hogarth (1907) 23 WN (NSW) 243. 14 It was formerly the case, under an English predecessor of this Rule, that if service upon people interested in a deceased estate was dispensed with, the order of the Court could provide a good legal justification for the person holding a fund of money to pay in accordance with the order, but the order did not bind the beneficiaries of the deceased estate, who would be free to bring an action to assert their rights (subject to any questions of limitations) against the person to whom the payment was made: May v Newton (1887) 34 Ch D 347 at 350. However, the provisions of Rule 7.10(3) makes clear that the deceased person's estate is bound when service is dispensed with. 15 There are two alternative claims which Mrs Porters makes in the present case to the proceeds of sale. One is that she has a right in the nature of a purchaser's lien over those proceeds. That purchaser's lien is one the present value of which would, she submits, be calculated by allowing interest on payments which had been made on account of the purchase price. The alternative basis upon which she claims is pursuant to the maxim that equity regards as done that which ought to be done. She asserts that, subject to allowing the Council to retain the unpaid balance of the purchase price, she had an enforceable equitable right to the land, and that that enforceable equitable right to the land has now been transmuted into an equitable claim against the proceeds. 16 It can be seen that each of those claims is a claim to an equitable interest, in a fund, being asserted in circumstances where the obligation of the Council, absent that equitable claim, would be to pay the net proceeds to the estate of Mrs Pointer. The case is therefore one which falls within the power of the Court under Rule 7.10. 17 In my view, it is appropriate to exercise the power in the present case. Extremely extensive inquiries were carried out in 1988 and 1989 by Mr Porters' then solicitor, seeking to find a legal personal representative, and to pay out the remaining balance on the contract. More recently, the solicitor acting for Mrs Porters has made other inquiries, seeking to track down people who might be interested in the estate, but with equal lack of success. The amount of money involved is small. The Court has an overriding obligation to find a just, quick and cheap way of resolving proceedings. It is appropriate to make an order that the proceedings may continue in the absence of a representative of the estate of Veronica Jane Pointer. I so order. Is Mrs Porters Entitled to a Purchaser's Lien? 18 A purchaser of land has a lien over the land for any part of the purchase money which is paid in advance. The lien exists by operation of law at least in an inchoate form from the moment any part of the purchase price is paid, and regardless of whether the vendor has committed any breach of the contract: Whitbread & Co Limited v Watt [1901] 1 Ch 911, disapproving Roger v Harrison [1893] 1 QB 161; Whitbread & Co Limited v Watt [1902] 1 Ch 835; Combe v Swaythling (Lord) [1947] Ch 625; Hewett v Court (1983) 149 CLR 639 at 645, 653-4. The existence of the lien is not dependent on whether specific performance of the contract is available: Hewett v Court (1983) 149 CLR 639 at 650, 651, 664-667. At least from the time the contract became unperformable by the Council selling the land, the lien was no longer inchoate, and attached, by tracing, to the fund into which the land was converted. 19 In the present case, while that purchasers lien would initially have endured for the benefit of both Mr and Mrs Porters, upon Mr Porters' death, just as Mrs Porters succeeded to Mr Porters contractual rights under the contract by survivorship, so the benefit of the purchaser's lien has come to be held for her alone. 20 Calculations have been performed, on the payments which have been made from time to time, adding interest at the Court rates which were approved, initially under Schedule K of the Supreme Court Act 1970, and now under Schedule 5 Uniform Civil Procedure Rules 2005. The end result of that interest calculation is that the amount for which a lien which includes interest could be claimed is $150,384. 21 I do not decide whether it would be appropriate to include interest on the amount for which a lien exists, whether for all or part only of the time since the instalments of purchase price were paid: cf Webster v British Empire Mutual Life Assurance Company (1880) 15 Ch D 169. That is because Mr Francey accepts that if Mrs Porters sought to enforce such a lien she would need to do equity, by giving credit for the value of the accommodation received from time to time. However the evidentiary basis for valuing that accommodation is not available. In contested proceedings, an onus of adducing that sort of evidence would lie on the party who claimed the benefit of the allowance for the value of accommodation. However, when the proceedings are continuing in the absence of any person to make such a claim, it would not be appropriate for the Court to proceed on the basis that the value of accommodation was bound to be less than the amount for which the lien exists inclusive of interest. I therefore will not decide the case on that basis. Entitlement Through "Equity Regards as Done that which Ought to be Done"? 22 That brings us to the second basis. The present claim is one which seeks to enforce the rights arising under the contract, adverse to the interests of the beneficiaries of Mrs Pointer's estate. There is no difficulty in a court enforcing by specific performance a Contract for Sale against a deceased person's estate, where the contract was entered during the deceased's lifetime. Indeed, in the days when real estate devolved separately to personalty, there was power for an equity Court to compel the heir at law to join in a conveyance, when a suit for specific performance was brought to enforce a Contract for Sale entered into by the deceased, even though, under the doctrine of conversion, the proceeds of sale would be distributable in that deceased person's will as though they were personalty: Hoddel v Pugh (1864) 33 Bev 489; 55 ER 458. 23 There would be difficulty in the making of an actual specific performance order today, when the subject matter of the contract - the land itself - has passed from Mrs Pointer's ownership. However, the doctrine that equity regards as done that which ought to be done can have a wider ambit of operation than does the law of specific performance. 24 An early example is the decision of Lord Chancellor Macclesfield in Frederick v Frederick (1721) 1 P Wms 710; 24 ER 582. (The case is also reported in 1 Str 455; 93 ER 632, but the report in P Wms is the fuller one.) In that case, a Mr Frederick had agreed with the Aldermen of the City of London to take up the freedom of the city (see para [33] below) within a year, in connection with obtaining their permission to marry an orphan under their care. The giving of permission to marry was regarded as the giving of consideration, and in that case the consideration had been executed by Mr Frederick acting on that permission. If he had carried out his agreement with the Aldermen, the fact that he was a freeman would mean that his wife would have had, upon his death, rights to one-third of his personalty, and his children a right to a further one-third of the personalty, in accordance with customary law of the City of London. However, he did not take out his freedom, and died forty or more years later. Even so, his estate was distributed as though he had carried out his contract. At 722 of P Wms, 586 of ER, Lord Chancellor Macclesfield dealt with an argument that the death of Mr Frederick altered the case, because he could no longer be made a freeman, and so the contract could not be specifically performed, by saying: "It is the substance and the chief end of the agreement, that equity will enforce, viz that the widow and children should have their thirds of the personal estate, which is not impossible to be performed. This, though Mr Frederick be dead, a Court of Equity may, and I think, ought, to see executed." 25 The decision was affirmed in the House of Lords, though the report records no reasons: Frederick v Frederick (1731) 2nd edition 1 Bro PC 253; 1 ER 549. Similarly, the law concerning equitable assignment of future property operates on the basis that equity regards as done that which ought to be done - because the assignor has received the consideration, his conscience is bound to recognise that an assignment has occurred as soon as the property comes into existence: In Re Gillott's Settlement; Chattock v Reid [1934] 1 Ch 97 at 108 - 109 (Maugham J); Palette Shoes Pty Ltd (In liq) v Krohn (1937) 58 CLR 1 at 27 per Dixon J; Booth v Commissioner of Taxation (Cth) (1987) 164 CLR 159 at 177-178 per Toohey and Gaudron JJ; McIntyre v Gye (1994) 51 FCR 472 at 481 per Davies, Burchett and Gummow JJ. And equity reaches this result quite independently of whether the contract to assign the property is at the time specifically performable: McIntyre v Gye (1994) 51 FCR 472 at 481 per Davies, Burchett and Gummow JJ. 26 There are certain limits on the way in which the maxim that equity regarded as done that which ought to be done can operate in connection with contracts. Contracts which have not been fully performed on one side require particular care and the maxim cannot be used to turn a contract into a source of obligations different to those of the contract itself - thus if the obligation of one party to do act A under the contract is conditional upon another party having first done act B, the maxim cannot require the first party to do act A when the other party has not done act B: De Beers Consolidated Mines Limited v British South Africa Company [1912] AC 52 at 65-66. It may well be that the maxim can apply in cases depending on contract only in favour of persons who are entitled to enforce the contract, and cannot be invoked by volunteers: In Re Anstis (1886) 31 Ch D 596. 27 Sir George Jessel's remark in Walsh v Longdale (1882) 21 Ch D 9 at 14-15, to the effect that where an agreement for lease exists the tenant holds on, the same terms in equity as if a lease had been granted, is an over simplification of the true position: Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 250 - 252. Meagher, Gummow & Lehane's Equity Doctrines and Remedies, 4th edition, para [2-180] to [2-225]. It appears to be accepted that the existence of an agreement for disposition of an interest in land does not give rise to rights enforceable in equity by, or obligations enforceable in equity against, a person who is not a party to the agreement or a successor in title or privy of such a party: Manchester Brewery Company v Coombs (1901) 2 Ch 608 at 618; Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 70 FLR 8 at 15-16; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 253. However, where the administration of a deceased estate is being considered, the legal personal representative of the estate, and the beneficiaries of the estate, do not count as people not party to the agreement, for the purpose of this principle. Rather, the legal personal representative and beneficiaries are volunteers, and successors in title of the deceased person, and are bound by the same equities as the deceased person. 28 This present case can also be seen as an instance of the operation of the law of conversion, where in the administration of deceased estates that which ought to have been done is regarded as done. What the beneficiaries of the estate of Mrs Pointer are entitled to receive is what they would receive if the contract by which Mrs Pointer was bound had been performed, namely the balance of the purchase price. In the present case, even before Mr Porter died, he made the most extensive efforts to find a person who could give him a legal discharge of his debt, and enable him to acquire the legal estate to which he and Mrs Porter would have been entitled. If there had been a legal personal representative of Mrs Pointer, Mr and Mrs Porters (or, after the death of Mr Porters, Mrs Porters alone) could have obtained an order for specific performance of the Contract for Sale of Land. It is because of the conduct of the persons entitled to Mrs Pointer's estate, whoever they might be, in not taking out any claim for any grant of representation, or in any way assisting Mr Porter's solicitor to regularise the title position during Mr Porter's lifetime, that the matter remained unresolved. When, years later, the Council sells the land the subject of the contract, the rights concerning the estate of Mrs Pointer should be administered in accordance with the maxim that equity regards as done that which ought to be done. It would be the sort of result that equity would abhor if, as a consequence of failing to take representation and cooperate in the manner in which they did, the beneficiaries were able to obtain a windfall benefit as a result of the land having been sold. 29 For these reasons, I am satisfied that Mrs Porters has established an equitable right to the fund of money now held by the Council, subject to her paying to the Council the amount which remained due under the contract. 30 There remains a question of what, now, is the amount which remains due under the contract. I have already held (at para [2] above) that an amount of $1,416 remained outstanding under the contract. The contract did not make time of the essence for payment of instalments of the purchase price, or make any provision for interest on overdue payments. The substantial reason why no payments of instalments were made after Mrs Pointer's death was because she had no legal personal representative, and people who might be her beneficiaries expressed no interest in becoming her legal personal representative. I see no reason why payment of the unpaid instalments should now be required to be made with interest. 31 If there were to be a meticulous working out of the legal rights under the contract, it would require that Mrs Porter pay to the Council the amount which remains due under the contract, and receive in exchange the entity that now represents the land itself, namely the entirety of the fund held by the Council. However, when equity looks at the substance of matters, and not form, in moulding decrees, the same effect is achieved by simply declaring that Mrs Porters is entitled to receive the fund, minus the amount unpaid. 32 I declare that subject to retention of the sum of $1,416, the balance of moneys held by the defendant from the sale of property known and described as 17 Main Road, Heddon Greta are held on trust for the plaintiff. I order the defendant to pay the balance, subject to retention of that sum of $1,416, to the plaintiff or as she may direct. ********** Endnote to para [24] 33 The "freedom of the city" means becoming a freeman in the City of London. Walker, The Oxford Companion to Law, (Oxford, 1980) page 497 says that "freeman" "… came to mean a person having the full privileges of a city or borough, or a company, especially one of the Livery Companies, which he has obtained by birth, apprenticeship, or purchase. Prior to 1835 the freeman of boroughs had trading privileges, and frequently had exemptions and influence in or even monopoly of the Parliamentary and local government franchise." 34 It appears from the report of Frederick v Frederick (1721) 1 P Wms 710; 24 ER 582 that one became a freeman by becoming a member of one of the guilds, that being a freeman could bring with it onerous responsibilities to undertake civic office, that the aldermen were guardians of the city orphans whose licence was necessary for a marriage to an orphan, and that the aldermen conducted their proceedings in a court of record. It was a common feature of medieval England for a borough to have such a court: Holdsworth, A History of English Law, volume 1, 7th edition 1956, page 148-150. **********

Porters v Cessnock City Council

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Judgment (10 paragraphs)

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