Syme v Commonwealth [1942] HCA 29;

Syme v Commonwealth [1942] HCA 29; - HCA 1942 case summary — Zoe

[5]

This is a demurrer by the defendant the Commonwealth of Australia to a statement of claim. The statement of claim contains the following allegations: - The plaintiff is the mortgagee under a registered mortgage of land under the Transfer of Land Act 1928 Vict.. The defendant Rea is the registered transferee of the land subject to the mortgage, and he has entered into an indenture with the plaintiff by which he has covenanted to pay principal and interest under the mortgage. Default has been made in payment of both principal and interest at the due dates. The plaintiff on 22nd September 1941 gave notice in writing to Rea requiring him to pay principal and interest then due and unpaid, but Rea remained in default: See Transfer of Land Act 1928, secs. 146 et seq. There is no allegation that the plaintiff has exercised the power of sale under sec. 148. Rea was allowed to remain in possession - though the plaintiff might have entered into possession (secs. 151, 156). In March and August 1942 the Commonwealth took possession of parts of the land in the exercise of powers conferred by the National Security (General) Regulations made under the National Security Act 1939-1940. The Commonwealth agreed with Rea to pay him compensation under the Regulations at the rate of four pounds per week for part of the land and at the rate of fifty-five pounds per annum payable monthly for the other part. The plaintiff subsequently gave notice to the Commonwealth requiring the Commonwealth to pay all such moneys to her as mortgagee. The Commonwealth refused to comply with this demand, and the plaintiff sues for a declaration that she is entitled to be paid all the compensation moneys and for consequential relief. The Commonwealth has demurred to the statement of claim upon the grounds that the plaintiff is not a party, either by original privity or otherwise, to the agreement for compensation, and that the compensation is payable only to the defendant Rea with whom the agreement was made and who was the person who suffered loss or damage by reason of the Commonwealth taking possession of the land. The defendant also relies upon the failure of the plaintiff to make a claim for compensation under the Regulations and upon a provision (reg. 60K) that no action other than an action for the recovery of compensation shall be maintained against any person for anything purporting to be or to have been done in pursuance of (inter alia) reg. 54, under which the Commonwealth acted.

[25]

The plaintiff, who is the mortgagee of land under the Transfer of Land Act Vict., claims in this action that she, instead of the mortgagor, is entitled by virtue of her rights as mortgagee to receive from the Commonwealth the compensation which it agreed with the mortgagor pursuant to reg. 60D of the National Security (General) Regulations to pay him. The facts alleged to support this claim are briefly that the Minister validly took possession of one parcel of thirty acres and another of sixty-two acres of the mortgaged land pursuant to reg. 54 of those Regulations. The Commonwealth agreed with the mortgagor to pay him "compensation" at the rate of four pounds per week "for the said thirty acres" and fifty-five pounds per annum, payable monthly, "for the said sixty-two acres." The compensation was "for the loss or damage suffered by reason of the taking possession" of these two parcels of the mortgaged land. It is not alleged that the agreement was in writing, and no agreement has been produced. It is assumed for the purpose of the demurrer that the agreement was in the terms alleged by the plaintiff. The other facts which the plaintiff alleges to support her claim are that, before the Commonwealth took possession of the land, the mortgagor had failed to comply with a notice in writing to pay the money owing on the mortgage and default in payment continued and she gave notice to the Commonwealth to pay her, as the mortgagee, all moneys due and accruing due to the mortgagor under the agreement. It is not alleged that before the Commonwealth took possession the plaintiff had taken any steps to enforce the security other than to give the notice; but it is alleged that the mortgagor was in occupation of the land at the time the Commonwealth took possession. The question is whether the moneys which the Commonwealth agreed to pay the mortgagor by way of compensation are bound by the mortgage, or fall within the scope of the plaintiff's powers and remedies to recover the moneys owing on the mortgage. Reg. 54 confers power on the Minister to take possession on behalf of the Commonwealth of any land and to give directions in connection with the taking of possession of the land. This regulation further provides that, while the land is in the possession of the Commonwealth in pursuance of such a direction, it may notwithstanding any restrictions imposed on its use be used by or under the authority of the Minister in such manner as he thinks expedient for defence. Broadly the regulation further confers on the Minister the rights of user incident to an unencumbered estate in fee simple. Reg. 60D creates an obligation for the payment of compensation to any person who has suffered or suffers loss or damage "by reason of anything done in pursuance of" a number of regulations including reg. 54 "in relation to ... any property in which he has, or has had, any legal interest, or in respect of which he has, or has had, any legal right." It allows the amount of compensation to be determined by agreement, and the Regulations also provide alternative procedure for its assessment. Sub-reg. 5 empowers the Minister, where the compensation is determined by agreement, to execute an instrument setting out the terms and conditions agreed upon.

[31]

By the statement of claim the plaintiff alleges that she is the registered proprietor of an instrument of mortgage executed on 16th April 1928 whereby 272 acres of land subject to the provisions of the Transfer of Land Act 1928 Vict. were mortgaged to her to secure the repayment of a sum of £4,000 repayable on 16th July 1934. On 16th July 1934 the mortgagors transferred the mortgaged lands subject to the mortgage to Rea, he entering into an indenture whereby he agreed to pay to the plaintiff the principal sum, £4,000, on 16th April 1938 and to pay interest in the meantime at the rate of seven per cent per annum reducible on prompt payment to five per cent per annum by equal half-yearly payments on the 16th days of April and October in every year. On or about 15th March 1935 Rea paid the sum of £250 on account of principal, but he has failed to pay the balance of principal or to pay interest on the overdue balance since 16th April 1940; the amount of interest owing at 16th April 1942 being £428 15s. Although Rea made default in payment of principal and interest, the plaintiff did not exercise her right under the Transfer of Land Act to enter into possession of the mortgaged land or her right under the Property Law Act 1928 Vict. to appoint a receiver. On 8th March 1942 the Commonwealth of Australia, acting under the powers conferred upon it by reg. 54 of the National Security (General) Regulations, made under the authority of the National Security Act 1939-1940, entered into possession of thirty acres of the mortgaged land, and, on 16th August, into possession of a further sixty-two acres thereof. On 8th March 1942, pursuant to reg. 60D, the Commonwealth agreed with Rea to pay to him compensation at the rate of four pounds per week from that date for the thirty acres, and, on 16th August 1942, agreed to pay to him compensation at the rate of £55 per annum payable monthly for the sixty-two acres "for the loss or damage suffered pursuant to the taking possession of these two parcels of land." On 22nd July 1942 the plaintiff gave notice in writing to the Commonwealth to pay to her as mortgagee all moneys payable as compensation for the taking of the thirty acres, and, on 25th August 1942, notice to pay to her all moneys payable as compensation for the taking of the sixty-two acres. Since 8th March 1942 the Commonwealth has been in continuous possession of the thirty acres, and since 16th August 1942 of the sixty-two acres, and is still in possession thereof. It has refused to pay to the plaintiff any of the compensation moneys which have become payable under the agreements, but has continued to pay them to Rea.

[34]

The legal position is, in my opinion, as follows. In July and August 1942 the plaintiff was entitled, as between herself and Rea, to exercise the powers conferred upon the mortgagee by the Transfer of Land and the Property Law Acts, including the right to enter into possession conferred upon her by sec. 151 of the former Act. But, if a mortgagee who has a right to enter into possession fails to exercise it, a mortgagor, pending such exercise, can still possess and use the land for his own benefit and is not liable to account to the mortgagee for any rents or profits which he may receive in the meantime. If the Commonwealth had been the tenant of Rea, the plaintiff could have served a notice on the Commonwealth to pay to her the rents which the Commonwealth had agreed to pay to the defendant for the thirty and sixty-two acres. By intercepting the rents and profits in this way and thus taking over the management and control of the ninety-two acres, the plaintiff would have exercised her right to enter into possession of this land (Noyes v. Pollock[22]). As a corollary to this right, if the Commonwealth had refused to pay the rents to her, she would have been entitled to bring an action to eject the Commonwealth from possession. But the Commonwealth is not in any sense a tenant of the land. Its title to possession does not depend upon any express or implied agreement made with any persons interested in the land, but is paramount to and overrides any other statutory or common law or equitable rights existing in any person with respect to possession (Attorney-General v. De Keyser's Royal Hotel[23]). It is therefore a right, the exercise of which can cause loss and damage, not only to the person in possession of the land at the date of the entry, but to any persons who become entitled to such possession at any time during the intrusion. The loss or damage arising from time to time from the intrusion is of the same nature as the loss or damage caused from time to time by a continuing trespass.

[35]

Reg. 60D provides that any person who has suffered or suffers loss or damage by reason of anything done in pursuance of reg. 54 in relation to any property in respect to which he has or has had any legal right or interest shall be paid such compensation as is determined by agreement, or, in the absence of agreement, may, within one month after the doing of the thing on which the claim is based or within such further time as the Minister allows, make a claim in writing to the Minister for compensation. A mortgagee suffers damage from the entry into or continuance in possession of the mortgaged land by the Commonwealth from the time when such entry or continuance interferes with his rights. If he is in possession at the time, he suffers immediate damage and can make an immediate claim, but, if the mortgagor is in possession, the mortgagee only commences to be damaged, and his claim, therefore, only arises when he becomes entitled to possession and attempts to exercise that right but is prevented from doing so by the Commonwealth. The entry into possession by the Commonwealth might never cause him any damage, as the mortgagor might not default or the Commonwealth might go out of possession before he had a right to enter into possession or he might not desire to exercise the right if it had arisen. The provision that a claim must be made (except where the Minister enlarges the time) within one month after the doing of the thing on which the claim is based, seeing that continuing loss and damage is caused by the continuance of the intrusion, means, in my opinion, that the claim may be made in respect of loss or damage suffered by any person at any time during its continuance, but that the claim must be limited to loss or damage suffered within one month of the date upon which it is made (Whitehouse v. Fellowes[24]; Wilkes v. Hungerford Market Co.[25]; Lloyd v. Wigney[26]; Harrington (Earl of) v. Derby Corporation[27]). The proviso recognizes that a claim may be made in respect of an interference with rights which is of a continuing nature and which can be compensated for by periodical payments. These payments would be compensation for the loss of the ordinary rents and profits of the land, whilst the further claim for compensation, which can be made within one month after the interference ceases, would be payable in respect of damage caused by acts done upon the land by the Commonwealth during its possession.

[36]

The regulation provides for each person damaged by the exercise by the Commonwealth of its rights under reg. 54 making a separate personal claim, whether that claim is settled by ordinary contract (reg. 60D (5)), by the quasi-contractual provisions of reg. 60E, or by adjudication under regs. 60F and 60G, so that any compensation that becomes payable pursuant to the settlement of an individual claim by any of these methods becomes the property of that claimant alone. Mr. Mulvany referred us to the case of Law Guarantee and Trust Society Ltd. v. Mitcham and Cheam Brewery Co. Ltd.[28], and other similar cases, and submitted that by analogy the compensation agreed to be paid to a mortgagor in respect of the possession by the Commonwealth of the land must be considered to be paid on behalf of all persons interested in the possession of the land; and must therefore belong to the plaintiff, after she had exercised her right to enter into possession, so far as she was able to do so as between herself and the mortgagor, having regard to the paramount title of the Commonwealth. But these cases are all distinguishable, because the compensation moneys in question were paid in respect of the extinction of the licence of licensed premises and in satisfaction of the claims of all persons interested in the licence (In re Bladon; Dando v. Porter[29]). Such moneys represent a conversion of part of the capital value of the property into money. A mortgagee is entitled to have such moneys applied in discharge of the mortgage debt on its due date. They would, therefore, have to be applied in discharge of the mortgage debt if it was then due, or invested until it became due, the mortgagor being entitled to the income until default. The regulation could, no doubt, have provided that the amount of compensation agreed to be paid by the Commonwealth upon its taking possession of the land was to be applied for the benefit of the persons entitled inter se to the possession from time to time. But, if this had been intended, one would have expected the Regulations to provide for the settlement of the amount of compensation to be made by an agreement to which all parties interested were parties, or at an adjudication of which all such persons were given notice. The amounts agreed to be paid to Rea were compensation for the personal damage he suffered by the Commonwealth taking possession of the land: Cf. In re Williams' Settlement; Williams Wynn v. Williams[30]; In re Lindsay's Settlement [No. 1][31]. The plaintiff cannot claim any part of them, either against Rea or against the Commonwealth in respect of any agreement entered into between it and Rea. But she is entitled to make an individual claim for compensation against the Commonwealth in respect of any damage she may suffer by its actions.

At a glance

Court

Decision date

Before

Source

Judgment (52 paragraphs)

Syme v Commonwealth [1942] HCA 29; (1942) 66 CLR 413 (28 October 1942)

Parties

Legislation Cited (3)

Cases Cited (1)