Nullagine Investments Pty Ltd v WA Club Inc
177 CLR 635116 ALR 26
(Judgment by: Deane J, Dawson J, Gaudron J)
Between: Nullagine Investments Pty Ltd
And: WA Club Inc
Judges:
Brennan J
Deane J
Dawson JToohey J
Gaudron J
Subject References:
Real Property
Judgment date: 26 August 1993
Canberra (heard in Perth)
Judgment by:
Deane J
Dawson J
Gaudron J
On 1 October 1976, the respondent, The Western Australian Club Incorporated ("the Club"), of the one part and the appellant, Nullagine Investments Pty. Limited ("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 CJ in the Supreme Court of Western Australia. [F42] 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 CJ 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 CJ, 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. [F43] 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". [F44] 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. [F45] Indeed, the common law writ of partition, [F46] 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". [F47] 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" [F48] 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 [F49] 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). [F50] 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. [F51]
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 (i.e. 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". [F52] 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". [F53] 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. [F54] 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 CJ 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. [F55]
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.