O'Neill v O'Connell
72 CLR 114(1945) 19 ALJ 227
(Judgment by: Williams J)
O'Neill
vO'Connell
Judges:
Starke J
Dixon J
Williams J
Legislative References:
Judiciary Act 1903-1940 - 38A; 40A
Rules Publication Act 1903-1939 - 6A(1)
Case References:
cf Ex parte Walsh and Johnson, Re Yates - 37 CLR 36; [1926] ALR 77
George Hudson Ltd v Australian Timber Workers' Union (1923) - 32 CLR 413; 30 ALR 19
re Cousins, Alexander v Cross - (1885) 30 Ch D 203
Skelton v Younghouse - [1942] AC 571
Sharp v Union Trustee Company (1944) - 69 CLR 539
London and South-Western Railway Company v Gomm - (1882) 20 Ch D 562
Given v Massey (1892) - 31 LR Ir 126
Re Wilson, Wilson v Wilson - [1908] 1 Ch 839
Larsen v Sylvester and Co - [1908] AC 295
Thorman v Dowgate Steamship Co Ltd - [1910] 1 KB 410
cf Robertson v Deputy Federal Commissioner of Land Tax - 65 CLR 338; [1942] ALR 237
re Cousins - (1885) 30 Ch D 203
Wright v Morgan - [1926] AC 788
Radnor v Shafto - (1805) 11 Ves 448; 32 ER 1160
Brooke v Garrod - (1857) 2 De G
&
J 62; 44 ER 911
cf Attorney-General v Wax Chandlers Company - (1873) LR 6 HL 1
Messenger v Andrews - (1828) 4 Russ 478; 38 ER 885
re Drew - [1919] VLR 600; 25 ALR 400
R v Maryborough Licensing court (1919) - 27 CLR 249
Pirrie v McFarlane (1925) - 36 CLR 176; 31 ALR 367
Ex parte Walsh and Johnson (1925) - 37 CLR 130
Commonwealth v Kreglinger (1926) - 37 CLR 420; [1926] ALR 180
James v South Australia (1927) - 40 CLR 333; [1927] ALR 334
R v Gates, Ex parte Maling (1928) - 41 CLR 519
R v Carter, Ex parte Kisch (1934) - 52 CLR 224; [1935] ALR 125
Ffrost v Stevenson (1937) - 58 CLR 577; [1937] ALR 533
Hopper v Egg and Egg Pulp Marketing Board (1939) - 61 CLR 673; [1939] ALR 251
Joyce v Australasian United Steam Navigation Company (1939) - 62 CLR 160; [1939] ALR 442
R v Bevan (1942) - [1942] ALR 170
Oppenheimer v Minister of Transport - [1942] 1 KB 242
Re Cant's Estate - (1859) 4 De G
&
J 503
re Kerry - (1889) WN 3
Re Armstrong's Will Trusts, Graham v Armstrong - [1943] 1 Ch 400
Commissioner of Taxes (Queensland) v Camphin - [1937] ALR 401
Trustees Executors and Agency Co Ltd v The Federal Commissioner of Taxation - 69 CLR 270; [1944] ALR 319
Re Busby, Busby v Busby - (1930) 30 SR (NSW) 399
Ex parte Hardy (1861) - 30 Beav 206
Re Davison and Torrens - (1866) 17 Ir Ch 7
Re Wilson - [1908] 1 Ch 839
Lord Advocate v Meiklam - (1860) 22 S C 1427
Judgment date: 11 April 1946
Judgment by:
Williams J
The testator, Jerome O'Connell, died on 26th October, 1944. By his will, made on 15th August, 1939, he appointed the respondents to be his executors and trustees, and gave, devised and bequeathed his property to them upon trust to sell and convert the same into money, with power to postpone conversion for such period as they in the exercise of their discretion should think fit, and to hold the proceeds of conversion upon the trusts therein mentioned. By a codicil made on 15th October, 1944, he gave the appellant an option to purchase the freehold of certain business premises known as the Busy Store at Shepparton for £6500, and authorised his executors, the respondents, to allow terms, the option to be exercised within twelve months of his death. The appellant exercised this option by two notices in writing, the one dated 24th August and the other dated 16th October, 1945. The second notice was given while it was considered doubtful whether the exercise of an option given by will is a transaction which is subject to the provisions of the National Security (Economic Organisation) Regulations. It was also considered that such an exercise is such a transaction, and the regulations were an effective exercise by the Executive of the defence power at the time they were made; they had ceased to be effective upon the unconditional surrender of Japan on 2nd September, 1945. The appellant applied to the Treasurer for his consent to the exercise of the option, in accordance with the Regulations, but this was refused on the ground that the sum of £6500 was considered to exceed a fair and reasonable value of the land on 10th February, 1942, and the respondents would not complete the transaction. The appellant then filed an originating summons in the Supreme Court of Victoria for the determination ( inter alia ) of the following questions: --
- 1.
- Is the notice dated 24th August, 1945, or the notice dated 16th October, 1945, delivered to the executors an effective exercise of the option to purchase the freehold of the business known as the Busy Store Shepparton under the terms of the codicil of the deceased dated 15th October, 1944?
- 3.
- Does the notice dated 24th day of August, 1945, or the notice dated 16th October, 1945, delivered to the executors confer upon the plaintiff an enforceable right to receive a transfer of the freehold of the testator's business premises upon the terms contained in the codicil of the deceased?
The cause was removed into this court under the Judiciary Act 1903-1940 by reason of a question arising as to the limits inter se of the constitutional powers of the Commonwealth and the States, and was heard by the Chief Justice, who held that the Regulations were valid at the respective dates of each notice, and that the exercise of an option to purchase land given by will is a purchase within the meaning of that word in reg 6 (1) ( a ).
The appeal therefore raises two main questions, the one whether the Regulations were valid at the respective dates of the notices, and the other whether, if they were valid on either of these dates, the exercise of an option to purchase land given by will is a transaction which falls within and is avoided by the Regulations. The Commonwealth sought leave to intervene upon the first but not upon the second of these questions. As it would only be necessary to determine the first question if the appellant failed on the second question, and as the court was constituted by three Justices, it was decided to proceed with the second question, and, if this question was determined adversely to the appellant, to re-constitute the court and to have the appeal re-argued in part or in whole. The Commonwealth then withdrew its application to intervene at this stage, and argument was heard on the second question.
The question raises two points. The first whether the exercise of the option in question was a purchase or other acquisition of land within the meaning of the Regulations; and the second whether, if it was, the failure to obtain the Treasurer's consent had the effect of avoiding the transaction, or the Regulations are so framed that the transaction was not avoided although the appellant became liable to a prosecution.
As to the first point: The principal regulation is reg 6. Regulation 6 (1) provides that a person shall not, without the consent in writing of the Treasurer, ( a ) purchase any land; ( b ) take an option for the purchase of any land; ( c ) take any lease of land; ( d ) take a transfer or assignment of any land; or ( e ) otherwise acquire any land. Regulation 6 (2) excepts certain transactions from the operation of reg 6 (1). One of the excepted transactions is reg 6 (2), "the taking of an option for the purchase of any land where the period within which the option may be exercised is limited to one month after the taking of the option." This exception would appear to have been made because the exercise of the option would make a binding contract for the purchase of the land and the consent of the Treasurer would be required to the purchase, and it would seem to follow that, although the Treasurer had consented under reg 6 (1) ( b ) to the taking of an option for more than this period, his consent would also be required to its exercise. Regulation 8 ( b ) therefore excepts the exercise of any option in writing given before 20th February, 1942.
Regulation 6(2)(d) excepts the acquisition of land by way of gift. The Oxford Dictionary states that a "gift" is "a transference of property in a thing by one person to another voluntarily and without any valuable consideration." There are three kinds of gifts in law, namely, gifts inter vivos , gifts mortis causa , and gifts by will. The meaning of "gift" in reg 6 (2) ( d ) depends to a great extent upon the meaning to be attributed to the words "other acquisition of property" in reg 6 (1) ( e ). The preceding paragraphs of reg 6 (1) all apply to the acquisition of property by virtue of an immediate transaction, and do not include interests in land acquired by devolution on death under the will or intestacy of a deceased person. The excepted transactions, omitting for the moment reg 6 (2) ( d ), also refer to immediate transactions, and the machinery contained in reg 6, subregs (3) to (10) inclusive for obtaining the Treasurer's consent also contemplates that the transaction under which the land or an interest in the land is to be acquired is a transaction about to be entered into in the immediate future, or is a transaction which has just been entered into subject to an application being made to obtain his consent within the following three months. These provisions would be quite unworkable with respect to an interest which is acquired upon the death or intestacy of a deceased person.
In the case of land, the prohibition is expressly imposed upon its acquisition without the consent of the Treasurer, whereas in the case of shares the prohibition is expressly imposed upon their disposal without his consent, but the effect upon the validity of the transaction would be the same in each case. Regulation 7 (1) ( c ) provides that dispositions by way of gift, by will or in the exercise of a power of appointment under a will, are to be an exception from the prohibited dispositions of shares. The inclusion of dispositions by will as well as by way of gift tends to show that the word "gift," when used in reg 6 (2) ( d ), does not include testamentary gifts. In the context of the Regulations as a whole it would appear, therefore, that the words "otherwise acquire any land," in reg 6 (1), should be read ejusdem generis with the provisions which precede and succeed them, so that they do not include the devolution of land on death, and by parity of reason that the acquisition of land by way of gift mentioned in reg 6 (2) ( d ) refers only to gifts inter vivos .
In this connection there are two provisions in reg 8 which require consideration. This regulation provides that nothing in this Part shall prevent ( d ) the vesting in the personal representative of a deceased person, in his capacity as such, of any property or any interest in any property, or ( f ) any transaction which is without consideration in money or money's worth, and the purpose of which is to vest any property, or any interest in property in any person beneficially entitled thereto under or by virtue of any will or intestacy.
The first of these provisions appears to assume that under the laws of each State, both the real and personal property of a deceased person, upon the grant of probate or letters of administration, will vest in the personal representative of that person, but does not deal with the equitable interests in property that arise upon death under, for instance, a specific bequest of shares or a specific devise of land.
The second of these provisions appears to assume that under the laws of each State it is necessary for the personal representative to assent to or execute some instrument of conveyance or transfer of land or shares to the devisee or legatee. The purpose of the words "any transaction which is without consideration in money or money's worth" appears to be to confine the vesting to a transfer of the legal and beneficial interest to the person beneficially entitled under the will or intestacy, and not to include some other person to whom the beneficiary has assigned his interest for valuable consideration.
The Chief Justice considered that an option given by will to purchase property does not in itself and independently of its exercise give an equitable interest in that property, whether or not the right of the optionee can properly be described as itself being property, and that it is only if the option is exercised, and if in the proper course of administration the executors are in a position to make and do make a contract of sale to the optionee, that the optionee will then under the contract obtain an equitable interest in the property in respect of which the option is given. But, with respect, I am unable to agree with this view. The authorities establish, in my opinion, that an option to purchase land, whether created by an instrument inter vivos or by will, creates an immediate equitable interest in the land -- Oppenheimer v Minister of Transport , [1942] 1 KB 242; Re Cant's Estate , (1859) 4 De G. & J 503; In re Kerry , (1889) WN 3; Re Armstrong's Will Trusts, Graham v Armstrong , [1943] 1 Ch 400; Commissioner of Taxes (Queensland) v Camphin , [1937] ALR 401; Trustees Executors and Agency Co Ltd v The Federal Commissioner of Taxation , 69 CLR 270 at pp 285 and 298, [1944] ALR 319 , 325. A donee of an option to purchase land given by a will is a beneficiary of that beneficial interest -- Re Busby, Busby v Busby , (1930) 30 SR (NSW) 399. The executors have as against him the same overriding common law or statutory power as they have against a devisee to sell the land to pay the funeral and testamentary expenses, death duties and debts of the deceased. But the donee of the option is still entitled to exercise the option, and upon such exercise and performance of its conditions to follow the proceeds of sale in the hands of the executors -- Re Armstrong (above ). As Lord Romilly said, in Ex parte Hardy , (1861) 30 Beav. 206 at p 208, referring to a compulsory purchase of land subject to such an option -- "The option will remain, whether the fund continues as it is, in stock, or is re-invested in land." This is because the option creates an equitable interest in the land at the date of death. The donee, therefore, upon exercising the option in accordance with the conditions contained in the will, acquires against the executors, irrespective of whether a contract is entered into or not, all the rights intended to be thereby conferred upon him, and if a contract is entered into it cannot override but will be subject to these conditions -- Brooke v Garrod , (1857) 3 K. & J 608, 2 De G. & J 62 at p 66. In this case, in the court below, the option was described by Sir W. Page Wood, as he then was, as a trust to convey the property to the optionee, provided he complied with the conditions of the option; and, in Radnor v Shafto , (1805) 11 Ves. 448 at p 454, Lord Eldon pointed out that the remedy of the optionee would be to bring a suit to administer the trust. Thus, an option has been described by Lord St. Leonards, in his book on Vendors and Purchasers , in a passage cited with approval in Re Davison and Torrens , (1866) 17 Ir. Ch 7 at p 10, as in substance a devise of the estate itself if the favoured object elects to take it; and in Williams, Vendor and Purchaser (4th ed ) at p 571, it is stated that -- "In order that an option to purchase land may be well exercised the terms of the ... devise, which created the option, must in all respects be strictly pursued." Cf . also Seton on Decrees (7th ed ), Vol II., at pp 1487, 1488.
The respondents, as I understood their argument, did not contend that the vesting of the option was an acquisition of land within reg 6 (1) ( e ), but they did contend that, in order to make its exercise effective, it would be necessary for them to enter into a contract with the appellant, and that this contract would be a purchase of the land by him from them within the meaning of reg 6 (1) ( a ). They relied strongly upon the decision of Warrington, J, as he then was, in Re Wilson , [1908] 1 Ch 839. There a testator devised and bequeathed his real and personal property to his trustees upon trust for sale and conversion, and directed that they should allow his son the option of purchasing two houses forming part of his realty for £450. These houses were subject to a mortgage of £300. The son exercised the option, and it was held that he was entitled to have the land conveyed to him free from the mortgage. His Lordship, following Given v Massey , (1892) 31 LR Ir 126, held that Locke King's Act did not apply, because the son was a purchaser and not a devisee of the land within the meaning of the Act. In case this was not the true view, he also held that the intention of the testator was to place the son in the same position as any outside purchaser would have occupied, or, in other words, that the will manifested a contrary intention within the meaning of the Act. He remarked (at p 845) that the testator
made it incumbent on the trustees, if the son expressed his desire to purchase the property, to sell it to him at a particular price. They are just as much acting under the trust for sale as in the case of any other purchaser.
But these remarks must be read in their context, and were only intended, it seems to me, to mean that because the exercise of the option made it incumbent upon the trustees to sell the land to the son, he was to be regarded for the purposes of the Act as being in the same position as any other person to whom the trustees sold the testator's land. They do not in my opinion throw any light on the meaning of the relevant provisions in reg 6 (1), and lend no support to the view that an optionee does not acquire an equitable interest in the property until the trustees accede to the exercise of the option and make a contract with him. Further, it does not appear that any contract had in fact been entered into between the trustees and the son. If trustees in the case of such an exercise are acting just as much under the trust for sale as in the case of any other sale, and the rights of the optionee are merely incidental to and dependent upon the exercise of the trust as they are in some forms of pre-emptive rights, the right of the optionee to a conveyance of the land upon the exercise of the option would be subject to the trustees' rights to postpone conversion, and would be liable to be defeated if all the persons beneficially entitled to the proceeds of sale elected to take the land in specie. But, subject to the exercise of an overriding power of sale, the right of the optionee is to acquire the subject land upon the exercise of the option, and this right is independent of and overrides the general right of the trustees to decide to sell or postpone the sale of the trust estate under a general trust or power. The creation of such an option, as the court of Session pointed out in Lord Advocate v Meiklam , (1860) 22 S C. 1427 at pp 1431 and 1435, indicates a wish by the testator that the holder of the option should have the particular land, and only to make that land subject to the general trust or power of sale if the donee declines to exercise the option.
In the light of all these considerations, it does not appear to me that the exercise of an option to purchase land given by will is a purchase or other acquisition within the meaning of reg 6 (1). The acquisition of the option without the Treasurer's consent is not, as I have said, prohibited by the Regulations, and the optionee becomes a beneficiary and liable to pay Federal estate duty on the value of the benefit conferred upon him -- Re Busby (above ). It would be highly anomalous if he could lawfully acquire the option without the consent of the Treasurer, but after being subjected to duty, could not lawfully exercise it without such consent. An exercise of such an option in the case of shares would fall within the exception contained in reg 7 (1) ( c ), and it would be anomalous that such an option should be exercisable in the case of shares but not in the case of land. Regulation 6 (1) must be construed against the background of the national purposes for which the Regulations were enacted, and upon which their validity as an exercise of the defence power must depend. These purposes were to guard against land and shares being bought and sold during the war at inflated prices, and possibly to promote the investment of money in war loans rather than in such property. Regulation 8 indicates that they were not intended to operate so as to restrict testamentary capacity, and such an operation would afford a strong argument against their validity. The purpose of reg 6 (1) ( a ) and ( b ) is to prohibit the making of contracts of sale between persons who prior to entering into such contracts are free either to contract or not, and the acquisition of contractual options from persons who are in a similar position unless the consent of the Treasurer be obtained. As I have said, the reference in reg 6 (6) to a proposed transaction is apt to apply to the making of such contracts and the taking of such options, but is inapt to apply to the acquisition of a testamentary option which is dependent upon the uncertain event of death. For these reasons I am of opinion that the consent of the Treasurer was not required to a valid exercise of the option under discussion.
On the assumption, however, that this opinion is wrong, the appellant also relies on reg 10, which provides that: (1) Where any transaction is entered into in contravention of this Part or of Part VI. of these Regulations, or where any condition to which the transaction is subject is not complied with, the transaction shall not thereby be invalidated, and the rights, powers and remedies of any person thereunder shall be the same as if these Regulations had not been made. (2) Nothing in this regulation shall affect the liability of any person to any penalty in respect of any contravention of these Regulations.
The ordinary principle is that, in the absence of a sufficient indication of intention to the contrary, a transaction which is made illegal by statute is void. But the statute may indicate, either expressly or by implication, that it is not intended that the illegality shall avoid the transaction, but only that the wrongdoer shall incur some punishment. Regulation 10 falls into the latter category, because it provides expressly that where a transaction is entered into in contravention of the Regulations, the transaction shall not thereby be invalidated . There are other provisions in the Regulations which appear to be inconsistent with this regulation. Regulation 6 (10) provides that where a transaction is entered into subject to the consent of the Treasurer, the transaction shall not have any effect unless the Treasurer gives his consent thereto. Regulation 10B (1) provides that Registrars of Titles may, upon submission to them for registration of any instrument, require evidence that the transaction to which the instrument relates is not in contravention of the Regulations, and may refuse to register the instrument until such evidence is submitted. It is the duty of the court to construe the Regulations as a whole, and to reconcile and give effect as far as possible to all their provisions. So construed, reg 6 (10) would appear to mean that the transaction shall not be lawful in the sense that it cannot be carried into effect without incurring a penalty unless the Treasurer gives his consent thereto. Regulation 10B (1) would appear to mean that the Registrar of Titles may delay the registration of an instrument until evidence is submitted to him of its validity. But if the evidence shows that the transaction is in breach of the Regulations, I am unable to see, as at present advised, how he could do more than inform the Treasurer to that effect. As the transaction is expressly validated by reg 10 the purchaser would be liable to pay the purchase money, and therefore to have the land transferred to him, and the Registrar would not be entitled to refuse to register the instrument indefinitely. The Chief Justice considered, and I agree, that reg 10 means what it says, but held that there had been up to the present no transaction between the parties because the exercise of the option was an offer which did not bind the respondents prior to acceptance and the respondents had made no offer to the appellant. For the reasons already mentioned. I am of opinion that the exercise of the option was more than the making of an offer to the respondents, and it bound them, subject to the payment of the purchase money, to convey the land to the appellant. If, therefore, contrary to my opinion, this exercise was a purchase within the meaning of reg 6 (1) ( a ), it was a transaction within the meaning of the Regulations which would expose the appellant to a prosecution, but would be validated between the parties by reg 10.
For these reasons I would allow the appeal, and answer Questions 1 and 3 in the originating summons in the affirmative with respect to the exercise of the option by the notice of 24th August, 1945.