Haque v Haque

[1966] ALR 553
114 CLR 98

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(Judgment by: Kitto J)

Haque
vHaque

Court:

Judges: Barwick CJ
Kitto J
Menzies J
Windeyer J
Owen J

Case References:
Attorney-General v Bouwens - 150 ER 1390
Attorney-General v Meyrick - 28 ER 30
Attorney-General v Worrall - (1895) 1 QB 99
Balfour v Scott - 2 ER 1259
Central Trust and Safe Deposit Company v Snider - [1916] 1 AC 266
Commissioner of Stamp Duties v Salting - [1907] AC 449
Commissioner of Stamps (Q) v Counsell (1937) - 57 CLR 248
Commissioner of Stamps v Hope - [1891] AC 476
Darby v Darby - (1856) 3 Drew 495; 61 ER 992
Drummond v Drummond - 2 ER 1293
Duckett v Collector of Imposts - (1927) VLR 457
Ewing v Orr Ewing - (1883) 9 App Cas 34
Forbes v Steven - (1870) LR 10 Eq 178
Haque v Haque (1962) - 108 CLR 230
Harding v Commissioners of Stamps for Queensland - [1898] AC 769
Henderson v Bank of Hamilton - (1894) 23 SCR (Can) 716
Herbert v Christopherson - [1930] 1 Ch 407
Heron v Espie - (1856) 18 D 917
Howard v Miller - [1915] AC 318
Jabbour v Custodian of Absentee's Property of State of Israel - [1954] 1 All ER 145
Jerningham v Herbert - (1828) 4 Russ 388; 38 ER 851
Jones v Gibbons - (1804) 9 Ves Jun 407
Lambe v Manuel - [1903] AC 68
Lawson v Commissioners of Inland Revenue - (1896) 2 IrR 418
Livingston v Commissioner of Stamp Duties (Q) (1960) - 107 CLR 411
Lysaght v Edwards - (1876) 2 Ch D 499
Macdonald v Macdonald - (1932) SC (HL) 79
McClelland v Trustees Executors and Agency Co Ltd (1936) - 55 CLR 483
Mount Albert Borough Council v Australasian Temperance and General Mutual Life Assurance Society - [1938] AC 224
New York Life Insurance Co v Public Trustee - (1924) 2 Ch 101
Payne v r - [1902] AC 552
Pipon v Pipon - 27 ER 14
Privy Council in Harding v Commissioners of Stamps for Queensland - [1898] AC 769
R v Lovitt - [1912] AC 212
Rayner v Preston - (1881) 18 Ch D 1
Re Anziani; Herbert v Christopherson - (1930) 1 Ch 407
Re Berchtold; Berchtold v Capron - (1923) 1 Ch 192
Re Colling - (1886) 32 Ch D 333
Re Fuller's Contract - (1933) Ch 652
Re Holland; Brettell v Holland - (1907) 2 Ch 88
Re Hoyles; Row v Jagg - (1911) 1 Ch 179
Re Loveridge; Drayton v Loveridge - (1902) 2 Ch 859
Re O'Neill; Humphries v O'Neill - (1922) NZLR 468
Re Ralston; Perpetual Executors and Trustees Association v Ralston - (1906) VLR 689 and
Re Ritson; Ritson v Ritson - (1898) 1 Ch 667; (1899) 1 Ch 128
Re Stokes; Stokes v Ducroz - (1890) 62 LT 176
Re Williams; National Trustees Executors & Agency Co of Australasia Ltd v Brien - (1945) VLR 213
Rodriquez v Speyer Brothers - [1919] AC 59
Royal Trust Co v Provincial Secretary-Treasurer of New Brunswick (1925) - 2 DLR 49
Tabor v Grover - (1699) 2 Vern 367; 23 ER 831
Taylor v London and County Banking Co - (1901) 2 Ch 231
Thomson v Advocate-General - 8 ER 1294
Thornborough v Baker - 36 ER 1000
Toronto General Trusts Co v r (1917) - 39 DLR 380
Toronto General Trusts Corporation v r - [1919] AC 679
Wall v Bright (1820) - 1 Jac & W 494; 37 ER 456
Wallace v Attorney-General - (1865) LR 1 Ch 1
Walsh v r - [1894] AC 144
Weston v Mowlin - (1760) 2 Burr 969
cf Brannigan v Brannigan - (1954) NZLR 858
cf Freke v Lord Carbery - (1873) LR 16 Eq 461
cf Payne v r - [1902] AC 552
cf Philipson-Stow v Inland Revenue Commissioners - [1961] AC 727
cf R. v Lovitt - [1912] AC 212
cf Re Holland; Brettell v Holland - (1907) 2 Ch 88
re Berchtold; Berchtold v Capron - (1923) 1 Ch 192
re Cutcliffe's Will Trusts; Brewer v Cutcliffe - (1940) 1 Ch 565

Hearing date: 9 and 10 September 1964
Judgment date: 29 July 1965

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Judgment by:
Kitto J

Abdul Haque, who will be called the deceased, died leaving a will by which he devised and bequeathed all his estate to the appellant absolutely. At his death he was resident in Western Australia and had property there; but he was domiciled in India. In Western Australia, as in all countries which accept the general principles of private international law obtaining in English courts, the law of a deceased person's domicile is followed for the purpose of determining the succession to property in that State which the law of the State regards as movable, but the State's own municipal rules govern the succession to property there which that law regards as immovable. Accordingly the will of the deceased, being valid according to the municipal law of Western Australia, entitles the appellant to succeed to immovable property (if any) in that State; but since, according to the relevant Indian law (which is Muslim law as proved in the present case) the right of succession to the property of the deceased belongs to his widow and children notwithstanding a will, the appellant takes no interest under Western Australian law in any of the property in the State which consists of movables. That this is so has been established between the parties in earlier proceedings (1962) 108 CLR 230 .

By the order made by this Court in those proceedings, any question arising in relation to immovables in Western Australia was expressly left for determination by the Supreme Court of the State. It had been assumed by all concerned that the property of the deceased in Western Australia consisted of movables only; but upon the matter coming again before the Supreme Court the appellant raised for the first time a contention that some of the property should be held to be immovables. Wolff CJ, having heard argument on the matter, decided that all the items in question were movables and made an order so declaring. From that order this appeal is brought, but in relation to some only of the assets to which it refers.

The order as drawn up takes the form of a declaration that the assets set out in a schedule are all movables. The schedule repeats a list which had been prepared between the parties and accordingly is expressed in their language and not that of the learned Judge. Though clear enough in intention, some of the descriptions employed tend to conceal the difficulties which it is necessary to resolve. For example, the first description is "moneys due to the deceased under contracts of sale" of certain lands, whereas the question to be decided concerns not only rights to receive purchase moneys but also interests in the lands comprised in the contracts. It is necessary therefore to define the question which arises in relation to each relevant item of property. (1) The first question concerns three parcels of freehold land in Western Australia. In respect of each parcel there was in force at the death of the deceased a contract by which he had bound himself to sell and convey the land to a purchaser upon payment of a price of which the whole or part was still unpaid. Unfortunately the terms of the contracts were not proved in the Supreme Court and are therefore not before us; but it is not suggested by any party that in any instance the time for completion had arrived or that the deceased had tendered a transfer. It is to be assumed, therefore, that the contracts were still in fieri. In each instance the deceased had the legal title to the land at his death, and subject to the contract he held it for his own benefit absolutely. But by the operation of well-known equitable principles the making of the contract had to an extent transferred the beneficial ownership to the purchaser. The deceased was not a mere trustee for the purchaser, but his position was something between that of a mere trustee and a mortgagee. He could exercise for his own benefit such rights with regard to the land as were consistent with the contractual rights of the purchaser until payment of the purchase money in full, and until that event he had a lien or charge for the unpaid purchase money: see Lysaght v Edwards (1876) 2 Ch D 499, at p 506. Sir George Jessel MR (ibid.) would have described him as being in a position analogous to (though not identical with) that of a mortgagee, one point of similarity being that if the contract should be validly cancelled for nonpayment of the purchase money the land would become his absolute property once more. Accordingly for some purposes he was in the position of a trustee, though for some he was not, as may be seen by contrasting Lysaght v Edwards (1876) 2 Ch D 499 with Rayner v Preston (1881) 18 Ch D 1 and Re Colling (1886) 32 Ch D 333. A fuller exposition of the matter appears in the judgment of Sir Thomas Plumer MR in Wall v Bright (1820) 1 Jac & W 494 (37 ER 456). The vendor is "in progress towards" trusteeship; and the incidents of trusteeship exist only if and so far as a Court of Equity would in all the circumstances of the case grant specific performance of the contract: Howard v Miller (1915) AC 318, at p 326; Central Trust and Safe Deposit Company v Snider (1916) 1 AC 266, at p 272.

Thus there devolved upon the deceased's executor both a right to enforce the contract, which in substance was a right to receive payment of the purchase money, and also a beneficial interest in the land. A right to receive a payment of money is undoubtedly a movable. An interest in land, on the other hand, is an immovable. The private international law in force in Western Australia must choose from three possibilities what rules of municipal law are to govern the succession to the right and to the interest. One possibility is that the law of the domicile governs the succession to the right in respect of the money, but that the law of the situs governs the succession to the interest in the land. But the right and the interest are not independent of one another, and it seems inconceivable that private international law should treat them as if they were. If this possibility be put aside, both the right and the interest must be governed by the one municipal law, either the law of the domicile notwithstanding the immovable character of the interest in the land or the law of the situs notwithstanding the movable character of the debt. Thus an exception covering the case must be allowed either to the general rule that succession to immovables is governed by the lex situs or to the general rule that succession to movables is governed by the lex domicile. There seems to be no clear authority on the point, strangely enough, but an analogy, not complete but sufficiently close, may be found in the case of a debt secured by a mortgage of land, and some degree of judicial consideration has been given to that case. The appellant relied particularly upon the judgments delivered in the Court of Appeal in Re Hoyles (1911) 1 Ch 179, and they require careful consideration. A testator domiciled in England gave by his will a share of his real and personal estate to charity. The estate included certain debts secured by mortgage of freehold lands in Upper Canada. By the law of England a testamentary gift of impure personalty to charity was void under the Mortmain Act, 1736, and by the law of Upper Canada such a gift was void under legislation which applied the provisions of the Mortmain Act to that country. The law of each country regarded mortgage debts secured on freehold property within the country itself as impure personalty. It was accordingly conceded that a bequest by a domiciled Englishman of a mortgage debt charged on land in England to a charity would be invalid, and that a bequest by a person domiciled in Upper Canada of a mortgage debt charged on land there to a charity would have been invalid. The dispute which came before the English courts arose because the Mortmain Acts had only local application and a mortgage debt charged on land out of England was not regarded as impure personalty by English municipal law. The decision was that English law regarded the law of Upper Canada as applicable to determine whether English courts would hold void a gift of land (including impure personalty) in Upper Canada, and that since according to the Mortmain law of Upper Canada a gift of a mortgage debt charged on land there was a gift of impure personalty and consequently void if made to a charity, the gift in question should be treated in England also as void. Both Cozens-Hardy MR and Farwell LJ approved the statement of Story in his Conflict of Laws, that "not only lands and houses, but servitudes and easements, and other charges on lands, as mortgages and rents, and trust estates, are deemed to be, in the sense of law, immovables, and governed by the lex rei sitae". It may be that in this passage the word "mortgages" refers only to the mortgagee's interests in the mortgaged land, and in Re Hoyles (1911) 1 Ch 179 it was unnecessary for the purposes of the judgments to consider whether it refers also to the debt. The reasoning of the Court may, I think, be reduced to three propositions: (i) a mortgagee's interest in mortgaged land is no less an immovable than any other interest in land; (ii) the Mortmain Act of Upper Canada therefore invalidated a gift to charity of the interest of a mortgagee in mortgaged land in Upper Canada; and English law will for its own purposes give effect to that invalidation; and (iii) because (as Cozens-Hardy MR said) "a mortgagee cannot assign the mortgage debt effectually without also transferring the security upon the land" (1911) 1 Ch, at p 184, a gift of a mortgage if invalid as a gift of the security should be held to fail as a whole. Fletcher-Moulton LJ, though joining in the decision, felt doubts about it, and Farwell LJ expressed himself as guided by the policy of the Mortmain Acts rather than by any considered conclusion upon what he termed "a preliminary abstract question whether mortgages on land are movable or immovable" (1911) 1 Ch, at p 187. To treat the case as an authority on that abstract question because of expressions occurring in the judgments but going beyond what the Court had actually to decide is to take a step that requires caution.

In Re O'Neill; Humphries v O'Neill (1922) NZLR 468 the New Zealand Supreme Court, in a judgment prepared by Sir John Salmond, held that it did not follow from Re Hoyles (1911) 1 Ch 179 that for all purposes mortgage debts were to be treated as immovable property. The Court decided that for the purposes of intestate succession such debts were to be treated as movables and accordingly as governed in regard to succession by the lex domicile. The conclusion does not rest only upon the language used by the Privy Council in cases such as Harding v Commissioners of Stamps for Queensland (1898) AC 769 and Lambe v Manuel (1903) AC 68, which arose under taxing statutes and on that account have been put aside, perhaps somewhat too readily, by some writers. Fundamentally it rests upon the view that English private international law, having to choose between diverting the security from its prima facie destination in order to make it follow the debt and diverting the debt from its prima facie destination in order to make it follow the security, accepts as of general validity the ingrained principle of English municipal law -- namely that the debt is the principal thing and the mortgagee's interest in the mortgaged property is an accessory only -- and accordingly makes the security follow the debt. It was that ingrained principle, "absolutely settled and determined centuries ago", which had led Palles CB to the same conclusion in Lawson v Commissioners of Inland Revenue (1896) 2 Ir R 418, at p 436; and the weight to which the opinion of that learned Judge is entitled is not lessened by the fact that what he said should no doubt be understood as confined to the case where the mortgage debt itself is to be considered as situate (eg because the specialty is there) in a country where the rules of English law apply. Sir John Salmond mentioned the contrast which is provided by the case of heritable bonds. Such bonds resemble mortgages when they contain both a charge of money upon land and a personal obligation. In Scottish courts, and consequently in English courts, such bonds, if they are situate in Scotland at the material time, are held to be immovables; but this is because Scottish law, rejecting the English principle that the debt is the principal thing, adopts the opposite rule that the land is to be considered "the principal debtor": Drummond v Drummond (1799) 6 Bro PC 601, at p 628 (2 ER 1293, at p 1311) and that therefore the immovable "draws after it the moveable or personal security": Jerningham v Herbert (1828) 4 Russ 388, at p 398 (38 E R 851, at p 855). There is here the clearest precedent for conceding that the rules in force in a country for the choice of law on the subject of intestate or testate succession may specially allow for the case of a movable and an immovable which are inherently connected with one another, and may select the law of that one which is considered the principal to govern the succession to them both.

The decision in Re O'Neill; Humphries v O'Neill (1922) NZLR 468 accords with views expressed repeatedly in this country: Re Ralston (1906) VLR 689, at p 694 (per Cussen J); Livingston v Commissioner of Stamp Duties (Q) (1960) 107 CLR 411 , at p 421 (per Dixon CJ); Re Young (1942) VLR 4 (per Martin J) and Re Williams (1945) VLR 213 (per the Full Court of Victoria). On the other hand, Re Hoyles (1911) 1 Ch 179 has been treated as an authority on the general question in one Australian case, Re F Donnelly (1927) 28 SR (NSW) 34 (where Re O'Neill (1) was not cited), and it has been accepted also in a Canadian case, Re Burke (1928) 1 DLR 318 , but cf Re Hole (1948) 4 DLR 419 . It was mentioned with apparent approval by two of their Lordships in Macdonald v Macdonald (1932) SC (HL) 79, at pp 85, 88, but there is no actual pronouncement by the House of Lords on the topic.

It will be observed from the foregoing that I have departed from the view of Sir John Salmond at the point where he said "the movable character of the secured debt extends to and attaches to the security itself" (1922) NZLR, at p 475. His Honour's general reasoning would have been accurately reflected, I venture to think, by saying that because at the death of the deceased his interest in the mortgaged land possessed, according to the law of its situs, the legal character of a mere security for recovery of the debt, the succession to it should follow the succession to the debt notwithstanding that it was itself an immovable; that is to say (to adapt the expression used in relation to heritable bonds) that the movable draws after it the immovable security. On this view the question whether ultimately the succession to the movable or the succession to the immovable turns out to be the valuable thing -- the former by receipt of the mortgage money or the latter by foreclosure -- is not only unanswerable at the death of the deceased but is of no consequence so far as the right of succession is concerned. I must confess that I see no reason for holding that a mortgagee's interest in the mortgaged land is a movable; but while its character as an immovable may well be of crucial importance for some purposes, such as a determination of the legal validity of a disposition, inter vivos or by will -- validity under a Mortmain Act no doubt provides a clear example -- it seems to me that English law could not, consistently with its traditional attitude as to the relation of debt and security, apply to such a special class of immovable the same rule of private international law for the choice of the law to govern succession as it applies to immovables generally.

The analogy of a contract of sale with a mortgage is not a complete analogy, but the points of similarity are the very points which are important for our present purpose. The problem, as in the case of a mortgage, is to decide whether the land or the debt should be considered the principal thing. It seems to me that a system of law which views the rights and interests of a vendor of land as they were viewed in Lysaght v Edwards (1876) 2 ChD499 must, of logical necessity, accept the answer that the debt is the principal thing. The residual interest which the deceased had in the land at his death, which is commensurate with the amount of the purchase money then remaining unpaid, possesses according to the law of its situs the legal quality which Sir George Jessel referred to by using the words "lien" and "charge". It devolves upon the executor as an asset to be employed in getting in the purchase money. Without the ability to transfer it or to cause it to be transferred the right to the purchase money is no right at all. It is true that a determination of the contract would free the land from the interest of the purchaser, just as it is true that foreclosure of a mortgage of land under common law titles frees the land from the equity of redemption; and it may be contended that in that event the right of succession to the land would become the right to which effect must be given; but the answer, it seems to me, is that the legal relationship at the death of the deceased between the purchase money and the land was such that the right of succession to the money must carry with it the right of succession to the land. I am therefore of opinion, agreeing with Wolf CJ, that the succession to the lands so far referred to is governed by the right of succession to movables.

(2)

Questions next arise in regard to certain parcels of land in Western Australia belonging to partnerships of which the deceased was a member at his death. There were two such partnerships, called respectively A& Naque and A Haque & Co, the business of each being carried on in Western Australia. The former partnership was dissolved by the death of the deceased: see s 44 of the Partnership Act, 1895 (WA); but according to the judgment of Wolff CJ there was a provision to the contrary in the partnership agreement of A Haque & Co, in which it is said that there were numerous partners. The terms of the agreements are not before us, but so much is common ground. Moreover, throughout the case it has been tacitly assumed, and I therefore take it as the fact, that both partnerships were solvent at the death of the deceased. It is proper of course to put aside the provision in s 32 of the Partnership Act that as between the partners (including the representatives of a deceased partner) land which has become partnership property is to be treated as personal and not real estate, for as is shown by Re Berchtold; Berchtold v Capron (1923) 1 Ch 192 the distinction between personal and real estate does not coincide with the distinction between movable and immovable property, and the equitable doctrine of conversion to which s 32 gives statutory effect has no counterpart in private international law. But in relation to both the partnerships with which we are concerned the preliminary question is: what asset of the estate is it material to consider for the purpose of deciding the right of succession? The deceased in his lifetime had, in relation to each partnership, rights of two kinds. On the one hand he had rights with respect to each individual item of partnership property, constituting an interest in each such item, which he was entitled to assert as against all the world: Re Holland; Brettell v Holland (1907) 2 Ch 88; Re Fuller's Contract (1933) Ch 652, at p 656. On the other hand he had his share in the partnership as a whole, consisting of a right as against his co-partners -- and this was his whole right as against them -- to have the assets realized on dissolution of the partnership, to have the proceeds applied in discharging the debts and liabilities, and to have his share of the surplus paid to him: see Partnership Act, s 33; Re Ritson; Ritson v Ritson (1898) 1 Ch 667; (1899) 1 Ch 128; Rodriquez v Speyer Brothers (1919) AC 59, at p 68. When he died, his beneficial interest in the individual assets no doubt devolved upon his executor, but the executor could not realize such an interest or dispose of it as if it were by itself an asset of the estate. The asset to be administered was (in the case of A. & N. Haque) the share in the partnership as a whole, and (in the case of A. Haque & Co) the money which the partnership agreement provided should be paid to the estate by the surviving partners in satisfaction of the share. The question of succession therefore arises with respect only to the share in the partnership in the one case and the obligation of the co-partners in the other. These assets, being choses in action, are in my opinion to be classed as movables.

(3)

Then there were lands in Western Australia which had been assets of the partnership of A. & N. Haque but at the death of the deceased were subject to contracts of sale. It follows from what I have said already that no separate question of succession arises with respect to these lands, for the administration of the estate must proceed on the footing that the whole of the share of the deceased in the partnership is a movable.

(4)

Next, there were certain rents owing at the death of the deceased to the partnership of A. & N. Haque, the demised premises in each case being partnership assets. Again it is only necessary to say that the share in the partnership is a movable.

(5)

Finally, the schedule treats as a separate item what it describes as the interest of the deceased in the goodwill, fixtures and fittings in a certain shop in Western Australia, the shop being held at the death by the partnership of A. Haque & Co under lease. The language used in this connexion in the schedule was chosen, as I gather, because when the partnership acquired the lease it paid the lessor or a former tenant a sum for the benefit of a goodwill attaching to the premises and for certain fixtures and fittings that were there. The reference, however, is to a partnership asset, and it is only necessary to repeat that the interest of the deceased in the partnership as a whole was a movable.

I should perhaps add that I have throughout accepted the assumption which was made by the parties in the arguments presented to us, that the executorial duties have all been completed long since, so that we are dealing with the right of beneficial succession to property held by the executor as trustee.

In the result I am of opinion that the answers given by the order of Wolff CJ to the questions as framed by the parties were correct and the appeal should be dismissed.