Opinion Number. 1027

Subject

WAR SERVICE HOMES POWERS OF WAR SERVICE HOMES COMMISSIONER TO SELL LAND WHERE PURCHASER IS IN DEFAULT: APPLICATION OF PROCEEDS OF SALES

Key Legislation

WAR SERVICE HOMES ACT 1918. ss. 30A, 31 (2). 32 (2). 33 (b). 34, 35 (2). 36 (1). (2)

Date
Client
The War Service Homes Commissioner

The War Service Homes Commissioner has forwarded for advice the following memorandum:

Section 36 of the War Service Homes Act 1918-1919 deals with action which may be taken by the Commissioner where instalments payable in respect of any contract of sale or advance under the Act are overdue, and, inter alia, provides in paragraph (a) sub-section (1) of the section that the Commissioner may, in addition to other powers contained in the section, 'in the case of a purchaser, cancel the contract of sale, and, in his discretion, forfeit the instalments previously paid by the purchaser'.

Sub-section (2) of this section provides that the Commissioner shall apply the proceeds derived from any sale made in pursuance of this Part in payment-

  1. of all moneys due in respect of the land or land and dwelling-house; and
  2. (or repayment) of any amount charged thereon in favour of the Commissioner or of so much thereof as remains unpaid; and
  3. of all expenses incurred by the Commissioner in relation to the sale or otherwise in respect of the land or land and dwelling-house; and
  4. to pay the balance (if any) to the persons appearing to the Minister to be entitled to receive it.

An opinion is desired as to whether the provisions of paragraph (a) of sub-section (1) of section 36 are governed by the provisions of sub-section (2) of that section, i.e. after the Commissioner has cancelled a contract of sale and forfeited the instalments previously paid by the purchaser thereunder and resold the property, must he apply the forfeited instalments as directed in sub-section (2) with regard to the proceeds derived from any sale made in pursuance of Part VI of the Act?

In a recent case decided in the Commonwealth High Court, In re the Stamps Acts-In re a Transfer, Philpott to War Service Homes Commissioner, A.L.R. March 30th(1), page 55, Counsel for the Victorian Collector of Stamps contended that the procedure under Part IV of the War Service Homes Act-'Sale of Homes on Rent-Purchase System'-where the Commissioner buys a dwelling-house and land for an applicant and sells the property to him under a contract of sale-in effect amounts to a mortgage only.

An opinion is desired as to whether the transaction under Part IV of the Act referred to, amounts in effect to a mortgage. If so, the provisions of sub-section (2) of section 36 above referred to would appear to apply to the proceeds obtained from action taken under paragraph (a) as well as paragraph (b) of sub-section (1) of section 36.

In this aspect section 34 of the Act will require to be considered as it applies the provisions of section 36 to the provisions of sections 32 and 33. Sections 30A and 31 also contain provisions conferring upon the Commissioner the right under the conditions therein prescribed to exercise the powers conferred upon him by section 36.

Some doubt has also arisen as to the Commissioner's powers in administering sub-section (2) of section 35 of the Act where a purchaser or borrower under the Act desires to transfer land or land and dwelling-house or any estate or interest therein.

Further opinion is desired as to whether conditions can be prescribed under sub-section (2) of section 35 enabling the Minister or the Commissioner to control, as is deemed fit, the disposal of any sum, payable under the transfer, in excess of the amount due to the Commissioner under the contract of sale or mortgage.

Sales made in pursuance of Part VI of the War Service Homes Act 1918-1919 comprise, in my opinion, sales made by the Commissioner-

  1. under section 31 (2) (b) where a borrower has failed to keep in good and tenantable repair, to the satisfaction of the Commissioner, all buildings, fences, fixtures and improvements upon the land comprised in a mortgage or other security given under the Act;
  2. under section 32 (2) (b) where a borrower, without the consent in writing of the Commissioner, lets, sublets or mortgages, or parts with the possession of the land or land and dwelling-house forming the subject of a mortgage or other security given under the Act;
  3. under section 33 (b) where a borrower becomes bankrupt or insolvent or if the land or land and dwelling-house included in a mortgage or other security under the Act is seized in execution; and
  4. under section 36 (1) (b) where any instalment or money payable in respect of an advance under the Act, or any part of such instalment or money is unpaid for three calendar months next after the time appointed for the payment thereof.

I may add that the Commissioner does not appear to have, under section 30A of the Act, any power of sale in the event of failure by a borrower to comply with the terms and conditions of a mortgage or other security.

Where the Commissioner, in pursuance of paragraph (a) of sub-section (1) of section 36 cancels a contract of sale, and forfeits the instalments previously paid by the purchaser, any subsequent sale of the land or land and dwelling-house which is the subject of that contract of sale is not made in pursuance of section 36 but is a new transaction.

I am, therefore, of opinion that the Commissioner is not required to apply the forfeited instalments in the manner prescribed by sub-section (2) of section 36 for the application of the proceeds of a sale under Part VI.

It is, I think, unnecessary to determine the question whether a contract of sale entered into under Part IV of the Act is in effect a mortgage, as section 36 of the Act clearly distinguishes between purchasers and borrowers-that is between persons who have entered into a contract of sale, and persons who have received advances.

The question has also been raised whether, under sub-section (2) of section 35 of the Act, it may be made a condition of the consent of the Commissioner to a transfer of land or of land and dwelling-house or of any estate or interest therein, that the Minister or Commissioner may control the disposal of such sum (if any) by which the amount to be paid by the prospective transferee exceeds the amount payable to the Commissioner by the prospective transferor.

The cases in which conditions may be prescribed are:

  1. where the proposed transferee is an eligible person (section 35 (2) (a)); and
  2. where the proposed transferee is not an eligible person, in the case of a transfer after the expiration of five years after the making of the advance or the date of the contract of sale (section 35 (2) (b) (ii)).

In my opinion, in both those cases, conditions of transfer may be prescribed giving the Minister or the Commissioner power to control the disposal of the sum in question.

[Vol. 17, p. 135]

(1)1920 Argus L.R. 55, at p.57.