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Colonial Cases

In re Brearley, 1893

[mortgage]

In re Brearley

Supreme Court for China and Japan
Hannen CJ, 20 July 1893
Source: North China Herald, 14 July, 1893

LAW REPORTS.
H.B.M.'S SUPREME COURT.
Shanghai, 11th July.
Before N. J. Hannen, Esq., Chief Justice, and George Jamieson, Esq., Assistant Judge.
IN RE DAVID SHEARD BREARLEY, ex parte THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD.
[Not transcribed.]
His Lordship announced that the Court reserved judgment.


Source: North China Herald, 28 July, 1893

H.B.M.'S SUPREME COURT.
Shanghai, 20th July
Before N. J. Hannen, Esq., Chief Justice, and George Jamieson, Esq., Assistant Judge.
IN RE DAVID SHEARD BREARLEY, ex parte THE HONGKONG AND SHANGHAI BANKING CORPORATION, a creditor.
  This was an appeal from an order of H.B.M.'s Court for Japan, which was heard on the 11th instant, raising an important question concerning the necessity for registering a deed of assignment or mortgage relating to certain property in Yokohama.
  Mr. James Ramsay Parsons, the agent at Yokohama of the Chartered Bank of India, Australia and China, appealed from an order of H.B.M.'s Court for Japan, made on 25th January last.
  M. W.A. C. Platt, (Messrs. Johnson, Stokes and Masler) appeared for the appellant, and Mr. C. Dowdall for the Hongkong and Shanghai Bank.
  His Lordship in giving judgment said -
  In the case of F. Cornes, by indenture dated the 14trh of April, 1886, leased to D. S. Brearley, for a term of  ten years a certain lot of land, viz.,  one half of lot No. 3 in Yokohama, D.S. Brearley agreed to purchase for a sum  named a shed then on the ground, and also to erect at his own costs buildings upon the land, and F. Cornes agreed to take over and pay for such buildings in cash at the termination of the lease, upon a valuation, and the deed set out the means of arriving at the valuation. Brearley, in 1891, assigned the lease and the benefit of this latter covenant (which was specifically mentioned in the assignment) to the appellants, to secure a debt.
  In 1892 Brearley became bankrupt, and, at the instance of the respondents, the Court for Japan made an order declaring that the debt secured by the indenture of 1891 had no priority over simple contract debts, and ordering the property and rights comprised in the indenture to be sold,  and that the appellant should deliver to the Receiver appointed by the Court all deeds and instruments relating to the property. The property was sold. The lease fetched $100, and the benefit of the covenant by Cornes to pay for the buildings erected by Brearley fetched $3,331.50. James Ramsay Parsons appealed from the Order of the Court for Japan. The appeal was heard on the 11h instant by me and Mr. Jamieson, the Assistant Judge.
  The first point raised by the appellants was that Section22 of the Order in Council, 1881, did not apply to leases. No authority was cited to us for this proposition, and we think on principle that it cannot be maintained. All property on land held by foreigners, whether in China or Japan, is in terms a lease, and in some ports a lease for a term of ten years is the only form in which it can be held.  We think that the terms of the Order in Council must be interpreted I n the light of the actual state of facts. To hold that it applies only to the fee simple in land, would be deprive it of all force, for we believe that no land in China or Japan is held on such a tenure. To hold that it applies only to leases in perpetuity would be to deprive it of application to a great amount of property which in ordinary parlance is described as land and houses, and to draw a distinction where in our opinion no distinction ought to exist. We therefore take the terms of the Order in Council in their plain and ordinary signification and construe the expression "land and houses" to mean any estate or interest in lands and houses.
  The question then arises - Is the assignment made by Brearley to the appellants a mortgage of land and houses and nothing more? We are of opinion that it is a mortgage of land and houses and should have been registered under Section 22 of the Order in Council of 1881.  But it was argued that it was something more. The appellants say that, granting that it was a mortgage of land and houses, it was also an assignment of a chose in action, viz., Brearley's right to receiver from the landlord, at the termination of the lease, the value of the buildings erected by him. I do understand that the respondents deny this, but they say that when the lease was assigned there was nothing more for Brearley to pledge.  The assignment of the lease assigned the benefit of the covenant by the lessor to pay for the buildings at a valuation, in other words the covenant ran with the land. Mr. Dowdall cited the case of Mansel and Norton (L.R. 22 C.D.769) in support pf this view.
  There it was held that a landlord was bound to pay the outgoing tenant for standing crops, etc., and that such a liability ran with the land. It is to be noticed that in that case the liability related to property which belonged to the lessee and which the lessee had a right to take away with him at the end of his lease.  Here the liability of the landlord arises from an understanding on his part to pay for that which belongs by law to him and not to the lessee. The buildings erected by the lessee would in the ordinary course of things come to the lessor, and moreover it was expressly stipulated in the indenture of lease that on the determination of the lease the lessee should quietly and peaceably surrender and deliver up to the lessor both the land and the premises to be erected thereon.
  We think therefore that it was the clear intention of the parties that the premises so soon as erected should be the property of the landlord, the lessee simply having the right to recover from him at the end of the lease a certain sum of money to be ascertained ibn a particular way. Brearley therefore had no ownership in the houses which he could assign to the Bank. All that he had was the lease, namely the right to occupy the land and houses till the expiry of the term, and a right of personal action - against the lessor.
  We think this clearly distinguishes the present case from that of Mansel and Norton cited by Mr. Dowdall, where the property to be paid for was the property of the lessee. The case of Grey v. Cuthbertson (4 Doug. 351) seems to us more in point. There the landlord agreed to pay at a valuation for all the trees planted by the lessee, that is to say, for things which apart from his contract he would not be bound to pay for at all. That was held to be a personal covenant not running with the land. So in this case we think an assignment of the lease without more did not carry with it the benefit of the agreement. It would have been quite competent for Brearley to have assigned the lease by itself on any terms he chose as between himself and his assignee, retaining in his own hands the right to recover the value of the premises whenever the lease might come to an end. This covenant, then, is in our point an independent one, only collateral to the lease; it was assigned by way of pledge to the appellants.
  The question then arises - Ought this assignment to have been registered as a mortgage of land and houses? It was a mortgage of a personal right to recover from the lessor a sum of money. This is not and cannot be construed as a mortgage of land and houses, inasmuch as the assignor had no property in the houses which he could assign.
  We are therefore of opinion that the assignment by Brearley to the appellants, dated 2nd September, 1891, was an assignment by way of mortgage of two things. 1. The lease of the lot No. 3 together with the buildings upon it. 2. - The right of Brearley to recover from the lessor, at the expiry of the lease a sum of money to be arrived at by valuation in a way set out in the lease. We think that the first of these ought to have been registered as a mortgage of land and houses, and, as it was not, the proceeds of the first portion, viz. The lease, ought to go to the Assignees in Bankruptcy, the Official Receiver. We think that the assignment of the second, not being a mortgage of land or houses, need not have been registered, and the proceeds should go to the appellant. As to the costs, both sides having partially succeeded, and partially failed, we think that each party should pay their own costs both here and in the Court below.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School