REHABILITATING REPUGNANCY? PRESERVING THAT PIECE OF MEDIEVAL LUMBER.

• Date: 01 April 2019
• Author: Grattan, Scott

CONTENTS I Introduction II The Context: Restraints and Repugnancy III The Numerus Clausus Principle and the 'Essence' of Property IV Specific Applications of the Doctrine of Repugnancy A Determinable and Defeasible Interests B Absolute and Limited Interests C Vested and Contingent Interests D Outcomes and Lessons from the United States E Restraints That Are Partial Only V Reasonableness and Policy in Assessing Restraints VI Conclusion I INTRODUCTION

For some time, the doctrine of repugnancy has had a bad name. The striking down of a restriction imposed on the enjoyment of a proprietary interest, on the basis that the restriction is fundamentally inconsistent with the essential characteristics of the interest granted, once held sway in the area of restraints on alienation. But it doesn't any longer, at least for restraints imposed by contract, where the 'cogent' method of applying public policy has displaced the 'scholastic'1 doctrine of repugnancy. This article examines the conceptual foundations of the doctrine of repugnancy and considers whether it should be retained as serving a useful purpose in the contemporary law of restraints on alienation. Or, should it be discarded, as Glanville Williams has said, as 'a useless piece of medieval lumber'? (2)

Part II of this article deals with the relevant basal concepts. It will explain what is meant by a restraint on alienation and describe the origins, content and general application of the doctrine of repugnancy. The article will then explore two areas of property law in which the doctrine of repugnancy might still have a concealed, but useful, part to play. Part III will deal with the numerus clausus principle, which is based on the idea that specific proprietary interests do have essential and inherent characteristics. In Part IV, we will see how the doctrine of repugnancy has been applied in relation to restraints on the alienation of specific and diverse proprietary interests under English and Australian law. Reference will also be made to the work of the American Law Institute in its various restatements on the law of property. (3) The most important aspect of this Part is the distinction between determinable interests and absolute interests defeasible by condition subsequent, a distinction upheld in the context of insolvency by the Supreme Court of the United Kingdom ('UK Supreme Court'). (4)

Part V of the article will examine two American cases dealing with restraints on alienation. We will see that, in these cases, the employment of an ex post facto policy analysis has produced uncertain or unprincipled results. Arguably, these results are inferior to those that would have been reached under the a priori doctrine of repugnancy.

This article concludes that a wholesale rejection of the doctrine of repugnancy is unwarranted. It is logically required by a structured approach to property as comprising a limited list of discrete and distinct proprietary interests; it is expressly or implicitly used in the distinction between permissible determinable limitations and impermissible defeasible interests; and it may be employed to give greater ex ante certainty to parties than applying an ex post facto policy analysis.

II THE CONTEXT: RESTRAINTS AND REPUGNANCY

Our concern is with the doctrine of repugnancy as it might apply to transfers of property subject to a condition that restricts the transferee in their ability to deal with the property. In such circumstances, the question arises as to whether the restriction imposed by the condition is inconsistent, or 'repugnant' to the interest granted. If the interest and the condition cannot stand together, the condition is rendered invalid and the interest takes effect freed from it. (5) In this context, the doctrine of repugnancy is based on the belief that the ability to transfer property is inherent in the bundle of rights that makes up ownership so that, as a matter of logic, one cannot own property when one is substantially deprived of the ability to transfer it. (6)

More specifically, our focus is on situations where such a 'restraint on alienation' is imposed as a condition in the grant (that is, the transfer of the asset itself from the grantor to the grantee), as opposed to where the restriction is created by a contract between the current owner of the property and a third party. (7) But our concern also extends to the involuntary 'transfer' of property on the bankruptcy of the owner, where the asset is taken from the owner by operation of law. (8) Accordingly, we consider the circumstances in which a transfer of property is made subject to a condition that purports to terminate the transferee's interest if the transferee attempts to alienate the property in a way prohibited by the grant, (9) or where the transferee becomes bankrupt. (10)

Such a restraint on alienation imposed as a condition in the grant of the property might or might not be effective. There are two bases on which the restriction could be struck down. The first is repugnancy. The second is public policy: the idea that to promote the public good, all property--especially land--must be freely alienable. (11) A possible third basis only applies to land, and is of historical interest only: namely, that restraints on alienation are contrary to the effect of the statute of Quia Emptores 1290. (12) By contrast, where the restraint on alienation is imposed by contract, the test for validity is based on public policy alone. (13)

There is a long line of English cases that have used repugnancy as the basis for striking down a restraint on alienation. (14) Similarly, Australian cases have found various restraints on alienation void on the basis of repugnancy. (15) Repugnancy has also been used in the United States as the reason why substantial restraints on alienation have been held to be ineffective. (16) Some of these English and Australian cases will be considered below. For now it is sufficient to note that repugnancy was used to invalidate the restraint in all of them. The following illustration from Re Dugdale; Dugdale v Dugdale is representative. (17) A gift of property in a will to the testatrix's son was subject to a gift over (an 'executory devise') in favour of that son's wife or living children if, by any act of the son or by operation of law, the son ceased to the beneficial owner of the property. Kay J held:

The events upon which the executory devise in this case is to take effect seem to be, 1. alienation, and 2. bankruptcy, or judgment and execution. The alienation contemplated is any alienation whatever by the devisee, not limited in any way. This is clearly invalid. With respect to the other event, bankruptcy or judgment and execution effect an involuntary alienation. Can a fee simple estate be divested by an executory devise on that event? The liability of the estate to be attached by creditors on a bankruptcy or judgment is an incident of the estate, and no attempt to deprive it of that incident by direct prohibition would be valid. If a testator, after giving an estate in fee simple to A, were to declare that such an estate should not be subject to the bankruptcy laws, that would clearly be inoperative. I apprehend that this is the test. An incident of the estate given which cannot be directly taken away or prevented by the donor cannot be taken away indirectly by a condition which would cause the estate to revert to the donor, or by a conditional limitation or executory devise which would cause it to shift to another person. ... I am of the opinion for the foregoing reasons that the executory devise in this case is invalid as repugnant. (18) Several of these cases used supplementary reasoning that, in purporting to restrict the alienability of an inherently alienable interest, the settlor or testator was attempting to create a new type of interest, one unknown to, and indeed forbidden by, the law. (19) Like the doctrine of repugnancy, the inability to create novel proprietary interests is based upon the notion that such interests have a distinct and predetermined set of characteristics. 17 18 19

The leading English critic of the doctrine of repugnancy is Glanville Williams. (20) He labelled the doctrine as 'spurious' (21) and 'pseudo-logical' (22) on the following basis. The doctrine makes the (unverifiable) assumption that each type of proprietary interest has a distinct and fixed essence and that alienability is, at least for some of these interests, held to be an inseparable aspect of that essence. (23) However, Williams says, this reasoning is circular. It presupposes that alienability is an indispensable incident of ownership and then goes on to conclude that a purported grant of ownership without the power to alienate is an attempt to do something which is impossible, so that the grant must take effect with the offending condition severed. The grantor cannot give with one hand and try to take with the other. (24)

Williams concludes that the doctrine of repugnancy, rather than being based on logic, is employed as a mechanism for promoting public policy favouring the free alienability of land. (25) However, it is an imperfect mechanism for doing so, because it does not fully escape its logical pretensions. For example, the doctrine of repugnancy would strike down as an impermissible restraint on alienation: (a) a condition in the transfer of Property 1 that the donee not alienate Property 1; but not (b) a condition in the transfer of Property 2 that the donee not alienate Property 1 (already owned by the donee). Further, the doctrine of repugnancy would invalidate: (a) a condition that if property is alienated a fine must be paid; but not, according to Williams, (b) a contract not to alienate property, the breach of which would result in damages. In each of these cases, public policy favouring free alienation would be offended, and would make no distinction between the form of the restraint in case (a) and case (b)...