PROPERTY 2 NOTES

WEEK 1 (CLASS 1): Torrens system – intro/indefeasibility The principle of indefeasibility

- Refer to pp 465 : Provision has a threefold operation:1. Fraud will vitiate, (i.e. make invalid or ineffectual), a registered title.

2. The estate or interest of the registered proprietor is subject only to those encumbrances actually noted on the register, with two exceptions.

3. Nevertheless there are certain unregistered interests which are enforceable against the registered proprietor.- The indefeasibility rule is supported by the ‘notice provision’. That is, except in the case of fraud, no person that is the registered proprietor will be affected by notice actual or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding. The knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud. (NSW, s43 [see also s43A]).- The main purpose of the notice provision is to prevent certain equitable principles applying to registered land.

The Concept of IndefeasibilityImmediate Indefeasibility: confers good title upon A immediately on registration of a transfer or other instrument, regardless of its invalidity. Thus, A, on registration of a forged transfer is entitled to protection against action by the previous RP whose signature was forged to the transfer, provided that A has acted w/o fraud and has given valuable consideration for the transfer. Gibbs v Messer [1891] AC 248

- The ratio of this case is confined to the case where a forged instrument in the name of a ficticious person is registered. PC engaged in artificial reasoning. Held, could not take title from a fictitious person therefore Ms Messer gets title. But, if McIntyre sold to another party (c), C would have that title. IF immediate, McIntyre’s would keep land. RPA now has amended the definition of fraud to include dealings with a fictitious person.

- The object of Torrens system is to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of their author’s title, and to satisfy themselves of its validity. But as in F v W, this does not deny a plaintiff to bring against a RP a claim in personam,

Frazer v Walker and Radomski [1967] (Affirmed immediate indefeasibility).Facts:- Mr and Mrs Frazer were registered proprietors of land, Mrs F forged signature of husband to mortgage it to Radomski for 3k pounds. Void coz forged signature. - Mortgage document prepared – solicitor’s clerk acted as witness for signature of Mrs F and falsely declared Mr F had also signed, when in truth Mrs F had brought the doc with the forged signature already on it- R became RP – no repayments made so R exercised power of sale under mortgage (they don’t get title as in old system) – sold to Walker for 5k pounds- W became RP W wanted possession of property since Mr F still living in itIssue: Could Mr. Frazer challenge the registration of Radomski as the RP of the register(i.e. does R get indefeasibility of title since he’s registered?) in that way, he challenges the RP status of W)Held:

- Appeal dismissed because Radomski, as a bona fide purchaser, obtained indefeasible title.- The title certifies is not historical or derivative. It is the title which registration itself has vested in the

proprietor. It is in fact the registration and not its antecedents which vests and divests title" (immunity is immediate upon registration). Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void.

- although the court does have powers to cancel or correct certificates of title – the extent to which they can do so is only limited to adverse claims that are accepted under the Act (ie s42(1)) – Assets v Mere Roihi

- Their Lordships noted that indefeasibility of title does not provide that the registered proprietor is protected against any claim whatsoever, and that the entry upon which he relies may be cancelled or corrected, or he may be exposed to a claim in personam.

- Frazer v Walker was not a case of conflict of unregistered interest as Breskvar v Wall. It was about mortgagees who had registered a mortgage from registered proprietors to which one signature was a forgery, sold the land under their power of sale to a purchaser who as duly registered as proprietor. The only fraud in the case was that of one of the registered proprietors who forged the name of her husband. Her fraud afforded no statutory basis for impeaching the title of the mortgagees when they were registered or of the registered proprietor from them. Both the mortgagees and the registered proprietor acted in good faith and without knowledge of the forgery. The poor husband lost the title to the property. It was never an issue of competing interest as there was an establishment of a new registered proprietor.

- Hence, it is now settled that an estate or interest purportedly created by an instrument, void under the general law, derives validity and indefeasibility from the registration of the instrument purporting to create that estate or interest.

- The rare forgery victim can be protected by the assurance fund compensation, and a preferable alternative to immediate indefeasibility exists in the form of deferred indefeasibility.

NOTE: s 135 of the Real Property (Amendment) Act 1970 NSW was amended to reflect the decision in F v W: “or under any void or voidable instrument” i.e. no RP can be deprived of their title by claiming the registration was obtained by fraud or error or under any void or voidable instrument (e.g. void contract or void transaction) page 475. Its purpose was to remove any ambiguity (then) latent in the section.

So! a RP who obtains registration in good faith and for value on the basis of an instrument that is void will ordinarily be entitled to an absolute and indefeasible title notwithstanding the invalidity of the instrument or dealing by which he/she obtains registration: Lansen v The Honourable Justice Olney (acting as Aboriginal Land Commissioner) (1999).

Daniell v Pardiso (1991): the mere fact that the RP entrusts the certificate of title to another does not create any ostensible authority to deal with the land or estop the true owner from denying that there is such authority.

WEEK 1 (Class 2) Torrens System – Frazer/Mercantile Breskvar v Wall (1971) HCA ( case is about priorities) affirmed immediate indefeasibility B by fraud to P and wall (grandson) Alban. If A got registered then there would be no dispute. But they were not so he only had an equitable right to get registered. Blank transfer therefore equitable mortgage. A (bona fide purchaser) tried to register title but B realized what was happening and put caveat on Registrar from further dealings with the land thus A did not have title but equitable interest. Wall (RP engaged in fraud) has a defensible interest against B, BUT an indefeasible interest against the world. So! Let W keep property against everyone except owner coz fraud.

The appellants can without doubt displace Wall’s title. But there is a third party involved namely Alban Pty Ltd, which Wall sold and transferred to. For the appellants to succeed against Alban they must go further than that of with Wall. They must show that Wall either did not have title at all, or that their claim is to be preferred to that of Alban.Issue: should A become the RP? In order to answer this question – should W (grandson) get immediate indefeasible title? Ask whether W was a party to the fraud (one of the exceptions to indefeasibility of title under s 42(1)) – Assets v Mere Roihi (fraud means fraud by oncoming RP ie Wall). B’s interest was also equitable – priority of equitable interests was the issue who should get priority over land, B or A?Held:

- Affirmed Frazer: registration is evidence of title (immediate indefeasibility). Conclusiveness of the certificate of title is definitive of the title of the RP ie immediate indefeasibility.

- Ct held that W became the RP by his own fraud while he gets title, it is not indefeasible since s42(1) by fraudulent means – but B ceased to be the RP under the Act., regardless of whether the transaction was invalid due to the Stamps Act – due to registration being evidence of title. That is, W still holds the title formally but this can be defeated.

- However, since A was a bona fide purchasor without notice their rights intervened thus they get priority of interests before B since A’s interest not yet registered, it becomes an equitable interest B’s interest is also equitable (not legal, since legal title is vested on W, even though it can be defeated, legal title still passed on to W even though title is defeasible – rules of register, certificate of title is conclusive)

- normally, if all circumstances are equal, first in time gets priority, however, due to B making the fraud possible by signing a blank form (faulty conduct on B’s part) Ct held B’s interests should come after A’s interests (since latter was bona fide purchasor without notice of prior interest)

- If Alban wasn’t in the picture, give back to B! So! Court held that there were 2 equitable interests to recover land. (i) Equitable interest of redemption = B (ii) equitable right to get registered = A

- B has priority but coz of their postponing conduct they lost! Thus, Alban won even though B were first in time. Postponing conduct = blank transfer therefore it was as if B were assisting the fraud! A didn’t do anything wrong. But if no postponing conduct, B would of got the property.

NOTE: - In personam: an action or right of an action against a specific person. The right of a beneficiary is a right in

personam against the trustee. That is, in certain circumstances, there exists the in personam exception to indefeasibility.

- Section 42 of the Real Property Act 1900 only renders title to an estate indefeasible upon registration. RECAP!

I.e. even though take title from someone and register it, when the person you took it from wasn’t registered, you are the RP if you didn’t engage in fraud. Ask: (i) did they engage in fraud? (ii) are they RP? If yes to these, then good against everyone

Registration cures voidness Registration cures inconsistent statute (not always doesn’t cure Cwlth coz state doesn’t override Cwlth).

Grundy v Lee (page 489) [1984]- Mortgage discharged i.e. payed back. Lawyer registered the forged discharge therefore it was void. - Q: does the forged discharge make it indefeasible? - If it becomes indefeasible this means that the mortgage is paid thus interest in land has disappeared

therefore person has lost interest. Court held: the interest in land disappeared but obligation to pay remains i.e. ‘shell’ disappeared by but terms (‘inside’) has not.

- Applied principle of indefeasibility to the ‘shell’ therefore Lee gets land free of encumbrances. But! Have to repay $5000. So! Only ‘shell’ is indefeasible.

Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) HCA Facts: The respondent was the lessee of land, and the appellant was the mortgagee of the land. The lease contained 2 covenants creating a right of renewal, which was exercised by the lessee but was NOT registered. The mortgagor defaulted so the mortgagee gave notice of its intention to sell the land. So! lease was registered BUT option to renew was unregistered. Issue: Contest between the lessee’s right to renew and the mortgagee’s right to exercise the power of sale. Does leasee (shell) have priority over Mercantile? ASK: does the right to renew constitute part of the lease? YES! Why? If the right of renewal created by the covenant can rightly be said to be part of the estate or interest specified in the lease, it will take priority. Held: Appeal dismissed.

- Not concerned with a question of indefeasibility but with the question of priority. - Right of renewal is so intimately connected (covenant (e.g. lease, mortgage) touches and concerns the land)

with the term granted to the lessee, that it should be regarded as part of the estate or interest which the lessee obtains under the lease and on registration is entitled to the same priority as the term itself. Hence, the respondent’s rights of renewal prevail over the appellant’s mortgage. The appellant’s rights as mortgagee can only be exercised subject to the respondent’s right of renewal and any extension resulting from its valid exercise.

- NOTE: the option to purchase will NOT be included in the original lease, because this concerns the termination of a lease and the creation of a new interest.

- Option to renew was indefeasible even though not registered coz it was so apart of the lease. When lease registered, covenants are also registered, but not all are enforceable. Only covenants that ‘touch and concern the land’ are indefeasible (if not registered). This does NOT include personal covenants. So! Option to renew was part of the bigger lease which was registered, thus took priority over mercantile.

- Distinction between option to renew and option to purchase (which does not attract indefeasibility. Why? Coz it doesn’t change the rights of parties and it is not a continuum of the term).

Karacominakis v Big Country Pty Ltd (2000) Facts: A memorandum of lease was altered by the lessor after the parties had signed the lease by insertion of a mortgage as a prior encumbrance (i.e. a burden or claim on property e.g. mortgage). The lessee was not notified of this development. The lease was then registered under the RPA 1900 NSW. Held:

- If change provisions in lease after sign VOID. ‘K’ changed provisions and said lease unenforceable coz void. Q: do they have to pay rent? Held: yes! Coz it is the very nature (i.e. ‘shell’) of the lease. Personal covenants are not enforceable.

- Payment of the agreed rent is an essential part of the transaction between the lessor and lessee. - The covenant to pay rent is a condition upon which the leasehold interest is held and intimately related to the

lessee’s title created upon registration; because of its connection with the continuance of the lessee’s interest in the land, it delimits or defines that interest.

- So! Registration does not cure a defective transaction if the instrument itself is ineffective. E.G’s: (i) because purporting to create an interest not known to the law: Ridgeway and Smiths Contract [1930]; (ii) or purporting to create a lease but void for uncertainty of the term: re Lehrer and the Real Property Act (1961).

- Void lease: ‘shell; enforceable but covenants (i.e. basic provisions or personal provisions) are not.

Travinto Nominees Pty Ltd v Vlattas (1973) pp 495- HC held that where there was statutory illegality, registration could not validate the option. - Leases and mortgages and surrenders of former or discharge of mortgage if registered by means of void

instrument, the ‘bear shell’ of interest receives benefit of registration (i.e. indefeasible) but covenants are unenforceable.

- But, if discharge opposite coz it relinquished obligation to pay.

Leros Pty Ltd v Terara Pty Ltd (1992)A caveat lodged to protect an option contained in an unregistered lease will not protect the lessee against a proprietor of the freehold who became registered before the lodgment of the caveat.

Westpac Banking Corporation v Sansom (1995) NSW Facts: The wife mortgaged the marital home by forging her husband’s signature. An officer of the bank falsely attested that the husband had signed the mortgage in his presence and the bank registered the mortgage.Held: It was held that the bank officer’s false attestation constituted fraud within the meaning of s42 of the Real Property Act 1900 (NSW). However the fraud affected the validity of the mortgage only against the husband and it was still enforceable against the wife.

WEEK 2 (Class 1): Torrens System – Volunteers/fraud Volunteers

- Volunteer is a person who doesn’t give any money i.e. have not paid value, you have just received a gift.- Becomes volunteer even though has no notice. So volunteer is deemed to know of notice. (Subject to equities

whether or not have notice of them). - The position of a registered proprietor of Torrens title land which has been acquired as a volunteer:

volunteers are treated in the same way as purchasers for value.

Bogdanovic v Koteff (1988) NSWCAFacts: Mrs. Bogdanovic lived in part of Koteff’s house and paid K rent for this. K and B seemed to have made an agreement that B could reside there for the rest of her life. K died and K junior became the beneficiary. That is K jnr became the registered proprietor. He began proceedings to reclaim possession of the land from the appellant.Issue: B said that K senior said she was allowed to stay. Was she? NO, she cannot stay!Held:

- Even though K junior took w/o notice and was a volunteer upon registration, it is an indefeasible title which defeats B’s life interest. K snr would not have been able to reject her equitable interest as he was the one who made the agreement – in personam argument – cannot renege on a contract that you make. So! Registration keeps you to your promises

- Mere notice is insufficient. Even K jnr had notice and then registered, that would not have constituted fraud, (s43 RPA).

- A volunteer has not a better title than that of their donor- Your interest can never be in a better condition and unaffected by any interest which would bind the donorHELD: not bound- Held that the RPA is absolute and makes no differentiation between volunteers or purchases with value (s42),

hence has absolute effect. That is, under s42 K jnr held his interest in the land as registered proprietor of an estate in fee simple ‘absolutely free’ from any estate or interest in her.

Clinton Garofano v Reliance Finance Corp Pty Ltd: held that the meaning of 'fraud' within the Act required "actual fraud or moral turpitude".

EXCEPTIONS TO INDEFEASIBILITYExceptions to the general principle that the RP has an indefeasible title to land, subject only to the encumbrances notified on the register:

(1) Express exceptions created by the Torrens leg e.g. Fraud (2) The Registrar’s power to correct the register in certain circumstances: NSW s12 (1) (d) and 3(b). (3) Specific exceptions imposed by other statutes, such as those authorizing the compulsory acquisition of land

by public authorities and those dealing with encroachment of buildings.(4) Overriding statutes, which on general principles of statutory interpretation affect the Torrens leg by

subjecting the RP to interests not noted on the register: Pratten v Warringah Shire Council (1969)NSW(5) Exceptions permitted by the courts, such as ‘the rights of a plaintiff to bring against a RP a claim in personam,

founded in law or in equity, for such relief as a court acting in personam may grant: Frazer v Walker [1967].

Real Property Act- S40(1) – register is conclusive evidence of who is the registered proprietor- s41(1) – dealing has no legal effect until it is registered- s42(1) – corrections of mistakes in the register: fraud, registration of interest prior to folio, wrong description of property, omission/misdescription of profit a prendre exceptions to indefeasibility concept- s42(1)(d) – leases/tenancies > 3 years can be registered in NSW to protect lease interests. - S42 (1) (d) (ii) protects leases < 3 years which can’t be registered – becomes equitable interest that burdens the purchasor’s title if they have had actual or constructive notice before registration.- s42 (2) – the folio will include registration of interests on the property – eg registered mortgage, charge or leases.- s43 – except in case of fraud – purchasor is not affected by direct or constructive notice of trust or unregistered interest (any rule of law or equity notwithstanding). Knowledge of such unregistered interest before registration is not to be imputed as fraud on the part of the purchasor. Purchasor only need to do search of register (ie no need to do historical searches), only those registered interests are to apply. Exception – leases < 3 years since they can’t be registered (notice before registration binds the purchasor)

REAL PROPERTY ACT 1900 - SECT 42 Estate of registered proprietor paramount

(1) …..the registered proprietor … shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except:

(c) as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and

FRAUD

- Real Property Act 1900 NSW s42 provides that the title of the RP is indefeasible or paramount subject to exceptions.

- S43: just coz u know of an unregistered interest (notice of an interest), it is not fraudulent if you register this protects the integrity of the register.

- The fraud which must be proved in order to invalidate the title of a registered purchaser for value must brought home (ie have actual knowledge of the fraud) to the person whose registered title is impeached or to his agents: Assets Co Ltd v Mere Roihi

- Being negligent is NOT enough ie just coz don’t make enquires, not fraud under statutory provisions). But equity may intervene in some cases to soften the common law.

- Where the proprietor has been guilty of fraud. The indefeasibility and notice provisions are so worded that the title of the RP cannot prevail against the interest of the person defrauded.

Loke Yew v Port Swettenham Rubber Co Ltd [1913] PCFacts: Eusope received a grant of 322 acres & became the RP of the land.

Loke Yew (unreg interest) became owner of 58 acres & paid annual rent to Eusope. Respondents gave verbal & written assurance that they would not disturb Loke Yew’s possession to induce

Eusope to execute the transfer of the whole 322 acres. Resp offered Loke Yew a price significantly less than the value of the land in return for his surrender of all

rights. He declined. Resp began this action claiming possession of the land as RP of all 322 acres. Loke Yew claimed the resp knew of his rights, their conduct amounted to fraud under S7, their title should be

rectified & the land transferred to him.Issue: Whether a failure to acknowledge and abide by a pervious undertaking is fraud in the sense of Torrens legislation. Ie was the transfer obtained by fraud? YES, coz gave actual assurance that acted as inducement. The assurance was dishonest from the outset as no intention to give land to Loke Yew. (Could not back out from promise). HELD:

- It may be laid down as a principle of general application that where the rights of third parties do not intervene no person can better his position by doing that which is not honest to do, and in as much as the registration of this absolute transfer of the whole of the original grants was not an honest act under the circumstances it cannot better the position of the plaintiffs as against the defendant and they cannot rely on it as against him when seeking to enforce rights which formally belong to them only by reason of their own fraud.

- The registered proprietor is bound to act in accordance to proper standards of conduct. Fraud will be found where there is:

1. Notice of the unregistered interest; &2. An acknowledgment or assurance that the interest will be preserved; &3. That assurance was, at the outset not meant to be kept.

- Order: in personam against company (personal promise). Ie create obligations on those who created obligations.

Wicks v Bennett (1921)- No promise, thus no in personam rights. - Fraud has been defined as meaning ‘something more than mere disregard of rights of which the person

sought to be affected had notice. It imports something more in the nature of “personal dishonesty or moral turpitude.

- If a transferee takes with notice of an unregistered interest, & relies upon the protections of registration to defeat that unregistered interest, that sharp practice does not amount to fraud.

- So! Just coz knew, not guilty. Maybe believed that B was acting with actual authority therefore not guilty of fraud.

Grgic v ANZ Banking Group (1994) - The fact that the officer clearly believed that the impersonator was the person he purported to be meant

that, in attesting the signature, the officer did not act with conscious knowledge of the falsity of what he had done and not with reckless indifference to the truth or falsity of what he had signed.

- Fraud would only be constituted if the bank officer had actual knowledge of the impersonation or that he acted with reckless indifference about what he signed.

Assets Co Ltd v Mere Roihi [1905] - Meaning of fraud for the purposes of the Torrens system:

There mere fact that he might have found out fraud if he had been more vigilant, and had made further inquires which he omitted to make, does not of itself prove fraud on his part. But if it is shown that his suspicions were aroused, and that he abstained from making inquires for fear of learning the truth (willful blindness), fraud may be properly ascribed to him.A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon. HAVE TO know of the dishonesty.

RM Hosking Properties Pty Limited v Barnes [1971]Issue: whether notice of an unregistered interest is fraud?Held:

- In personam? No promise made. Go to s42 Fraud? Not really. No promises made that were dishonest. - Despite knowledge of unregistered lease, not guilty of fraud.- There was no evidence of actual dishonesty and to hold that ‘mere notice’ of an unregistered interest

amounted to fraud would stultify the notice provision (ie Mere notice is not intention ie knowledge as opposed to active steps towards fraud).

- A purchaser who knew of an unregistered lease was entitled to complete his/her contract by registering a transfer.

- Upon registration of its transfer, the plaintiff’s title prevailed over the defendant’s unregistered lease (so lessee had to vacate). Thus the P was entitled to possession. So! Just coz knows of unregistered interest, you can still get registered (thus indefeasible) and it is not fraud!

The cases on fraud may be divided into those involving:1. Fraud against the holder of an unregistered interest eg Loke Yew; &2. Fraud is committed against the RP (less common in the reported cases) eg Breskvar.

** Aust courts are consistently taking a narrower view of fraud (ie an interpretation more protective of the registered proprietor).

Wicklow Enterprises v Doysal (1986)FACTS:

Pl purchased property from vendor who used a fictitious name, and then Pl gave a mortgage to the vendor who used a different name.

Pl, unaware both were the same person, did not pay mortgage instalments because he could not find mortgagee. Mortgagee then exercised his power of sale & sold the subject land to the def.

Def had bus dealings with pl & was aware that pl could not locate mortgagee.HELD:

By withholding vital information concerning the whereabouts of the mortgagee, the def was pursuing a vindictive course & was guilty of fraud.

However, the use of fictitious names by mortgagee, although intended to defraud the revenue, was not intended by mortgagee to defraud pl & title to the mortgage was held to be indefeasible.

Barnes v AddyFacts: concerned with the liability of a stranger who dealt with assets as trustee in breach of trustHeld:

2 limbs:(i) Recipient liability: addressed a situation where the stranger receives a trust property in breach of trust (need to know of breach of trust)(ii) Accessory liability: situation where a stranger, although not receiving trust property, assists with knowledge in a fraudulent or dishonest design. (doesn’t relate to ppl who have received trust property. Need to have knowledge). ** Trust property: sometimes even hold strangers liable if receive trust property in breach of trust title will be defeasible! ** Need personal equity to make someone a constructive trustee.

Baden Delvaux & Lecuit v Societe Generale pour Favoriser [1992]5 categories of knowledge:(i) Actual knowledge(ii) Willfully shutting ones eyes to the obvious(iii) Willfully and recklessly failing to make such inquirers as an honest and reasonable person would make(iv) Knowledge of circumstances which would indicate the facts to an honest and reasonable person (ie failed to recognize existence or breach of trust)(v) Knowledge of circumstances which would put an honest and reasonable person upon inquiry (LHK: circumstances where the defendant does not in fact possess knowledge, whether of the trust itself or the breach of trust, but is deemed to have such knowledge coz honest and reasonable person in their position would have made inquiries to discover the facts).

Tara shire Council v Garner [2002]- When agree to buy, and paid purchase price, but not registered; the vendor holds on trust therefore have a right to get registered. - The respondents received trust property. Barnes v Addy held, if receive trust property in breach of trust = CT. - In this case, there was no fraud, no personal equity, BUT coz receipt of trust property and knowing of it: falls into first limb. - In relation to the 1st limb, knowledge embraces the first 4 categories but not the 5th. As in LHK the first 4 categories implies that there was unconscionability or a want of due attention on the part of the 3 rd party sufficient to hold him/her liable as a constructive trustee. Knowledge in the 5 th category, which connotes no more than mere negligence, is not a sufficient basis to undermine the interest of a 3rd party who has obtained registered title. - Broader view than LHK in that dishonesty for the purpose of 2nd limb in Barnes v Addy is seen to include knowledge of a breach of trust which may fall short of fraud or moral turpitude. - More lenient approach than Say-Dee. Ask:

(i) Is it trust property? yes(ii) Did they know it was in breach of trust? yes

Therefore: defeasible; give the land back! Consul Development Pty Ltd v DPC Estates Pty Ltd (1975)

- In relation to the 1st limb, not necessary to show dishonesty in order to render a defendant liable. - Knowledge does not extend to the 5th category in relation to the 2nd limb:

English law states that dishonesty is a necessary ingredient of accessory labiality Royal Brunei Airlines v Tan [1995]. Aust authority is consistent with this: Tara Shire Council v Garner.

WEEK 2 (Class 2): Torrens system; in personam/LHK refer to class notes on this topic! LHK Nominees Pty Ltd v Kenworthy [2002] Expressed view in line with Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] in that dishonesty in 2nd limb is the same as fraud for the purpose of the fraud exception to indefeasibility and that fraud must be pleaded and proved by the person challenging indefeasibility. Facts: Agreement that he would transfer back to trust but went to new wife! Appellant submitted that the respondent received the property knowingly in breach of trust and claimed relief accordingly under both limbs. 3

sons argued that there was receipt of trust property in breach of trust. Even though died, obligations passed onto estate. Held: Per Anderson and Steylter JJ:

- As to the 1st limb, the equity arising is defeated by registration of Torrens title in favour of the recipient. - Where registration of title is not dishonestly obtained it is not possible to treat the holder of the registered

title to property that is subject to a trust as having received trust property. - Per Pullin: his registered title (Ie the RP) is defeasible only if the appellant shows ‘actual fraud, personal

dishonesty or moral turpitude’. (So in this case, appellant could not succeed merely by proving a breach of trust based on knowledge by Mr K of the failure of the 2 directors to investigate the value of the land before selling it).

- The registered interest of a purchaser of Torrens system land is not defeasible simply because he became registered with knowledge that the transfer was in breach of trust by the vendor.

- As to the 2nd limb: requires a finding of dishonesty, either in the sense of knowledge by the defendant that what he was doing would be regarded as dishonest by honest ppl or knowledge on his part of circumstances which would indicate to an honest and reasonable person that a fraud is being committed. 2nd limb: need dishonesty in the sense of knowledge. Need something more than notice.

- Didn’t know it was in breach of trust, there indefeasible title. - Appellant bares onus of proving fraud.

Bahr v Nicolay: the title of a purchaser who not only has notice of an antecedent unregistered interest but who purchasers on terms that he will be bound by the unregistered interest is subject to that interest, equity will compel him to perform his obligation. Per Atkinson J:Issue: What degree of knowledge is sufficient to render a 3 rd party recipient a constructive trustee? Ie recipient liability est. when D Knowledge which the 3rd party must possess is a (i) knowledge of the trust and (ii) knowledge of the breach of trust.

- Negligent failure to inquire would not constitute sufficient knowledge but a 3rd party would be liable where he or she knew all the relevant facts but did not recognize an impropriety in them.

- Equity will hold a 3rd party liable as a constructive trustee if he/she takes property with knowledge of the existence of the trust and the breach of trust where the knowledge falls within the 1 st to 4th categories in Baden, but the 3rd party will not be liable if he/she has knowledge limited to the 5th category.

- The act of registering a transfer must be colored by a degree of knowledge that involves more than the mere carelessness connoted by the 5th Baden category.

- Bahr v Nicolay: mere notice of a prior interest is never sufficient to overcome indefeasibility.

The IN PERSONAM exception Just coz someone is RP, doesn’t mean they have no obligations. Torrens system can’t override all laws e.g. contract law. In personam – personally, in person.

- Personal equities remain even if registered. - Blur the distinction between it and the fraud exception: Bahr v Nicolay (1988).- The principle of indefeasibility ‘in no way denies the right of a plaintiff to bring against a registered proprietor

a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant’. F v W. The Privy Council was recognising that a person cannot rely on being registered proprietor to avoid the law of contract or other obligations under the law

- Indefeasibility of title does not entitle a RP who enters into a contact to sell the land to refuse to complete that contract or a trustee to evade the equitable obligations owed to a beneficiary.

- However, the exception is not limited to obligations voluntarily undertaken by the RP but also to obligations imposed by equity in its inherent jurisdiction to relive from unconscionability.

- The rights in personam may arise out of the conduct of the registered proprietor or the conduct of those for show acts the registered proprietor is responsible, e.g. agents or employees

- The conduct might pre-date or post date registration i.e. rights can arise before or after you become a RP. - E.g. A beneficiary can compel performance of a trust despite the trustee's status as registered proprietor

Bahr v Nicolay (1988) HCA (appeal allowed)Facts: Bahr’s (who needed money) sold to Nicolay with an option to repurchase back their land when they get enough money. Nicolay sold it to Thompson (who knew of cl 6 i.e. option to repurchase; which was cl 4 in their agreement i.e. which acknowledged the agreement that already existed with B express trust). T became RP. B’s interest was not registered. Issue: does merely acknowledging prior promises bind you by the other agreement?Held: NO! B equitable interest prevailed. Thus T’s title was not indefeasible against B.

- Neither s42 or 43 nor the principle of indefeasibility itself precludes a claim to an interest in land arising out of the actions of the registered proprietor himself, Breskavar v Wall (1971, HCA)

- Thus an equity arising against a registered proprietor out of a transaction taking place after he became registered proprietor can be enforced against him, Barry v Heider (1914, HCA)

- The same goes for an equity arising out of conduct of the registered proprietor before the registration so long as recognition and enforcement of that equity involves no conflict with sections 42 and 43

- Mere notice of an unregistered interest is not enough to raise equity. So there is no fraud on the part of a RP in merely acquiring a title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest: Mills c Stockman (1967).

- The repudiation (i.e. of cl 6) is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer (i.e. expressed in cl4). It is irrelevant that there was no fraudulent intent at time of transfer, Bannister v Bannister (1948)

- Per Brennan J: the fraud which attracts the intervention of equity consists in the unconscionable attempt by the RP to deny the unregistered interest to which he has undertaken to subject his registered title.

- In this case, notice was enough to make it a constructive trust. I.e. Thompson was a Constructive trustee. Why? By taking transfer on the basis of s4 (acceptance that they would be bound), and B’s interest under cl 6 constituting an equitable interest in land, T became subject to a constructive trust in favour of B. There is a personal equity enforceable against T. There was intention to protect interest in the B's, the effect being that T holds the land subject to the right created in favour of the B's in the antecedent agreement

Wilson and Toohey JJ:- Held, no actual fraud. He just hoped that they wouldn’t have money to buy pack house. Unless there was no

fraud, T holds their interest free of any interest B have by reason of cl 6, subject to any claim in personam that may lie against T.

- Because of the agreement (cl 4), Thompson had a personal obligation to sell the land back to B. So! Constructive trust coz of agreement. So! Recognized it therefore personal equity in personam rights.

- So! if agreement to recognize CT in equity (to prevent unconscionable conduct) in personam - Just coz have notice of prior interest, doesn’t give you in personam rights – different from s42, 43. WHY? Coz

it’s an agreement, haven’t promised anything. IF want in personam right the purchase agreement has to be subject and bound by that interest.

Brennan J: - A purchaser who takes with notice of an antecedent interest but who becomes registered under the Act w/o

fraud takes free of that interest: Oertel v Hordern (1902). - The title of a purchaser who not only has notice of an antecedent unregistered interest but who purchasers

on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation.

- Orders of that kind do not infringe infeasibility provisions. Thos provisions are designed to protect a transferee from defects in the title of a transferor, not to free him from interests with whom he has burdened his own title.

- A means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest

Conlan v Registrar of Titles [2001]: unless there is identified some personal conduct by the RP or by some person whose conduct he or she is responsible, the general rule is that registered title ought to prevail.

Mercantile Mutual Life Insurance Co Ltd v Gosper (1991, NSW Court of Appeal)Facts: Husband forges the wife’s signature (who was the RP) in obtaining and varying a mortgage. The mortgagee acts in accordance with the husbands unauthorised actions. Mercantile registered increased amount of mortgageHeld:

- S 41 and 42 of the RPA provide indefeasibility of title for a person registered as the proprietor of an estate or interest in the land ‘except in case of fraud’.

1. The Torrens Title Issues The position is as follows:(a) the registration of the forged variation of the mortgage rendered the land liable as security for the increased

amount and gave rights to Mercantile accordingly(b) However, notwithstanding the provisions of the RPA, there may be enforced against the holder of an interest

registered under the Act equities which are "personal equities"(c) Mrs. G has the right in equity to have the transfer set aside and that right is a "personal equity" of the relevant

kindEnforcement of rights against a registered proprietor in this way:1. Such rights may be enforced whether they arose before or after a registered interest was acquired, see Bahr v

Nicolay 2. Enforcement of such an unregistered right must not be inconsistent with the terms of the relevant Torrens Act

(RPA)- However, it is established that the right to be enforced qualifies and negatives the rights of the registered

proprietor and is not inconsistent with the terms of the Act- Words in s42(1): "Registered proprietor… shall… except in the case of fraud…hold the same….subject to such other estates and interests…as are recorded in the folio, but absolutely free from all other estates and interests that are not so recorded…"

- It is not inconsistent with s41 and s42(1), properly construed, that there are interests which are not so recorded that are personally enforceable against the registered proprietor

- 2 conditions emerge: the interest must not be inconsistent with terms of Act AND 'personal equities' arise only from the acts of the new owner

- Mahoney concludes that Mercantile breached its obligations to Mrs. G in using the certificate of title to procure such registration without authority from Mrs. G thus, assisted in fraud by registering title (Mrs. G equity against M entitled her to a correction of the register). So! A right in personam may be enforced against a registered proprietor where the proprietor became registered via unauthorised use of the certificate of title. Creates a personal equity why? assisted to register the forged instrument, thus breached obligation to look after her therefore creating a personal equity against mercantile; this is not inconsistent with s42.

- There was no contract or personal obligation. The personal equity arose from the fact that mercantile broke their obligation to G – coz gave certificate of title to someone else breach of trust. So! In effect, M assisted husband to forge the G’s signature.

- BUT! If the husband stole the certificate of title (thus not creating a person equity!), M’s interest would be indefeasible from the mortgagees perspective.

- Forged variation should be set aside- Indefeasibility of a registered proprietor's title is subject to personal equities against him and this principle

may be extended to the holders of other registered interests

** If the person becoming registered is guilty of unconscionable conduct as the primary actor, the in personam exception to indefeasibility will answer to repel reliance by such a person upon a registered title.

A commonly argued personal equity exception has been the equity a wife has to set aside the surety given to a 3rd

party by her husband to secure his debts In Yerkey v Jones (1940, HCA) it was held that is might be appropriate in some cases to give special protection to

a wife in this situation

In Atkins v NAB (1994, NSW) the court held that the principle in Yerkey has been subsumed by the principle of unconscionable conduct, but the High Court refused special leave to appeal

Adverse Possession Under the Torrens System in NSW the registered proprietor is protected against squatters etc getting title

by adverse possession while those interests are unregisteredConclusion

End result is that in all states a bona fide purchaser of Torrens land is exposed to the risk of being bound by interests, the existence of which cannot be ascertained from the register or, in some cases, from any other source at the time of purchase

Fraud v In personam rights: fraud is more restrictive, need actual fraud. But, equity says you don’t need actual fraud, something else.

Statutory fraud S 42Actual fraudMoral turpitude Personal dishonesty Brought home to the RP E.g. Assets co.

Personal equities I.e. rights in personam Knowing of interestUnconscionableTrust e.g. constructive trust E.g. Bahr, Loke Yew

Notice of interest Prudent registration

Fraud (Tension) Enforce rights in personan against RP (tension) Stupidity

WEEK 3 (Class 1): Torrens System- Say-dee/ overriding Alleged unconscientious acquisition of joint venture property by JV and 3rd parties Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA Facts:

- Farah (controlled by Mr. Elias) & Say Dee entered into joint venture to purchase & redevelop property. But council did not grant development approval as land was too narrow.

- Thus F and Mr. Elias arranged for various people (his wife and daughters) to purchase nearby properties. - Mr. Elias offered SD opportunity to invest in nearby properties. But he did not inform SD of benefits of

acquiring extra properties NOR how acquisition would complete and amalgamation of land (which council required if the max. potential of the initial investment property were to be realized)

- F breached its fiduciary duty (failed to disclose info relevant to JV to SD).- SD argued that unit 11 is held on trust for them.

Held:- Strict approach, favoring the RP. No fraud. He knew of the info but it wasn’t confidential so just coz had info

doesn’t mean fraud. There was no receipt of trust property as info does not constitute as trust property. No in personam rights: in personam is an exception operating outside the s42 (1) in relation to certain legal or equitable causes of action against the RP. In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd held that a claim under Barnes v Addy was not a personal equity which defeated the equivalent of s42(1).

- In Macquarie case: “If registration achieved dishonestly then the registration and the interest are liable to be set aside not because, on registration, the registered holder became a constructive trustee but because s42 (1) recognizes that fraud renders the interest defeasible. If the registration is not achieved by fraud, the Act, subject to its terms, provides for an indefeasible interest. Those terms allow a claim in personam founded in equity against the holder of a registered interest to be invoked to defeat the interest; and a claim in personam founded in equity may no doubt include a claim to enforce a constructive trust…..It is not possible to treat the holder of a registered interest over property that is subject to a trust, registration having been honestly obtained, as having received trust property. The argument that the appellant is liable as a constructive trustee because it had ‘knowingly received’ trust property should fail” agreed with this. Also LHK and Tara shire council agreed with this statement.

- S42 – indefeasible, therefore F can keep land! (there was no fraud! If there was, then s42 could not have assisted them).

- Mr. Elias non –disclosure cannot be described as amounting to ‘actual fraud’ for the purposes of s42 (1) (moral turpitude).

- Registered proprietors prevailed over SD (even if they were volunteers). Daughters had no duty to investigate (i.e. to piece info together).

- SD argued: Mr. Elias breached fiduciary duties owed to the JV & other appellants (wife and daughter) were liable on the basis of knowing recipient, & equity imposed an obligation to make good the relevant loss.

- Mr. Elias relied on indefeasibility to retain title in land. - First limb of Barnes v Addy (1874) did not apply to wife and daughters – as there wasn’t relevant receipt of

property & no relevant notice. - Wife and daughters not caught by 2nd limb of Barnes v Addy – they lacked ‘consciousness of those elements of

the transaction which make participation transgress ordinary standards of honest behavior’. - Court of Appeal erred in finding that wife & daughters were liable as recipients of trust property on basis of

unjust enrichment. - Actual fraud was not established = appellants could rely on indefeasibility to maintain title to the properties

registered in their names.

WEEK 3 (Class 2): Torrens System – assurance fund/ reg/ eq interests The assurance Fund

- Play a key role in ensuring the achieving the objective of security of title. (Page 546)- A person sustaining loss either by reliance on the register or by being deprived wrongfully of a registered

interest can be put in the same position as if the loss had not occurred, in so far as money can be sustained for a proprietary interest.

- (page 548 table) - Limitation on liability is imposed to the extent of the claimant’s contributory negligence s129 (2) (a)) and the

fund is not liable where loss is sustained as a consequence of the failure of the claimant to mitigate loss: s129 (2) (c).

- The limitation period for making such a claim is either within 6 yrs after the act or omissions causing the loss occurred or 6 yrs after the date on which the compensable loss arose: 131(2).

- S134 (2): if no balance is assurance fund, take it out of consolidated revenue. - 129(1) (e): partial deprivation of land is enough (Register of Titles v Franzon 1975).

Short-term tenancy: exception to indefeasibility. Need notice: (actual or constructive ie courts can infer). Tenant needs to be in actual possession or entitled to possession. Applies for tenancies of less than 3 yrs (don’t have to register). So! If RP took without notice, not bound.

Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) SCNSW Facts:

- Defendant used forged bank cheque to discharge a mortgage to regain his registered land that was subjected to a security by the mortgagee.

- The defendant then entered into a contract to sell land to Chelliah and Jain as joint tenants. C had knowledge of the fraud but J did not and she was a bono fide purchaser of value without notice. (So J had the equitable interest).

- The mortgagee lodged a caveat before the joint tenants were registered. - J claimed compensation under the assurance fund because of fraud.

Issues: - Can J claim comp through insurance und under section 129 of the RP Amendment (Compensation) Act 2000? - Ass S129 only provided compo for those who were ‘deprived of land’ as a ‘result of the operation of the Act’

and ‘in consequence of fraud’ the case hinged on whether the circumstances fell under section 129. Held:

- Dismissed the claim. Windeyer J was of the view that the fraud of one joint tenant infected the other but ruled on the assurance fund claim on the assumption that J was innocent of fraud. So J got compo.

- The words ‘as a result of the operation of the Act’ was to be given a broad interpretation and was intended to make the Assurance Fund more accessible rather than restrict claims. Thus J interest which was defeated by

the original owner’s indefeasibility was a result of the operation of the RPA as under Old system Title, J would probably have authority.

- J was ‘deprived of land’ coz it was held that to ‘deprive’ included the meaning of keeping someone from possessing or withholding, in this case, J right to the land was withheld. Deprivation is the result of some interest lost as a result of the doctrine of indefeasibility.

- This was the ‘result of fraud’ and comp should be given to persons suffering damage as a result of fraud which has ‘enabled the proprietor of a registered interest to maintain an indefeasible title to such interest based upon its continued registration’.

- Thus, had J been the sole purchaser of the land, his claim would have fallen within s129 (1) (e) of the Limitation Acts. So! There was no reason why comp should not be available to persons suffering damage as a result of fraud which has enabled the proprietor of a registered interest to maintain an indefeasible title to such interest based upon its continued registration. Such damage seems to arise out of the operation of the Act.

Robinson v Register General (1982) Facts: There was an agreement to purchase land by the plaintiff from their in laws. The conveyance was performed by C who fraudulently inserted his name into a blank transfer signed by the in laws. He then gave a mortgage to the bank. The land was then transferred to the plaintiffs, subject to the mortgage. The P’s took bankruptcy claim against C but to no avail. P then sought compo funds against the Register General under s126Held:

- At the time of the contract the P’s or the transferors of the montage had signed a contract. - They could recover form the RG but they could recovery no more than what they could recover from C.- Under this analysis, the cost of the bankruptcy proceedings and the cost of proceedings against could not be

recovered.

The Register Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) HCA Facts:

- Dispute over airspace. - Bursill certificate of title has a notice of encumbrance with regards to a ‘right of way created by Transfer

7922’.- The certificate of Berger, a neighboring land said that the right of way created by the Transfer 7922 was

appurtenant to the land. - The right of way extends way back to 1872 when Guy (Bursill’s predecessor) granted Long (Berger’s

predecessor) an extension of an existing right of way. The right included ‘the right to pull down the buildings and rebuild others at the height of no less than 12 feet from the ground over such road’.

- Berger argued that it retained an exclusive right to use the land to receive support for its building from Bursills building, and that they could demolish the immediate building and rebuild on the land.

ISSUE:Are additional rights included to what is registered? Yes! Don’t take register @ face value, look @ the dealings of the parties. The dealings indicate that there was an entire transfer. A prudent person would have investigated that, not the easement alone. It was discoverable by a prudent solicitor even if badly described. The majority of the court held that the additional rights burdened the land! Not intended that the register provide all info necessary to be known to comprehend state or title of owners land; therefore this protects prudent purchasers. Held: Per Windeyer J:

- ‘What is notified to a prospective purchaser by his vendor’s certificate of title is everything that would have come to his knowledge if he had made such searches as ought reasonably to have been made by him as a result of what there appears’. (Not concerned with s43 which gives protection against unregistered instruments, as Transfer 7922 was registered and was noted on the COT).

- He concluded that Bursill thus had constructive notice from the notification of encumbrance on his certificate of title that his interest was not only limited by a right of way but also to an interest of the adjoining land

holder. Therefore, Berger has, in law, an exclusive right to use the building (the RP (Bursill) held his title subject to that interest).

- With regards to the right of Berger to demolish and rebuild the building. He says that any right which Berger has to demolish and rebuild is limited to erecting a building of the same dimensions as that which the original building had.

Ratio:The ratio of this case is therefore that a reference to a registered dealing in the folio of the register is constructive notice of the contents of such registered dealing. His Honour basically said that the 'right of way' shown on a CT was sufficient notice to a purchaser that there was some encumbrance on the land, and that they should investigate it further to ascertain what rights that instrument gave to people.

The moral of this story is if you see a reference to any encumbrance on a CT; investigate fully what that reference actually says and what rights it conveys.** The reasoning in this case remains applicable in NSW: NSW RPA ss3, 31B, 42.

Equitable Interests and Equitable Unregistered Instruments- If get registered in good faith indefeasible! Even if have notice. - Unregistered interests are equitable, but not completely coz of exceptions. - 2 interests both unregistered priority issues: legal over equitable, earlier in time, postponing conduct. In

some circumstances, the failure to lodge a caveat to protect an unregistered interest may be a factor warranting the postponement of an equitable interest to a latter interest acquired by a person in the mistaken belief that the registered proprietor had an unencumbered title. Thus if a prospective purchaser searches the register and finds no interests registered or caveats noted on the title of the RP, the unregistered interest may take priority over earlier interests which are neither registered nor protected by a caveat: Butler v Fairclough (1917).

- If competing between unregistered interests, not all are equitable. Unregistered interests under Torrens title exist look for the better equity. If equal first in time.

- Egs of legal interests: (i) s 23(D) (2) Conveyancing Act: oral lease: so if unregistered, then override over other unregistered interests. (ii) Tenancy @ will s127 CA.

- Although the Torrens system is based upon the registration of dealings and a state guarantee of the accuracy of the register, the legislation recognizes that unregistered or equitable interests can continue to exist with respect to registered land (despite the guarantee of indefeasibility). E.g. trusts may operate as encumbrances on the registered proprietor’s land, yet the Registrar-General is not allowed to record these on the register.

- E.g. while the Register is forbidden to record in the register notice of any trust, whether express, implied or constructive, the legislation provides a procedure for depositing declarations of trust with the Registrar for safekeeping; NSW s282.

- But the legislation clearly acknowledges that trusts of Torrens system land may be declared, although they many not be registered. The accommodation of equitable interests within the framework of the Torrens system raises difficult issues.

Barry v Heider (1914) HCA (refer to class notes) Facts:The appellant (Barry) was the registered owner of some land. He sold that land (for apparently a very cheap price) in two parcels to two separate purchasers, Schmidt and Lawlor. Schmidt mortgaged the parcel he bought to Heider, but the CT was not amended yet to reflect the 'sub-division' of the land. Therefore, all these dealing with the subject land were not registered. Then the appellant commenced proceedings against Schmidt, alleging that his signature on the purchase document had been forged and that he originally had agreed to sell the land to Schmidt for a much greater sum.In the present case, Schmidt is out of the question, but there is a conflicting interest between Barry, and Heider and Gale. In this appeal, Barry's main argument was that an unregistered instrument (re the mortgage and transfer) is inoperative to create any rights with respect to the land.

High Court, per Griffith J: examining equity in the RPA

4 competing unregistered interests:(i) Mortgage in favour of Heider(ii) Mortgage in favour of G+G(iii) Fee simple in favour of Schmidt (who was fraudulent and waiting to register) thus as fraud, the interest in

no longer valid in equity. (iv) Unpaid vendor’s lien (equitable interest) in favour of Barry (1200). - Held VOID order of interests:(1) H (a bona fide purchaser for value without notice) (most innocent coz Barry armed Schmidt with the ability to

give others interest) therefore his interest is postponed 800. (2) B G+G postponed coz they should of known about the caveat (they had notice so Gale was obliged to

inquire further that Barry, the vendor, had in fact received the full price due to him) Barry gets the land back (i.e. his fee simple coz fraud on behalf of Schmidt! 1200

(3) G + G – mortgage

- Rights in equity, such as the mortgagees above, were able to be dealt with under the register applicable to Torrens title land.

Griffith J first establishes that the Real Property Act does take into account unregistered and equitable interests. Sections 82, 86, 72 and 44 of the Real Property Act take such interests into account in the following way:

- Section 82: although this section holds that trusts may not be registered (trusts being equitable interests), an instrument may declare a trust, which may be deposited with the Registrar-General. If it is so deposited, then the Registrar-General must enter on the register a caveat forbidding the registration of any further interest on the land in question that is not in accordance with the terms of the trust.

- Section 86: this section allows vesting orders to be made under the relevant Trustee Acts.- Section 72: a caveat is the means by which an equitable and unregistrable instrument can be

recognized and protected (i.e. by forbidding registration). - Section 44: this section implicitly acknowledges the existence of rights and encumbrances not on the

register which may nevertheless burden the registered proprietor: “other circumstances which would affect the vendor’s right.”

- In this case, Griffith CJ saw the transaction of the transfer of land between Barry and Schmidt as establishing an equitable right to the land in favour of Schmidt, who then could have assigned this as a mortgage to Heider. The case as seen by Griffith CJ came down to competing equitable interests, and Heider was left with a mortgage over Barry's land, who had a vendor's lien that was unpaid.

Isaacs J looking at equity in contractual- VOIDABLE. Regarded that the equitable interest stemming from contractual transactions between the

parties: on the basis of estoppel. - Barry had created the indiscretion. Consequences of his conduct estopped him from asserting his title coz he

handed over the COT. ** Barry = RP indefeasible, but exception coz in personam rights that’s why Barry takes his interest subject to the other interests. Ratio:1. The Torrens system recognizes the existence of equitable/unregistered instruments.ie equitable or unregistered

interests can be protected under the Torrens system,2. Where there is a conflict between competing equitable interests (such as between an unpaid vendor’s lien and a

mortgage), the first in time will prevail, unless there has been postponing conduct – see Rice v Rice (first session case).

3. In this case, was there a conflict between competing equitable interests or between a legal interest and a subsequent equitable interest? The court seemed to treat the case like the former (therefore see point 2), but it should have been seen as the latter, because Barry had not in fact got an unpaid vendor’s lien (as there was fraud) but still was the legal registered owner of the property.1 In such a case, the earlier legal will prevail

1 Unless, of course, he had agreed to sell the property for £4000, in which case there would be competing equitable interests.

against the later equitable unless there is postponing conduct – see Northern Counties v Whipp; Walker v Linom (first session cases)

A note - in a conveyance of Torrens land, two things usually occur, first you have the contract of sale, then you have the transfer of land document signed by the parties and then that gets submitted for registration. Suits for specific performance of contracts of sale necessarily arise before the transfer is executed.

- An unregistered interest in land under the Torrens system is liable to be defeated by the registration of an inconsistent dealing by a good faith purchaser, even if that purchaser has notice or knowledge of the unregistered interest. This flows from indefeasibility provisions which gives the purchaser a conclusive title subject only to the interests recorded on the register and those protected by recognized exceptions of indefeasibility.

- The notice provision absolves the purchaser, upon registration, from the need to investigate trusts or other outstanding unregistered interests, even if he/she is aware of them. Thus enforceability of an unregistered interest in Torrens system land is different from that of an equitable interest in old system land.

- The vulnerability of equitable interests to registered dealings presents a problem to the holder of such an interest. E.g. if a beneficiary under a trust, or the holder of any other unregistered interest, has no means of protection he/she is at the mercy of a person registering a transfer from the registered proprietor, even if that person is aware of the unregistered interest. The necessary protection is provided by the CAVEAT SYSTEM: NSW SS74F-74R.

- In general, any person claiming an estate or interest in land under any unregistered instrument or otherwise may lodge a caveat with the register forbidding the registration of any person as transferee, or proprietor, or of any instrument affecting the estate or interest.

- A lapsed caveat cannot be renewed. - The caveat system thus affords protection to the holders of equitable interests but usu places the onus upon

them to ensure that no dealing inconsistent with their interests is registered. - The caveator may be liable to pay comp to any person sustaining loss where the caveat is lodged w/o

reasonable cause: NSW s74P.

WEEK 4 (Class 1): Torrens system- Caveats CaveatsPurpose of caveat: (i) freeze (ii) give notice. The caveat system protects the vulnerability of equitable interests to registered dealings. The provisions are found in ss74F - 74R (Part 7A) of the RPA. Any person claiming an estate or interest in land under any unregistered instrument or otherwise may lodge a caveat with the registrar forbidding any dealing that affect their interest. The onus is on the person lodging the caveat to ensure that no dealing inconsistent with their interest is registered. There is no obligation to lodge a caveat. Indeed it has even been held that a failure by an equitable interest holder to lodge the caveat may amount to postponing conduct in favour of a person’s later interest (Butler v Fairclough).

Caveats also have to be framed with great precision (i.e. needs to be correctly specified). Notice of the caveat is given to the registered proprietor who may commence proceedings to remove the caveat. Caveat does not give you a better legally enforceable interest – just give notice. At the time you lodge a caveat, have to have a present caveatable interest e.g. easement, mortgage of deeds, interest of a lease, if contributed purchase price. If have joint tenants, if one person lodges then it’s for all. If have license to occupy land, can’t lodge a caveat.

A caveat works in the following way:1. A holder of an estate/interest in land under an unregistered instrument lodges the caveat, forbidding the registration of any person as transferee/proprietor, or of any instrument affecting the estate or interest.2. Memorandum of caveat is entered on:

(i) Crown Grant; or(ii) Certificate of Title; or(iii) Folio of the Register.

3. Notice of caveat is given to the registered proprietor.

4.Where someone wants to register an interest protected by the caveat, the caveator must either consent or show cause as to why the dealing should not be registered.5. If the caveator does not respond within a specified time, the caveat lapses, and cannot be renewed.

a) In Vella v Aliperti, it was held that a caveat will be extended if the caveator’s claim has or may have substance, if the claim raises a serious question to be tried, and if the balance of convenience favours retention of the caveat pending the trial to substantiate the interest claimed.b) The onus of proving that the caveat is reasonable lies on the caveator.c) The caveator may be liable to pay compensation to any person suffering loss where the caveat is lodged without reasonable cause: s74P. d) If a prospective purchaser searches the register and finds no interests registered or caveats noted on the title of the registered proprietor, the unregistered interest may take priority over earlier interests which are neither registered nor protected by a caveat.

Kerabee Park v Daley [1978, SC NSWFacts:The registered proprietor of land mortgaged the land to P, the first mortgagee, who registered the mortgage. The R.P. then mortgaged the land to D1 and D2, the second and third mortgagees respectively. D1 and D2 lodged caveats preventing the registration of all inconsistent dealings. P applied to the court to remove the caveats.Held – Per Holland J:

- Caveat is nothing more than a statutory injunction to keep the property in statu quo until the court has an opportunity of discovering what the rights of the parties are: Re Hitchcock (1900). Its purpose is not to give notice to the world of a claim, but to protect caveator’s interest from being defeated by a registration of dealing, w/o ceaveator having opportunity to invoke assistance of the court to give effect to his interest.

- So! Caveat cannot prohibit registration of a dealing which caveator cannot object to in court First mortgagee has proper right to sell upon default, and subsequent mortgagees cannot hinder this process.

- A subsequent incumbrancer, registered or unregistered, has no right to interfere in or object to a proper exercise by a mortgagee of the mortgagees powers of sale and would have no ground on which to seek the intervention of the court, notwithstanding the fact that registration of the transfer to the purchaser would discharge or defeat all mortgage interests in the land whether registered or not.

- In the circumstances it was not reasonable for the defendants to refuse to reply. In the absence of any proven fraudulent conduct by the first mortgagee, the second mortgagee’s refusal to remove the caveat is unreasonable in that it detracts potential buyers. The plaintiff assured them of notice before proceeds distributed, and provided details of the auction.

The only circumstances in which a caveat would be justified are when there is suggestion of fraudulent of improper dealings on the part of the registered mortgagee. This seems to require actual positive evidence, established by the caveator.So! If 1st mortgagee wants to exercise bona fide sale, other 2 have to remove caveats no reason for the caveats as dealing with arms length transaction (i.e. fair transaction). Note: if have multiple mortgagees, it is a good idea to have caveat as you want other people to know that there are other mortgagees. Standard form of caveats (from Easton v Ardizzone):

(i) proper statement of the estate or interest of the ceaveator(ii) state amount or nature for which security was claimed by caveator(iii) Identify the instrument or specify the facts on as the source of interest claimed by caveator.

This case affirms the need to specify the quantum of the estate claimed by the caveator and the facts on which the claim is founded.

Note that amendment to the RPA (s 74L), provides that if a question as to the form of a caveat is raised, the court shall disregard any failure of the caveator to comply strictly with the formal requirements. The affect of this section is not clear. It appears that the validity of a caveat will be established if the substance of the caveators claim is upheld: In the Marriage of Stevens (1991).

** Amendments to the RPA 1900 (NSW) in 1986 entrenched the reasoning in Kerabee Park. The legislation now requires the caveatanle interest to be specified and verified by statutory declaration: s74F (5).

** Hopper v Australia & New Zealand Banking Group Ltd (1996): held that technical deficiencies in the form and content of a caveat should not be allowed to deprive a bona fide claimant from the advantage that prompt notification to the Registrar is intended to achieve.

Re Jones [1935, NSW]The caveat was held to be defective on the ground that it did not specify the duration of the leasehold estate claimed. Dunecar Pty Ltd v Colbron [2001]: caveat will usually be ordered to be removed if the caveator’s interest is overridden by a superior interest in the land by the registered proprietor.

If tenants in common, must state shares as tenants in common (%): Re Fairlie 1959 NSW. The following is a list of all caveatable interests:Interest of purchaser under a conditional sale if court would protect by injunction. Jessica Holdings v Anglican Property Trust

Beneficiary’s interest in a unit trust. Costa & Duppe Properties v DuppeInterest of a builder on the land if the contract provides for a charge.

Gibson v Coordinated Building Services;Rising Developments v Hoskins

Unregistered profit a prendre. Permanent Trustee Aust Ltd v ShandBorrower under a contract of loan agrees to charge a specific property as security for payment of the loan, thereby creating an equitable charge which is sufficient to support a caveat.

Avco Financial Services v White

Oral agreement for the extension of an easement supported by acts of past performance sufficient to justify caveat on title to servient tenement.

Deanshaw v Marshall

Guarantee, provided equity would grant Sp. Perf. Composite Buyers v SoongOthers such as: constructive, resulting or express trusts equitable mortgages and leases equity of acquiescence equitable easements unpaid vendor’s lien equity of redemption

The following are not caveatable: An equity to set aside transaction for fraud: Re Pile’s Caveats [1981]. An agreement to share profits: Simons v David Benge Motors Pty Ltd [1974] A mere personal right is not caveatable. A claim to set aside a transfer on the ground of fraud is a claim in personam which may result in a proprietary

interest but is not caveatable until such claim is successfully established: Valerica Pty Ltd v Global Minerals Australia Pty Ltd (2000).

A right of preemption.

Application for removal of caveat - The registered proprietor can apply to the court for removal of the caveat in s 74MA of the Real Property Act.

Kerabee Park v Daley: Power of the court is not confined to cases where the caveat is bad in form. The courts discretion to order the removal of a caveat depends on it being satisfied that the caveator will be protected: Morling v Morling (1992) where sold for undervalue w/ knowledge.

- The vendor’s obligation under a contract for the sale of land to make good title requires it to remove all caveats on the title: Zanee Pty Ltd v CG Maloney.

Re Jorss’ Caveat [1982] Sup Ct of QldCourt’s power to grant an interlocutory injunction is discretionary. The caveator, when challenged by a caveatee, bears the onus of showing (1) that his or her claim to an interest in the property does raise a serious question to be tried; and, (2) that on the balance of convenience it would be better to maintain the status quo until the trial of the action, by preventing the caveatee from disposing of his land to some 3rd party.Doesn’t have to show that there is a ‘probability’ or ‘strong prima facie case’ that if the action goes to trial he will succeed. Onus of proof in proceedings for removal of a caveat rests with the caveator: Re Little; Ex parte Thorne’s Bankstown Estate Ltd (1929).

Section 74P of the RPA (NSW) provides compensation might be payable by a person who lodges a caveat “without reasonable cause”.

Bedford Properties Pty Ltd v Surgo Pty Ltd [1981]: in considering the plaintiff’s claim for compensation reasonable cause is not the actual possession of a caveatable interest, but an honest belief based on reasonable grounds that the caveator has such an interest. That may not be enough. In Young v Rydalmere Credits Pty Ltd (1963): a caveator was held to have acted w/o reasonable when he lodged a caveat not for the protection of his interest but for an ulterior motive and w/o regard to its effect on transactions to which the caveator had agreed.

Two fold test: - Subjective test: caveator honestly believed they had caveat interest - Objective test: the caveator had reasonable grounds to think that

A caveat lodged in ‘deliberate infringement of the rights of the RP or interested person’ may render the caveator liable: Dykstra v Dykstra (1991).

A caveat lodged solely to place pressure on the registered proprietor to give something to which the caveator was not entitled cannot be maintained: Wildshut v Borg Warner Acceptance Corp [1987]. Applied in Lee v Ross (No 2) [2003]: where compensation for wrongful lodgment of a caveat was awarded in circumstances where the caveator was honest but the solicitor for the cavetor was neglectful and lacking in diligence in failing to adivse the client that the vendor’s termination of a contract for he sale of land (the alleged caveatable interest) was valid. Caveator must accept the risk of liability to compensate the registered proprietor for loss realistically attributable to the wrongful lodgment.

Competing equitable interestsAbigail v Lapin [1934] Privy Council (earlier equity v later equity)

- Followed in HC in Breskvar v Wall (1971): i.e. Look to conduct, representations made etc to decide who has the better equity: Abigail v Lapin. Issue in Breskvar was whether A’s later equitable interest prevailed over the earlier equitable interest of B. HC unanimously held in favour of A (B P W A). The priority of B will only be lost by some conduct on the part of B which must have contributed to the assumption, false as the event proved, upon which the holder of the competing equity acted when that equity was created. In this case B armed P with the power to deal with the land as owner, by entrusting him with a certificate of title and signed memorandum of transfer in BLANK, and thus enabled W to sell to A as owner of the land. Thus, the equitable interest of B is postponed to that of A. note: P’s power, if the occasion arose, was to exercise his powers as a mortgagee, to complete and register the memorandum of transfer.

- Emphasis is placed on the conduct of the mortgagor: Rice V Rice. Facts: L (unregistered interest: right to get property back) H (loan: security) H acted as if it were their interest and transferred to A A (A’s interest was unregistered; not aware of L’s interest). Qs were whether A’s mortgage prevailed over L when they lodged a caveat to protect their rights?Held:

- A won. The conduct induced A – created circumstances. Focus is upon the conduct of the 1st equitable encumbrancer.

- Lord Wright: apart from priority in time, the test for ascertaining which incumbrancer has the better equity must be whether either has been guilty of some act or default which prejudices his claim.

- L (who had the transfer papers) gave H the ability to transfer: thus postponing conduct. - There is no obligation to lodge a caveat, but sometimes failure to do so a caveat is an important consideration

in priority disputes when searching for the better equity. Failing to lodge a caveat may qualify as conduct, which results in an earlier interest losing its priority to a later interest.

- First in time prevails if the merits of both equities are equal: Rice v Rice only really applies as a last resort. As competing equities are said to be unequal displace this rule by ‘better equity’ rule rooted in the nature of unconscionable conduct.

Consequently a caveat does not necessarily affect priority. In this case, Lapin lost priority because they armed Heavener with the documents necessary to perpetuate the fraud (ie allowed H to go into the world as the absolute owner of the land). They could have lodged a caveat to prevent such improper dealings. This is notwithstanding that no evidence was adduced to show that Abigail searched the register (though if he had done so nothing would have been found). Butler v Fairclough [1971, HC]Had the defendant’s mortgage not been registered: a person who has an equitable charge over the land may protect it by lodging a caveat. This operates as notice to the entire world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat. If the plaintiff had been diligent, the defendant would have found his caveat in the Register before paying the price for the interest. If two equitable interests, all other things being equal, the first in time is entitled to priority. But here the pt would have failed.Why does failure result in a postponement? Because the conduct of the plaintiff misleads later interest in the land into believing that there are no prior interests on the land.How prompt do you have to be to lodge a caveat? B did it a week later, but the court felt that two days would have been more prompt. (per Griffith CJ).Note: since this case, it is the practice of the Land Titles Office to give fresh notice to the caveator.

Commonwealth Bank of Australia v Platzer [1997]Held that an equitable interest will not prevail over a prior interest if there is notice of that interest. However, if the first interest holder misleads the second interest holder then the priority otherwise accorded to the first in time will be lost: Commonwealth Bank of Australia v Green [1997, HC] (in this case, her conduct in releasing the certificate of title induced the bank to believe that there was no earlier interest).

Heid v Reliance Finance Corp [1983]Facts:Heid was the RP of land. Heid agreed to sell this land to Connell, a company controlled by Newman, McKay & Co. Heid accepted the advice of N M & Co to engage an employee, Gibby, to act as a solicitor. Gibby was actually unqualified, which Heid didn’t know. Heid left for a holiday after delivering the transfer documents and the Certificate of Title to Gibby. Before Gibby registered the transfer a mortgage was created with the respondent. After the Connell transfer was registered but before the respondent’s mortgage was registered, Heid discovered the fraud and sought an equitable interest as against the respondant. Qs as to whether H’s interest is postponed by his conduct?Held:

- HC said that H’s interests were postponed because of his conduct in handing over the signed documents; followed Lappin: he armed the rogue with the ability to represent to third parties that they had unencumbered interests in the land.

- Look at conduct of 1st interest holder: ‘the delivery of the documents to the employee armed the purchaser with the capacity to represent itself (i.e. C) to be the true owner of the property and to engage in fraudulent and deceptive conduct.

WEEK 4 (Class 2): Torrens system: Caveats/Leases Refer to class notes! J & H Just (Holdings) v Bank of NSW (1971) HCA * Different to Abigail case coz Bank took COT! Issue is between 2 competing unregistered interests. The Bank, as an equitable interest holder, had not lost their priority just coz they didn’t lodge a caveat. It was entitled to rely on the

duplicate COT. So! If done something else (ie in this case took the COT), that is sufficient! Don’t need a caveat in all cases to protect interest. • Mere failure to lodge a caveat does not result in postponing conduct depriving a prior equity of its priority. • Postponing will occur when the failure to lodge a caveat COMBINED with other circs results in conducing or contribution to the belief on the part of the subseq equity holder that no prior equity interest existed over the land in Q. It is the fact that you mislead (by act or omission) others who are interested in the land that will determine postponement: Heid v Reliance.• The purpose of a caveat is protective, it is not to give notice; so if the information is there to be found out and the co do not take advantage of it, then the initial mortgagor will prevail. Ie M2 should have made their own inquiries about the safekeeping of the title given that the owner did not produce the title or a copy. The standard practice estab with regards to the producing of the title for dealings and the fact that the owner did

not produce it should have put the co on notice so bank’s interests not postponed. The fact that a caveat discoverable by a search of the title ‘is notice to all the world’ of the interest claimed does

not mean that the absence of a caveat is a notice to all and sundry that no interest is claimed. Australian Guarantee Corporation (NZ) Ltd CFC Commercial Finance Ltd [1995]: held that the combination of the delay in registering the caveat and the failure to obtain the title justified the conclusion that it was just and fair that the priorities should be reserved. ‘Notice to all the world’ means such persons as are proposing to deal with the registered proprietor in respect of

his land, and who accordingly should as a matter of prudence check upon the title which is to be offered to them by a RP.

No occasion for the P to be called upon to search the title of the mortgagor, more particularly when the P had no notice of any circumstances suggesting any impediment to the further advance being immediately and automatically secured under the P’s 1st mortgage.

** Mere notice of knowledge of an unregistered interest would not amount to fraud. ** Under unregistered interests, notice is important. Notice of caveat can be constructive or actual. ** s43A (1) notice section whereby the purchaser is protected against unregistered interests only after registration of the dealing. (Page 598).

Section 43A, RPAMain points of s43A[a] When a reg prop of TT land gives an unreg mortgage to X and then sells to P. The Qs is what protection does the P have under s43A? (AIC v Courtenay) and (Jonray) Under the section, the purchaser is deemed to have a legal interest as if it was OST. Void dealings: ie ones created by actual fraud: the true owner can prevent registration and the purchaser may be

guilty of participatio criminis. No s43A protection. Voidable dealings: The sale will go through if the purchaser did not have previous notice. What if the purchaser

did have notice? Then the earlier interest will prevail. If the purchaser gets to settlement before receiving notice and satisfies the requirements of s43A, then he will override the unreg interest

[b] Conditions to get the protection of s43A, the dealing must be registrable immediate.-So if the purchaser gets a mortgage to buy the property, then the mortgage is not protected by s43A becos it is not a direct dealing. Both mortgages are simply competing equitable interests.i) It has to be in formal order (AIC v Courtenay)ii) It has to be accompanied by a duplicate or the cert of title (Finlay v R&I)iii) It must be immed registrable as in received and executed by the reg prop; but transfers by direction are

permitted whereas discharge and recharges of morts are not becos two differ parties BUT the Wilkes and Spooner principle will apply. (Jonray)

iv) It has to be bona fide, ie cannot ignore notice: knowledge that any registered interest exist itself shall not be imputed as fraud ie mere notice is not the same as notice but even constructive notice is enough to strike out s43A.

Postponing Conduct: Where the registered proprietor signs transfer of the land along with the cert of title to another on particular terms and the terms are breached at the detriment of the propietor.

Every time, the proprietors interest is postponed to the later interest because of his/her conduct ie their conduct estops them from seeking priority.

Person-to-Person Financial services Pty Ltd v Shahari (1984) NSW Equity Division FACTS: • A gives a reg mortgage to Tredgolde (T) and gives anor unreg mortgage to Shahari (S).• Later gives mortgage to Person-to-Person (P).• P relied on representation that T was the only mortgagee. A title search by P confirmed this. • To enable registration P wrote to T’s solicitors to get consent and for production of title certificate. There was no reply so P remained unregistered.• P sought a declaration to assert the priority of his interest over S’s.HELD:The combination of not holding onto the certificate of title and not lodging a caveat was sufficient to constitute as postponing conduct. So they represented to the world and unencumbered title ie failure to lodge caveat led the plaintiff to acquire its mortgage on the supposition that no unregistered 2nd mortgage already existed, in circumstances which make it inequitable as between the parties that the defendants mortgage should have priority over that of the P. the D must suffer the consequences of any default of his solicitor.

After Person searched register and found no caveat, you can’t just create one and expect it to be enforced! This case was reconciled with J & H holding on the basis that J&H had COT. Lodging a caveat does not alter the nature of your interest ie doesn’t elevate an equitable interest into a legal one. • P’s mortgage had a priority over S’s• An earlier equitable interest has priority over a later one, unless some act or omission by the holder of the first interest misleads the second into believing the first didn’t exist.• The circumstances of each case shall determine the effect of failure to lodge a caveat. • S’s failure to lodge a caveat had caused P to give its mortgage on the supposition that there was no second mortgage. Consequently, it would be inequitable that S should have priority over P.

Moffett v Dillon SCVIC [1999] - Moffett = equitable interest; lodged caveat. Dillion = notice of moffetts unregistered interest 2

unregistered interests. - D knew about the earlier interest therefore M won (there was no postponing conduct). - Notice of an earlier equitable interest by a later equitable mortgagee will in general secure priority of the

earlier interest.

Leases and the Torrens system Leases can be registered under Torrens title! s53 (1) RPA (NSW):

- provides for the registered proprietor to execute a memorandum of lease in the approved form where land is ‘intended to be leased or demised for a life or lives or for any term of years exceeding 3 years’.

- Accommodates for the registration of leases for life which at common law would not be regarded as creating leasehold estates for a term.

- In NSW the practice of registering short term leases, although not expressly authorized, has been judicially sanctioned: Parkinson v Braham (1961).

S53 (3) RPA (NSW):- Protection to options to purchase in leases. - ‘ a right for or covenant by the lessee to purchase the land therein described may be stipulated in such

instrument, and in case the lessee shall pay the purchase money stipulated and otherwise observe the lessee’s covenants expressed and implied in such instrument, the lessor shall be bound to execute a transfer of the said land to such lessee’.

- Because the terms ‘lessor’ and ‘lessee’ include executors, administrators and assignees (NSW s3 (b)) an option to purchase is enforceable by and against successors in title of the lessee and lessor notwithstanding the general rule that an option to purchase does not run with the land.

- Consolidated Development Pty Ltd v Holt (1986): an option to purchase the reversion given to a lessee of a registered lease could not be invalidated by the rule against perpetuities. Thus elevated the option to the status of an indefeasible interest.

- Options to renew and other terms in registered leases are governed by the general principles of indefeasibility: Mercantile Credits Ltd Shell Co of Australia Ltd (1976).

An unregistered lease may be enforceable against a registered proprietor of the land because it comes within one of the statutory exceptions to indefeasibility.

A tenant holding under an unregistered lease, which is not within the statutory exceptions, has an equitable interest on the principle of Barry v Heider (1914). Such an interest would be defeated by the later registration of a transfer from the lessor: R M Hosking Properties Pty Ltd v Barnes [1971]; but would be protected by the lodging of a caveat.

If the lease is unregistrable then, apart from the express exception to indefeasibility, it is enforceable between the parties: Josephson v Mason (1912).

Indefeasibility principle would presumably operate to prevent enforcement of the lease against a transferee of the reversion who obtains registration: Munro v Stuart (1924).

S 43A (refer above)S42 (1) (d)

- Provides that the registered proprietor holds the land free from unregistered estates or interests except: (d) a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected:Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) In the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years. United Starr-Bowkett Co-operative Building Society v Clyne (1967) NSWCADeals with the interpretation of s42 (1) (d) and its relationship with s43A.Facts:

- Clyne is the RP of an estate in fee simple. The applicant was a weekly tenant in the premises – this lease was not registered.

- Clyne mortgaged the premises to Starr, who had actual notice of the existence of the tenancy at the time when it obtained the registrable memorandum.

- Clyne defaulted in payment and Starr sued out of a writ of ejectment in which Clyne was the sole defendant. - The tenant discovered the proceedings when he received a notice to vacate the premises.

Held:- A tenancy of land under the RPA which is not for a term exceeding 3 years may be created without the

necessity for registration of a memorandum of lease. And this includes the creation of a periodical tenancy such as one from week to week: Josephson v Mason (1912). But a tenancy so created was liable to be defeated by registration of a memorandum of transfer of the subject land even though the transferee took with notice of the existence of the tenancy, and the tenant could be ejected by the transferee: Munro v Stuart. But how is this different for a tenant in possession or entitled to immediate possession by s42(d) and 43A

- Question s42 (d) and s43A must be read in conjunction with each other: Despite registration, the purchaser holds subject to a tenancy for a term not exceeding three years created by a previous registered proprietor (whereunder the tenant is in possession or entitled to immediate possession) if he had notice of that tenancy before he obtained a registrable instrument, or one which when appropriately signed by him or on his behalf would be registrable i.e. before completion of the purchase. In this case, S took its mortgage subject to the outstanding weekly tenancy of the tenant.

- S, having become registered subject to the tenancy, by force of s42 (d), could not bring an action of ejectment in order to recover possession against him without first terminating his tenancy by the appropriate notice to quit and that was not done eg letter. So couldn’t treat him as a trespasser.

- His Honour held that a mortgagee of land under the Real Property Act who is bound by a pre-existing tenancy is, or at the least becomes on default by the mortgagor, a ‘successor in title’. Thus S was bound by s62 of the Act and was unable to determine the tenancies of the applicants except in accordance with the Act.

Refer to eg on pp 879

Right of reversion:A (lessor) (fee simple) C (assigning reversion) | B (lessee) D (assignment of the lease: take position as a lessee) |E (sublease)

** NOTE: B would pass money to C if sublease.

WEEK 5 (Class 1): Leases – introduction CLASS NOTES:

- No obligation to lodge caveat - Caveat does not change rights, but prudent to so do eg if armed 3rd party- Lease = right to exclusive possession v license= don’t have a right to exclusive possession - There are substantive requirements ((i) exclusive possession (ii) certainty)) v Formal requirements - If paid reference to a yearly period, then implied tenancy s127.

Lease Legal lease: s23D? or by registration s42 RPA Equitable: Walsh v Lonsdale: agreement for a lease e.g. (i) acts of part performance or (ii) need to meet s54A (ie

in writing and capable of specific performance). - Implied lease if LL accepts rent, therefore equitable lease. - If lease >3 yrs, will gain indefeasibility via s53 (1) ie have to register it ie ‘approved form’. - Exception to leases that are unregistered: s23 (D) (2) ie <3 yrs: can be classified as a legal interest and doesn’t

have to be registered. Prudent to lodge a caveat! - Tenancy @ will: you can be kicked out at any time.- TPA 1974 (Cth) has made a significant impact on commercial leases by proscribing unconscionable conduct,

misleading and deceptive conduct and certain kinds of false representations: ss 51AA-51AC, ss52-53A.

The General Law of Landlord and Tenant- Lessor or landlord: person granting the lease. Usually holder of the fee simple estate in the land, but they may

have a lesser estate such as a life estate or a leasehold estate (in the case of a sublease) ‘lease’ or ‘let’ the premises (or demise). Lessor’s interest in the land during the currency of the lase is known as the ‘reversion’. The reversion consists of the fee simple estate, subject to the leasehold interest of the lessee ‘Assign the reversion’

- Lessee or tenant: person taking the lease. Lessee may dispose of the interest by ‘assigning the lease’. The assignee of the lease steps into the lessee’s shoes and becomes the new lessee or tenant.

- Lessee may ‘sublet’ the premises for any period less than the duration of the lease. Lessee continues to pay rent to the lessor, but is now entitled to receive rent from the sublessee instead of remaining in occupation of the premises. At the end of the sublease, the lessee will be entitled to resume possession of the premises.

- A purported sublease for a period equal to or in excess of the balance of the term is at law an assignment of the lease, no matter how it is described by the parties: Milmo v Carreras [1946].

- A purported assignment for less than the balance of the term operates as a sublease: Lonsdale Pty Ltd v Carra [1947].

- A yearly tenant has a sufficient reversion to enable a sublease for a term of years Oxley v James (1844)- Protected tenant i.e. by legislation may sublet for longer than contractual lease Skelton v Harrison [1975].

- A Lease for a specified period is known as a ‘term of years’/fixed term. Continue for a specified duration unless determined earlier e.g. forfeiture or surrender of lease.

- Periodic tenancy lasts for the designated period and continues thereafter for a further period unless the appropriate notice is given by either party. In the absence of express agreement to the contrary, a landlord may not unilaterally vary the rent during a periodic tenancy

- If the landlord wants to increase the rent and the tenant does not agree – the LL must give notice to terminate the periodic tenancy and offer a fresh tenancy at the new rent: Mitchell v Wieriks; Ex parte Wieriks [1975] Qld SC

- Notice must at least be equivalent to duration of lease: Create v Miller. Exception is yearly tenancy, which is half the period: Holland.

Refer to pg 747 Standard form lease

- Different depending on form e.g. residential or commercial.- Most are designed to protect the interests of landlords.- In NSW a written residential tenancy agreement must be in the form of or to the effect of the prescribed

standard form: Residential Tenancies Act 1987 (NSW) ss8,9. A standard form which recognizes the interests of both landlord and tenant has been prescribed by Residential Tenancies (Residential Premises Regulation 1995 (NSW) reg 6.

- Short forms of lease which may be used by the parties as a word-saving device. Under these provisions, if a lease employs the appropriate short form of words, the legislation implies detailed covenants in the usual form specified in detail in the legislation itself: NSW s86, Sch 4, Pt II.

- The only essential characteristic of a lease is that the LL should give the tenant the right to exclusive possession for a term of a certain period. Although the payment of rent may be an almost invariable provision of a lease, it is not necessary for a lease to provide for the payment of rent: Commonwealth Life (Amalgamated) Assurance Ltd V Anderson (1945) NSW SC

Landlord’s obligations: quiet enjoyment of premises, payment of rent, repair and cleaning of the premises and any furniture or fittings, payment of rates and other charges levied on the property, insurance, purpose for which the premises may and may not be used, alterations, inspection by the LL, assignment, subletting, accidental destruction or substantial damage to the premises, insolvency of either party, review of rent during the term, options for renewal and holding over by the tenant after the expiration of the term. Also adjustments of tenants rights with respect to other occupiers of a common building, use of common areas. Landlord’s rights: non-payment of rent, breaches of tenants obligations and covenants.

Options to Renew- Options are exercisable so long as there are no existing breaches or failure to observe covenants in the lease. - Requires lessor to serve a notice on the lessee, specifying the breach and stating that the lessor proposes to

treat the breach as precluding the lessee from exercising the option. Lessee may then apply to the court for order for relief against the effect of the breach in relation to the option. NSW ss133C-133G Conveyancing Act.

- Solicitors have a duty to explain to their clients the effects of ‘unusual’ terms in leases. Sykes v Midland Bank [1969]. A failure to advise the client may render the solicitor liable in damages to the client for any loss sustained by reason of the unusual term.

Creation of LeasesLease created by:

Express agreement Implication of law: - Continuation of possession (holds over) after determination of lease and pays rent which is accepted by the

landlord, will obtain a fresh leasehold interest by implication of the law.- Tenant entering possession of land without concluding an agreement with the LL as to lease terms of a

proposed lease acquires tenancy by implication of law when rent is paid and accepted: Moore v Diamond (1929) HC

- A leasehold may be created where the parties do not enter into a lease as such, but agree to enter a lease at a later date. Such an agreement for a lease, while it cannot of itself create a legal leasehold estate, may create equitable leasehold as well as contractual rights between the parties.

- A lease of Torrens system land, if registered, creates legal leasehold.

Formal RequirementsConveyancing Act 1919 (NSW)S23B1) No Assurance of land shall be valid to pass an interest at law unless made by deed (deed under old system). 2) This section does not apply to -

(c) A surrender by operation of law and a surrender which may, by law, be effected without writing(d) a lease of tenancy or other assurance not required by law to be made in writing.

3) This section does not apply to land under the provision of the RPA 1900.S23C 1) Subject to the provisions of this Act with respect to he creation of interests in land by parol - (a) No interest in land can be created or disposed of except in writing signed by the person creating or conveying the

same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law…S23D1) All interests in land created by parol and not put in writing and signed by the person so creating the same, or by

his agent thereunto lawfully authorised in writing, shall have, not withstanding any consideration having been given for the same, the force and effect of interests at will only. (formalities not met, tenancy @ will, can be oral).

2) Nothing in this section or in sections 22B or 23C shall affect the creation by parol of a lease at the best rent which can reasonably be obtained without taking a fine taking effect in possession for a term not exceeding 3 years (exception to indefeasibility) with or without right for the lessee to extend the term at the best rent which can reasonably be obtained without taking a fine for any period which the term would not exceed 3 years. (Can be created orally. Must confer immediate possession).

S23E Nothing in SS 23B, 23C or 23 D shall – (c) Affect the right to acquire an interest in land by virtue of taking possession.

- Note that where s23D(2) applies, any special terms agreed upon by the parties may be proved and enforced: Bolton v Tomlin (1836) UK case; and applies to periodic tenancies notwithstanding that they may continue for more than three years before they are determined. But note that the section does not apply to a lease for a definite term exceeding three years even if the lease can be determined by notice on either side before the 3 year period: Kushner v Law Society [1952].

- Remember that the subsection only applies to leases for a period not exceeding three years. An agreement for a lease, even for a period less than 3 years, must be in writing or, if it is to be enforceable in equity, supported by acts of part performance.

Agreement for a Lease- Agreements for leases in the future are enforceable at law as a contract, provided that it is in writing, but

does not of itself create a legal leasehold estate.- Equity, Walsh v Lonsdale (1882), may regard the parties to an enforceable agreement for a lease (i.e. in

writing or supported by sufficient acts of part performance) as landlord and tenant. Need specifically enforceable agreement - will need to be complete and enforceable on the usual contractual principles.

- If the agreement is neither in writing nor supported by acts of part performance, it is not enforceable at law or in equity. If you (in possession of land as the result of the unenforceable agreement) do not have these requirements – you cannot resist a claim by the holder of a fee simple estate for recovery of possession of the land: Perpetual Executors and trustees Association of Australia v Russell (1931) HC. But if the owner has accepted rent, then an implied lease will arise at law.

Industrial Properties (Barton Hill) Ltd v Associate Electrical Industries Ltd [1977] UK : Facts: LL entering an agreement to lease did not have legal title (never took the conveyance from the vendor)Held: Walsh v Lonsdale was not confined to the case of a single agreement or where there was a direct contractual link between the holder of the legal title and tenant.

Granted specific performance and treated the parties to the agreement for a lease as LL and tenant in equity.- The doctrine of Walsh v Lonsdale applies only if the agreement for a lease is complete and enforceable on the

usual contractual principles. A lease requires names of the parties, rent to be paid, but does not have to stipulate the rights and obligations in detail. The court will imply certain terms into leases.

- If the agreement for a lease is ‘subject to contract’ it will not be enforceable since it is not regarded as a final and enforceable contract: Masters v Cameron (1954) HC

- If the agreement contemplates the execution of a more formal document in the future this does not of itself deprive the agreement of binding effect: Branca v Cobarro [1947] UK, Godecke v Kirwan (1973) HC

Implied Tenancies at Law s42 (1) (D): exception to indefeasibility. Where a person went into possession of land as a tenant and paid rent, an implied tenancy arose at common law. Talk about this if agreement is VOID or no agreement at all or ‘hold over’ ie stay after fixed term has ended! Legal implied tenancy in the following situations: (a) Where the parties have made no agreement or arrangement at all(b) Where the parties have entered into a void lease(c) Where the parties have entered into an agreement for lease or a lease that does not comply with the statutory formalities(d) Where the lessee ‘holds over’ upon the expiration of a fixed term lease and where there is no holding over clause.

Where a lease is implied by payment of rent:s127 (1): No tenancy from year to year shall be implied by payment of rent; if there is a tenancy, and no agreement as to its duration, then such tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one month's notice in writing expiring at any time apply this where necessary formalities have not been observed! So! s127 is implied yrly tenancy @ CL. So can terminate after 1 months notice. Incorporates the term of the agreement.

- The Torrens legislation permits the registration of leases exceeding a specified period, usu 3 years, although it may be permissible to register shorter term leases, as in NSW.

Adler: even though paid monthly, it was with reference to a yearly period. In AUST, if you hold over and pay by refernce to yearly period = implied! : Bank of Victoria.

Dockrill v Cavanagh (1944) (Supreme Court of NSW – Full Court)Facts a memorandum in writing of a lease registered under the RPA: four years with option to renew for further two years. Cavanagh exercised first option to renew, but no further formal lease entered into. C remained in possession and paid rent which was not best rent. Lessor died while lessee in two year option period, executor of estate refused to accept rent, and brought an action of ejectment.Issue: Implied periodic tenancy or tenancy @ will? the possession and payment of rent, pursuant to the agreement for a lease for 2yrs constituted by the exercise of the option, brought into the existence at common law a lease at will on such terms of the agreement as were applicable, which terminated at the need of the 2 years without notice since it had not been previously terminated by a month’s notice. Once the two year period had expired, there was no need to give notice to eject the tenant.Held:

- The provisions of the first agreement were incorporated into the 2nd agreement. - Paying by reference to years – aliquot. - Equitable lease coz had an option. - Tenancy @ will (s127) determinable automatically @ end of period originally agreed without need of notice

coz earlier agreement is incorporated into the new one (coz s127 incorporates all the terms of the original agreement).

- Three types of leases: fixed terms (terminates at the expiration of the term), leases at will (terminable by either party at any time and no period of notice is necessary unless the conditions of the lease require it. Cannot be assigned!) And leases creating periodic tenancies (eg lease from yr to yr, week to week, continues indefinitely until either party terminates it by giving notice equal to the length of the period and terminating and terminating at the end of a complete period).

Jordan CJThree situations where in the past the common law would have implied yearly tenancy:

1. T entered into possession subject to enforceable agreement and started paying rent2. T held over after fixed term, paying rent referable to aliquot part of year3. T moved in without enforceable agreement and began paying rent referable to aliquot part of year (part

performance)• After s127, these situations will give rise to a tenancy-at-will terminable at one month’s notice, not a periodic yearly tenancy• ‘no agreement as to its duration’ in s127 effective means: ‘no agreement as to its duration’ means no agreement as to it duration which, at common law, is incorporated in the lease for all purposes. Ie the agreement for the term of the lease must be contained in a lease that complies with the legal formalities. Eg ss23B and 23D(2) of the Conveyacing Act. An agreement for duration in a lease that does not so comply will be irrelevant to a consideration of the threshold question whether s127 (1) applies to the legal implied tenancy but will be relevant to a determination as to whether the rent paid is referable to an aliquot part of a year.

Position at CL in NSW with respect to creation of leases is as follows:RPA 1900 : A purported lease, to be operative, must be both in the form of a memorandum of lease and duly registered if it for a period longer than 3 yrs.If for less than 3 yrs may be duly registered memorandum of lease if this is not so may still be operative if made in writing duly signed (Conveyancing Act s23C(1)(a))or if it is for best rent it is operative at common law however made, oral or written (Conveyancing Act s23D(2)). An otherwise intended lease not validly created a lease at will terminable by a month’s notice may arise at common law by s127 and implication of law arising from possession and payment of rent.

The section only applies to implied tenancies from year to year at common law. Express tenancies are left untouched. Section 127(1) applied to the agreement for lease in Dockrill v Cavanagh but it was not necessary for the executors to serve a one month’s notice to quit as provided in the section for the reason that the implied tenancy expired by effluxion of time at the end of the agreed term of two years.

Read eg on pp 758. Kemp v Lumeah Investments Pty Ltd (1983): agreement for lease for a term of 5 years contained a provision

that if default occurred on the part of the lessee, the lessor had the option of converting the lease to a weekly tenancy terminable on one week’s notice to quit. Needham J held the option to convert was ineffective as it was inconsistent with a lease at will terminable on one month’s notice.

Cram v Bellambi Co Ltd [1964-65]: where rent is paid yearly but there are, in addition, other factors pointing to a yearly tenancy, such as the nature of improvements, the tenancy is, nonetheless, one to which s127 (1) applies since the nature of the improvements points towards a finding that the rent is paid by refernce to an aliquot part of a year.

Moore v Diamond (1929)- The High Court held that the tenancy was from year to year, even though the rent was paid weekly. A yearly

tenancy will be implied if payment is made by reference to an aliquot part of a year eg “yearly”, “half-yearly”, “quarterly.

- Rent is compensation for the entire lease period and is not to be interpreted as paying for distinct terminable periods.

Turner v York Motors Pty Ltd (1951)- Parties were negotiating for a lease but had not reached a conclusive agreement. Pending negotiations, the

tenant entered possession of the premises and occupied for 2.5 years without a final agreement being reached. The tenant paid first on a weekly then monthly basis. When negotiations finally failed, the tenant was given notice to quit. Whether notice was effective depends on what type of lease!

- The High Court held that a monthly tenancy had been created as implied from the manner by which the rent was paid. When a tenant enters into possession with the agreement still pending, the tenancy is at will initially. He/she might continue to be a tenant at will even if some compensation is paid to the LL for the use of the premises.

- Once the tenant starts paying rent on a periodic basis in advance, a strong presumption for a periodic tenancy arises.

- NSW s 127 did not apply since the evidence did not support a presumption in favour of a tenancy from year to year arising from the payment of rent.

Adler v Blackman [1953]: Where a lease for one year expires and the tenancy remains in possession paying rent on a weekly basis the position is that the tenancy is presumed to hold under a weekly tenancy not a tenancy from year to year. Burnham v Cartroll Musgrove (1928): if a tenant holds over after determination of periodic tenancy (after the expiration of a valid notice to quit) and pays rent with reference to the period of the former tenancy, the presumption is that the same periodic tenancy has been revived.

Leitz Leeholme Stud Pty ltd v Robinson [1977] NSWCAAgreement for 6 years: paid by reference to yrs – s127 terminable by 1 months notice! Equitable lease and s127 can co-exist. S127 enforceable against RP. Issue: Was the agreement for the lease still effective despite the fact that the actual lease was never registered which had left the parties with a tenancy at will type lease?Held:1. The agreement for the lease and the tenancy at will were independent sources of rights. They do not merge so that the termination of the estate automatically extinguishes the agreement. 2. Lease under RPA for a term exceeding 3 yrs creates no legal interest unless it is both registrable and registered.

But the informal instrument may be treated as evidence of a formal lease. The unregistered memo of lease operates merely as an agreement specifically enforceable in equity but not of itself creating a legal term in land: s41 RPA. However, defendants entry into possession and payment of rent bring into existence a common law tenancy upon such terms of the unregistered memo as are applicable to the tenancy at will. But, in so far as the memo operates as an agreement, it retains a separate identify as the repository of the substantial rights of the parties.

The purported lease took effect as an executory agreement for a lease enforceable in equity and there entitling the lessee to a formal lease: Hoyt’s Pty Ltd v Spencer (1919).

3. By giving notice, Robinson had terminated both the tenancy at will which had arisen by virtue of s127 and the agreement to take a lease for six years.

4. Upon repudiation and subsequent acceptance the lessor may upon such rescission become entitled to sure for damages (both under contract law or in equity) for loss of bargain.

5. LL won on the breach of contract and obtained damages for loss of bargain.Contract is still enforceable even without lease.

** In this case the relationship was primarily contract based and therefore a legal relationship. Registration of the lease under the RPA would have conferred a legal lease upon the lessee but would have not qualified or augmented the legal rights and obligations of the parties derived from the contract. TENANCY BY ESTOPPEL Tenant may estopped from denying the LL title and a LL may also be estopped from denying the T title. A landlord cannot claim that a lease is invalid on the ground that the landlord lacked the title to create the lease.

This may create a ‘tenancy by estoppel’. This occurs where a person, who has no estate in land, purports to grant a leasehold interest in the land to any other person. Since the ‘LL’ has no estate in the land, the transaction cannot, of itself, create an interest in the land in the tenant. The parties are estopped from deny in that a tenancy was effectively created and thus as between themselves and their successors in title, a landlord-tenant relationship will be deemed to exist: Lee v Ferno Holdings Pty Ltd (1992).

Can apply the doctrine where the person granting the lease is acquiring an estate in the land, buts acts prematurely and grants the lease before actual acquisition of the estate: Buckness v Mann (1862).

If an estopped landlord subsequently acquires an estate in land sufficient to support the ‘tenancy’ the acquisition is said to ‘feed the estoppel’ and in place of the tenancy by estoppel an actual tenancy will spring up so that the tenant will now have a leasehold interest in land.

A tenant who has been in possession of the lease premises for the whole term of the lease is estopped from denying the landlords title during the period of possession unless faced with a claim based on title paramount. Thus, a tenant who had delivered up possession could not defeat the LL’s claim for breach of the covenant to repair on the ground that the LL did not have the legal title to the premises: Noyes v Klien (1985).

While the LL had not taken conveyance of the legal title, it had aquired the beneficial interest and the tenant was not at risk of an adverse claim by the holder of the legal title: Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB

Waltons v Maher: HC recognised the creation of a lease by estoppel (tenant who expends money on the premises in expectation of the lease. Need detriment.

A tenancy by estoppel does not arise from receipt of rent by a receiver appointed by a mortgagee – Commonwealth Bank of Australia v Baranyay [1933].

Concurrent LeasesAssign your interest in the land, then other person becomes LL. LL gives concurrent lease then that person becomes LL to the person in possession. When person in possession leaves, then concurrent person becomes tenant. A landlord who has granted a lease to a tenant may grant another lease in respect of the same land for the same

or a different period. The landlord is said to have granted a lease of the reversion and to have created concurrent leases.

In effect, the LL has assigned the reversion for the period of the 2nd lease and consequently the 2nd lease must comply with the formalities required for an assignment of the reversions.

The lease of reversion creates the relationship of LL and T between the lessee pursuant to the lease of the reversion and the original lessee. Refer to pp 765!

A lease of reversion may be for a term shorter than or equal to the term of the original lease, in which case the lessee of the reversion will not be entitled to possession at the expiration of the original lease: NSW s120A(5).

A concurrent lease is to be distinguished from a future or reversionary lease which takes effect as a new lease after the termination of the existing lease: Abjornsen v Urban Newspapres Pty Ltd (1986). Doesn’t commence until the future, < 21 years NSW: s120A(3).

Tenancy at sufferance: when someone holds over. Can’t assign: Remon v City of London.

WEEK 5 (Class 2): Leases- implied/substantive requirements Substantive Requirements Exclusive Possession Radaich v Smith (1959) HCA Facts: Deed between the Smiths (Licensors) and Radaich (Licensee) provided that ‘the Licensors hereby grant to the Licensee for a term of five years…the sole and exclusive License and privilege to supply refreshments to the public admitted to’ certain premises on a variety of terms.Issues: Did the deed create a lease or licence?Held: McTiernan J:

- The deed created a lease! Why? ‘It is the substance of the deed that matters’, not the form. ‘Their relationship is determined by the law and not by the label they choose to put on it’. Exclusive possession (objective test!) is the test to be used in determining whether the agreement constituted a lease. It is generally decisive with a few exceptional cases where exclusive possession has been given without grant of a leasehold interest. A transaction motivated by friendship did not fall within the exceptional class ( Per Taylor J).

- The “licensee” was to carry on the business of a milk bar and that such a business could only be carried out by persons with the exclusive possession of the premises.

- Here the substance of the agreement (e.g. windows, door locks shall be paid for by tenant control of premises) was to grant an interest in the premises which amounted (in substance) to a lease.

Windeyer J:

- Distinction between a lease and a license A licence does not pass an interest, nor alters or transfers property in anything but only makes an action lawful which without it had been unlawful: Thomas v Sorrell (1673).

- Whether a contract creates a licence or lease is a question of intention, the intention being the nature of the right which the parties intend the persons entering the land to have in relation to the land.

- Tennant if an interest is given in the land as opposed to personal permission to enter the land and use it for some stipulated purpose. A lease is given when the grantee has been given a legal right of exclusive possession (can’t kick out ppl) of the land for a term or from year to year or for a life or lives.

- A reservation to the landlord, either by contract or statute, of a limited right of entry e.g. to view or repair, is not inconsistent with a grant of exclusive possession. Subject to such a reservation, a tenant for a term or from year to year or for a life or loves can exclude his landlord as well as strangers from demised premises.

Cobb v Lane [1952]Facts: Sister entered into a contract for the purchase of a long lease of a house and allowed her brother free use and occupation of the premises. The sister died in 1950 and the executors claimed possession of the house.Held:

- The defendant was never a tenant at will, but a mere licensee.- The Defendants possession was the consequence of a convenient family arrangement designed to provide

financial assistance to the defendant and his immediate family. These circumstances suggested that the parties did not intend to enter a binding legal relationship, but only to confer a ‘personal privilege’ on the defendant.

**Note the definition of ‘residential tenancy agreement in Residential Tenancies Act 1987 (NSW) s3: "Residential tenancy agreement" means any agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence: (a) Whether or not the right is a right of exclusive occupation, (b) Whether the agreement is express or implied, and (c) Whether the agreement is oral or in writing or partly oral and partly in writing…..

** A common problem is whether a person occupying premises or part of premises is to be regarded as a tenant or as merely a boarder or lodger (licensee). Test: whether the person granting the right of occupation retains ‘general control’ of the premises. If so, the person in occupation does not have the exclusive possession which is essential to the existence of a tenancy. Whether the owner lives on the premises the presumption is that the person in occupation of part of the premises is a mere lodger: Varella v Marisicovetere [1954]. Residential Tenancies Act 1987 defines "Residential tenancy agreement" as including licensees but excluding boarders and lodgers” ss3 (1) and 6(1).

Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987): held that the label which parties to an agreement give to it is only one of a number of important factors to be taken into account in lease/license cases subjective element! Pp 771L Claude case, exclusive possession of walls.

Duration Keep in mind s127! - The common law rule is that a valid lease must be of a duration that is certain or at lease capable of being

rendered certain. Prudential Assurance v London Residuary Body [1992] HL citing Say v Smith and Fuller (1530)Contract sufficient to make a lease should be certain in three areas

Commencement of the lease, Continuance of it, End of it Certainty rule applied to fixed and periodic terms.

- If the maximum period of the lease is certain, the fact that it may be determined within that period on the occurrence of an event the timing of which is uncertain, does not render the lease invalid.

- Note: the terms of years may be made determinable by a given period of notice by one or both of the parties.

- It is permissible for the parties to a lease to combine the features of a term of years and those of a periodic tenancy. Amad v Grant (1947): Provided for a weekly rent, payable in monthly in advance. It was held in the HC that the transaction could be regarded as creating a monthly tenancy, determinable on one month’s notice, with a proviso that notice could not b given by either party for at least 3 yrs.

- A term which stipulates that a periodic tenancy can be determined only by the lessee and not the lessor is regarded as repugnant to the nature of the tenancy and therefore void: Centapoly Ltd v Matlodge Ltd [1974]. In that case the court accepted that a periodic tenancy is not subject to the rule that the maximum duration of a lease must be known before the lease takes effect.

- Even a tenancy at will may require a period of reasonable notice to be given before it is effectively determined: Landale v Menzies (1909). A tenancy at will is unlike other leasehold interests in that it is determined by the death of either party or an attempt to assign by the tenant. The tenant at will is liable, in the absence of agreement, to pay a reasonable sum for his/her use and occupation of the land: Zegir v Woop [1955].

Reversionary Leases- These are leases which provide that the actual term of the lease is not to commence until some future date.- A term limited to ‘take effect more than 21 years form the date of the instrument purporting to create it,

shall be void, and any contract …to create such a term shall likewise be void: NSW s 120A(3). - The section does not invalidate a contract to grant a lease at a date more than 21 years after the date of the

contract if the lease the subject of the contract will not be a reversionary lease when granted: R e Strand and Savoy Properties Ltd [1960].

MUTUAL RIGHTS AND DUTIES OF LANDLORD AND TENANTLegislation may imply terms in lease but these are allowed to be varied by express agreement of the parties: Malzy v Eichholz. E.g. NSW includes covenants by the lessee to pay rent (subject to a proviso which applies where the premises are destroyed or damaged) and the keep the premises in repair. Lessor is also give power to enter and view the premises, execute repairs where the tenant is in default, enter and carry out structural repairs required by public authorities and to forfeit the lease in the even of breach by the tenant: NSW ss18, 24, 74, 84, 85.

Covenants ie terms in lease Any promise in a lease or agreement for lease.Covenants in leases may be derived from:

- Covenants implied by law- Covenants implied by Statute- Covenants by necessary implication- Covenants the subject of express agreement between the parties.

Covenants implied by the common lawQuiet enjoyment exists in all leases! Peaceful, but not free from noise! Malzy v Eichholz [1916] CA Issue: should a LL be liable for unlawful acts caused by other tenants.

- There must be something which can fairly amount to his doing the act complained of or allowing the act complained of, either by actual participation by himself or his agents or active participation of what is complained of LL liable.

- The possibility of a nuisance is not enough but if it were let for a purpose that necessarily involved a nuisance then liability may be possible.

- In this case, E was complaining of the conduct in question and told C that he ought to stop. Don’t consider what E could have done. He was no more bound to enter into the premises than he was bond to commence an action.

- There is no breach of the covenant for quiet enjoyment where another tenant of the landlord commits unlawful acts (2 qualifications to this: (i) the landlord will be liable for those claiming under him if their lawful acts cause interference such as where the proper use of defective drains causes flooding (Sanderson v Berqick-upon-Tweed Corporation (1884); or where the use authorized in the lease of adjoining premises would

necessarily cause nuisance to the tenant: Malzy v Eichholz (ii) more stringent duties on landlords in cases of disturbance by other tenants of the landlord Charted Trust Plc v Davies (1997) where landlord of a shopping mall was required to ensure that the public did not loiter in and around one premises so as to interfere with an adjacent tenant’s business.

Aussie Traveller Pty Ltd v Makrlea Pty Ltd [1998] Qd - The landlord who had leased premises to a retailer, and who subsequently leased adjacent premises to a

tenant manufacturing staircases was held to be in breach of an implied covenant for quiet enjoyment. - Landlord was liable on the ground that the landlord could have taken steps to prevent the interference

(under the terms of the lease the tenant was obliged not to ‘do or permit any act or thing which might be a nuisance or cause damage or disturbance to any other tenant of the landlord’). So in this respect the landlord had control over the other tenant.

- So! The covenant of quiet enjoyment will be implied even if not expressly stated in lease.- LL not liable for ordinary noise!

* A landlord is not liable under an express or implied covenant for quiet enjoyment for interference with the tenant’s possession of the premises caused by the exercise of a ‘title paramount’: Jones v Lavington [1903].

* Covenant has been implied into a weekly tenancy: Lavender v Betts [1942] (case where the landlord removed all the windows and doors).

* Landlord may be liable even from actions authorised by Statutory Authorities. JC Berndt Pty Ltd v Walsh [1969]: ie the execution (how he did it) was a breach.

* Clauses that attempt to exclude liability cannot exclude liability for negligent acts nor can they exclude liability for acts by the Landlord not relating to the premises actually demised to tenants: Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976].

* Famous Makers Confectionery Pty LTd v Sengos (no 2) (1993): the implied covenant of quiet enjoyment can be qualified by express covenants in the leaseException to being liable for quiet enjoyment: overlaps with derogation! Lawful acts which cause interference eg day care v Brothel. When you necessarily know that a nuisance is going to be caused by granting of a lease: authorizing it!

Breach of covenant of quiet enjoyment found when repeated threats were made to remove the tenant’s coz they live in anxiety.

Not sufficient for breach eg writing letters asking them to leave; building of an external staircase – creates discomfort, but this is not enough.

3rd parties: if you can take proceedings and don’t, covenant of quiet enjoyment won’t protect you. Can’t be a trivial interference, has to be deliberate. Interference cannot be accidental ie consequences have to be reasonably foreseeable.

Obligation not to derogate from the grant APPLIES ONLY IF GRANT SOMETHING FOR A PURPOSE.

- A landlord impliedly, if not expressly, covenants with the tenant not to derogate from the grant ie anything inconsistent with the purpose of the lease. The purpose for which the premises are leased defines the scope of derogation.

So! Identify purpose Does the subsequent grant interfere with that purpose? Materially affect the purpose? Ie materially less fit? If remain reasonable fit, then that’s OK. Is makes it less

reasonable fit, then that’s OK as well! Eg in Gordon v Lidcombe Developments Pty Ltd [1966]: for practical purposes, fairly regarded as being unfit.

The LL is NOT liable if they did not know @ the time of grant that the demised premises were used for special purpose so need to know of (special) purpose!

Aldin v Latimer, Clark, Muirhead [1874]Facts:

Aldin had timber business on land leased from defendants. Defendants erected equipment to supply electricity to adjoining areas. This equipment interfered with the access of air to A.’s drying sheds for the timber businessISSUE: was this derogation from the grant in original lease?Held:If landlord leases part of property for the carrying on of a particular business he is bound to abstain from doing anything in his adjoining land that would render the leased property unfit for that business in the way it is normally carried out. Does not extend to extraordinary protection.

Lend lease v Zemlicka (1985)Difference in scope between the landlord’s covenant of (i) quiet enjoyment and (ii) obligations not to derogate from grant were distinguished by Kirby P: (i)‘Threats or other intolerable nuisances which offend the covenant for quiet enjoyment and (ii) user of the retained part which makes the demised premises less fit for the purpose for which they were let.’ Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA

- There will be a breach of the covenant for quiet enjoyment where the ordinary and lawful enjoyment of the demise premises is substantially interfered with by the acts of the lessor or those lawfully claiming under him, whether or not the title to the land or the possession of the land is otherwise affected.

- There will be a breach of the covenant for quiet enjoyment or alternatively the implied covenant not to derogate from the grant where the acts or omissions are such as to render the demised premises unfit for the purpose for which the leased premises are intended to be used.

Implied condition of fitness for habitationNote that there is no general duty on the part of the landlord to provide premises fit for habitation.Condition only applies to furnished residential leases

Cruise v Mount [1933] CD allows you to terminate lease. For commercial leases! Statutory development: note that this case has been superseded by s 25 Residential Tenancies Act (NSW) 1987. On landlords: S 25 implies into every residential tenancy agreement a term requiring the Landlord to provide premises in a “reasonable state of cleanliness and fit for habitation by the tenant”, and to maintain them in a “reasonable state of repair” throughout the tenancy.

- The duty imposed on landlords extends the common law obligation in two ways:(i) The duty includes the provision and maintenance of habitable premises.(ii) They duty extends to the contents supplied by the Landlord.

On tenants: to adhere to ordinary standards of cleanliness… and to repair all damages caused by them.- However, this is statutory. In any event, the common law principle in this case is restricted to furnished premises. The principle does not extend to flats: flats are not “furnished”.

Liverpool City Council v Irwin [1977] There was an implied obligation on the LL “to take reasonable care to keep the (common) areas in reasonable repair and useability”. But generally, there is no common law obligation to repair. (Does not extent to intentional damage). This obligation is not absolute and the nature and extent of the implied obligation will depend on the circumstances. In this case, the court held that the LL had not breached the covenant as the T caused the damage.Hill v Harris [1965]

- There is no implied warranty on the part of the landlord arising from a lease for a particular purpose that the premises could be lawfully used for that purpose: the tenant should search the title to find out any restrictions on usage. (Caveat emptor).

Bawofi Pty Ltd v Comrealty Ltd (1992) NSW: acknowledged that if a provision of the lease required the lessee to use the premises for the illegal use, the lease would have been unenforceable but, in the circumstances of the case, the lessee was not obliged to use the ease for any purpose at all.

WEEK 6 (Class 1): Leases Covenants Duty to take reasonable care for the safety of occupants

- No general duty on the part of the LL to provide premises fit for the purpose of the lease or to provide premises fit for the habitation.

- But in the HC cases of Northern Sandblasting Pty Ltd v Harris (1997) and Jones v Bartlett (2000), the HC recognized that the LL is under a duty (implied) to take reasonable care for the safety of occupants.

Northern Sandblasting Pty Ltd v Harris (686)Brennan and Gaudron held that engaging a licensed electrician to repair the stove = discharge of duty but there was a breach of the duty for failing to inspect the premises adequately before the tenants took possession. An inspection would have identified the problem. Court accepted that a duty to take reasonable care for the safety of occupants was owed and the Majority held that there was a breach of duty.

Jones v Bartlett (2000) HCA Facts: J ran into glass door and suffered serious injury. The glass did not comply with the current industry standards, although it did at the time the property was constructed. Held:

- Thus, before the tenancy commenced, it was reasonable both to inspect the premises and to remedy existing defects that gave rise to a foreseeable risk of injury (to member of T h/h). I.e. duty to take reasonable care to avoid foreseeable risk of injury to a person. defects which caused special defects or potential defects which posed special dangers e.g. electrical wiring, it was reasonable to have an inspection carried out by persons skilled or expert in that regard.

- Defects which were not present at the commencement of the lease, reasonable care is required by only remedying of those defects which the LL was or ought to have been aware.

The LL is under a duty to ensure that premises are reasonably fit for the purposes for which they are let:- Premises will not be reasonably fit for the purpose for which they are let where the ordinary use of the

premises for that purpose would, as a matter of reasonable foreseeability, cause injury. The duty requires a LL not to let premises that suffer defects which the LL knows or ought to know make the premises unsafe for the use to which they are to be out.

- LL is under a duty to protect the tenant from dangerous defects i.e. will only be defective if they are dangerous when being used in a regular fashion and ordinarily would not be dangerous when so used. Ask: is defective from faulty design or lack of repair?

- The danger must appear in the course of the use of the premises for the purpose for which they are let. - LL will only be liable if an ordinary person in his/her position would or should have known that there was a

risk; whether that person would or should have known of steps that could be taken in response to that risk; and the reasonableness of taking such steps. Not an exercise of hindsight. Not required to institute a system of regular inspection for defects during the current of the tenancy nor engage experts in e.g. electrical wiring where such risks of defects could be seen as a possibility.

- The duty wrt dangerous defects will be discharged if the LL takes reasonable steps to ascertain the existence of any such defects and once the LL knows of any, if the LL takes reasonable steps to remove them or to make the premises safe.

- This does not amount to a proposition that the ordinary use of the premises for the purpose for which they are let must not cause injury; it is that the LL has acted in a manner reasonably to remove the risks.

IN this case, NOT dangerous defect, therefore LL not liable!

What constitutes the taking of reasonable steps: depend on all the circumstances Will be affected by the terms of the lease, including the level at which the rental is pitched; the obligations the

parties allocated and any specification of limited purposes to which the premises is put. Affected by the Residential Tenancy Act.

- LL duty relating to dangerous defects extends to other entrants. But it will be narrower e.g. not liable for slippery floor; only dangerous defects. I.e. dangerous defect of which the LL knew or ought to have known.

- Liability for injury suffered by an entrant upon residential premises primarily rests with the occupier. It will be the tenant who is best placed to inform such persons of any dangers or defects and the tenant who is more directly in touch with emerging repair needs than a LL who has surrendered possession.

Obligation to repair (implied) LL Subject to the implied obligation that the LL must put furnished premises into a state of repair at the commencement of the term and dangerous defects (above), at common law: no implied obligation to repair: Liverpool City Council v Irwin [1977].

- Homebush Abattoir Corp v Bermria Pty Ltd: lessor was subject to an implied obligation to repair or replace a defective refrigeration plant. The court based its decision on the fact that the lessee was obliged to carry on a cold storage business on the premises and that the lessor was entitled to terminate the lease if the lessee failed to do so.

- Courts may imply an obligation to repair where it is necessary to give business efficacy to the agreement between the parties (Barret v Lounova)

- Where a lease relates to part only of the premises the LL may be under an implied obligation to repair the common areas of the building which have been reserved for the use of all tenants, e.g. common access ways and stairs: Liverpool City Council v Irwin [1977].

Tenant Free of any implied obligation to repair, but obliged to use the premises in a “tenant-like” manner: Sources of obligations: expressed in leases, implied by common law (by necessity or business efficacy), implied by statute (s 84(1) (b) Conveyancing Act).Warren v Keen 1[954]: do the little jobs about the place which a reasonable tenant would do. Must not damage the house, willfully or negligently; and he must see that his family and guests do not damage it and if they do, he must repair it. Apart from that, if the premises fall into disrepair through fair wear and tear or lapse of time, to for any reason not caused by him, then the tenant is not liable to repair. I.e. many repair covenants are qualified in that a lessee usually exempt from repair of damage caused by reasonable wear and tear.

- NSW: s 84(1) (b) Conveyancing Act Implies a covenant in every lease, subject to any contrary agreement between the parties, by the lessee for himself/herself, his or her executors, administrators and assigns that he/she or they will: at all times during the continuance of the said lease, keep and, at the termination thereof yield up the demised premises in good tenantable repair, having regard to their condition at the commencement of the lease subject to exception of accidents, war damage and damage from fire, flood, lighting, storm and tempest, and reasonable wear and tear. The parties may expressly exclude this section. So this is a statutory covenant to repair!

- Accidents: events causing unintentional or unexpected damage which could not have been reasonably foreseen by tenant: Saviane v Stauffer: tenant was held liable for collapse of wall because goods were carelessly stacked against it by an independent contractor.

- If premises are in disrepair at commencement of lease, tenant is not under a duty to put them into repair. - Tenant not obliged to renew or improve premises: Graham v Markets. - Tenant is not under obligation to repair inherent defect in premises: Graham v Markets. Inherent defect=

original or supervening defect of an abnormal kind e.g. would not be found in a properly built structure subject to ordinary processes of degeneration or decay. Inherent defect can only be remedied by replacement or remolding of structure or part thereof: Graham v Markets.

S 26 Residential Tenancies Act: a tenant must not intentionally or negligently damage the premises and must keep it in a reasonable state of cleanliness having regard to their condition at the start of tenancy.

Tenant’s obligation to yield up possession- At the determination/expiration of the lease, the T (lessee) is bound to yield up vacant possession to the LL

(lessor): T must ensure that subtenants and other occupiers have also vacated e.g. subtenants. - Tenant will be liable for any costs incurred by LL in evicting a subtenant after expiration of primary lease:

Anderson v Bowles.

Covenants implied by statute S 74 : that covenants and powers implied by ss84 and 85 would apply unless expressly negatived, varied or

extended. Thus, the usual rule that implied covenants must give way to express covenant dealing with the same subject matter may NOT apply to these statutory implications.

It appears that an express covenant that is inconsistent with an implied covenant is effective to vary or negative it: Bucknall v Reid.

S 84(1) (a) : covenants on the part of the tenant: pay rent unless premises destroyed: this covenant is usually express—no need to be implied.

S 84(1) (b) : that the tenant is to “yield up the premises in good and tenantable repair”. S 85(1) (a) : right to inspect by the LL. S 85(1) (d) : right of entry by LL to end lease if tenant commits breach (e.g. late rent, covenant breaches). Note the

complex notice requirement: also, tenant protected by legislation: may apply to court for relief against forfeiture.

Covenants by necessary implication- Courts may imply terms into the lease in order to give effect to the intention of parties as gathered from the instrument as a whole: Dillion v Nash. Telstra Corp v Capetan Pty Ltd (1996): a clause in a commercial lease which provided that the lessee was not, without the previous consent in writing of the lessor, to install water, gas or electricity, air conditioning, heating and cooling, was qualified by an implied condition that a commercial tenant was empowered to keep the demised premises to current Australian Standards.

Express Covenants The covenant to repair The covenant against assignment or subletting The covenant as to user The covenant to pay rent

Covenant to repair- May be given by either the LL or the tenant as covenantor. - Standard to which you repair is a matter of construing covenant. When express, initial condition does NOT

matter. - If don’t give notice to LL about defect, LL not in breach coz can’t assume that LL knows of defect even though

LL has right to enter. In such a case, T is in breach.

Factors commonly taken into account in assessing the extent of the repair obligation: The nature and locality of the premises Age Condition of premises at commencement of the lease Proudfoot v Hart

Terms of lease Nature of the building State of the building at the date of the lease Nature and extent of defects sought to be remedied Holding & Management Ltd

v Property Holding & Investment Trust plc

Nature and extent of cost of proposed remedial work At whose expense the proposed remedial work is to be done Value of building and its expected lifespan Current building practice Likelihood of recurrence if one remedy rather than another is adopted Comparative cost of alternative remedial works and their impact on the use and enjoyment of the building by the

occupants

Note: distinction between renew and repair: - Repair: make good defects.- Renew: give LL something new, replacing old materials with new ones. - Therefore, a covenant to repair does not extend to giving something new or replacing the whole or

substantially the whole of the demised premises: Lister v Lane. So unless the lease makes it clear that the tenant is liable for both, if he covenants to repair, not liable to renew.

Proudfoot v Hart (1890) England Facts: T covenanted to keep premises in ‘good tenantable repair’ and leave them in good tenantable repair at the expiration of the tenancy. Covenant to keep premises in “good and tenantable repair” imposes obligation to remedy all defects whether

arising before or after taking possession. T must yield up possession in “good and tenantable repair” if covenanted to do so, even if it have never been so: Credit Suisse v Beegas Nominees Ltd [1994]

Held that “good and tenantable repair” will depend on the age, character, and locality of the premises. The standard is that which would make it reasonably fit for the occupation of a reasonably minded T of the class who would be likely to take it. (An objective test), not judged against the condition of the building at the commencement of the lease, Credit Suisse v Beegas Nominees Ltd [1994] It need not be in perfect repair nor does it need to be in the same condition as when the T first took possession.

E.g. obligation is different where house is 50 years old compared to 200.

* Although covenant to keep in repair also includes an obligation to put in repair, regard must be had to the age, character and locality of the building and to the type of tenant likely to lease the building: this caveat was applied in Abrahams v Shaw (1969).

Bailey v J Paynter (Mayfield) Pty Ltd [1966]- Any structural alteration without L’s consent = breach of covenant to repair. - A previous tenant had made structural alterations to the premises which although improved the value of the premises, constituted a breach of covenant. - The Court held that the current lessee was not in breach of his her repair covenant for the structural alterations made by the previous tenant because they “did not put the premises into a state of disrepair or out of repair or not in tenantable repair unless they “produce a factual or physical state of deterioration or dilapidation”. I.e. The position of subsequent tenants: liable only for those structural alterations or defects that give rise to “visible disrepair”. The position of the original tenant: liable for all structural alterations and repairs associated/ caused by him.

When is the covenantor in breach: immediately or within a reasonable time?* A Landlord is only in breach of a LL covenant to keep in repair in circumstances where the landlord is aware of a defect that would put a reasonable landlord on notice that repairs were necessary and the repair work has not been done with reasonable expedition. O’Brien v Robinson [1973] House of Lords – NB this case was approved by the HC in Northern Sandblasting: confined to cases where there was a defect in the demised premises themselves.

* However, where the landlord covenants to keep the whole building in repair and a defect occurs in a part of the building not comprising the demised premises the Landlord’s covenant to repair obliges him/her to keep them in repair at all times. Thus there is a breach of this obligation as soon as the defect occurs. (BT plc v Sun Life Assurance [1995])

Inherent defects (exception to the lessee’s liability under the ‘standard’ repair covenant i.e. complete defence for an action of breach of covenant to repair: Graham v Markets. Inherent defect= original or supervening defect of an abnormal kind e.g. would not be found in a properly built structure subject to ordinary processes of degeneration or decay. Inherent defect can only be remedied by replacement or remolding of structure or part thereof: Graham v Markets.

Ravenseft Properties Ltd v Davstone (Holdings) Ltd {1980} QB Facts: tenants denied liability under the repair covenant alleging the problem was caused by an inherent defect in the building.Held:

- Covenant to repair does not involve giving L something more/ new/ different to what the T took when he entered into the covenant.

- A covenant to repair may include repairing inherent defects. The test: depends on the degree and extent of the repair: if the remedy involved “substantial remodelling” then it is not included in a covenant to repair; not giving back something whole different from that which LL demised.

- This is consistent with the repair vs renew concept. Repair does NOT include acts of renewal.

Damages for breach of covenant to repair (express) - Where covenant essential term repudiate terminate. - Tenant, who expends money that LL supposed to make, can recoup in Equitable set off.- S 133A: tenant covenant to repair. How much you diminish is how much LL gets back. - If the action for breach of the covenant to repair is brought during the term of a lease, the measure of

damages is the decrease in the value of the landlord’s reversion caused by the breach Conquest v Ebbetts [1896]

- If the breach is brought after the determination of the term, whether by effluxion of time or otherwise, the measure of damages is the cost of carrying out the required repairs: Joyner v Weeks [1891].

- If the required repairs amount to a substantial reconstruction of the premises, the measure of damages is the cost of rebuilding, less any increase in the value of the premises when rebuilt: Strang v Gray (1952).

- NSW s133A (1): damages cannot exceed the value of the reversion. In the case of a covenant to leave or put the premises in repair at the termination of the lease, if the tenant shows that the premises are about to be demolished the LL can recover no damages.

- NSW s133A(2): further restriction of the LL’s right to recover damages for breach of the covenant to repair by requiring that the LL first serve a notice specifying the breach and requiring its remedy.

- NSW s133A(2): if there is a covenant against the making of ‘improvements’ without the consent of the lessor, the covenant is to be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that consent is not to be withheld unreasonably.

- No liability for repairs due to reasonable wear and tear: Haskell v Marlow: reasonable fair wear and tear: reasonable use of the house by the tenant and the ordinary operation of natural forces. But, bound to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly produce.

The covenant against assignment or subletting (express) - Since the leasehold interest is proprietary, the lessee may assign the lease or grant a sublease. - Unless the lease provides otherwise, the lessee may assign or sublet without the consent of the lessor:

Commonwealth Life (Amalgamated) Assurance Ltd v Anderson. Even for periodic tenancies. - Right of assignment is an incident of all leases, except a tenancy at will (Pinhorn v Souster); hence parties

must include an express covenant if they intend to restrict this right. - But LL can waive this covenant in the case of a specific agreement: ss 120, 123.- It is possible to assign part of the demised premises: Coles v Commissioner of Taxation

Two types of covenants against assignment or subletting or parting with possession:(i) Absolute prohibition - Prohibits any dealing with lease by tenant. No provision for LL consenting to a particular assignment or other

parting with possession. - These covenants are strictly construed against the LL. There will be no breach of the covenant unless the T

has voluntarily disposed of the leasehold inter vivos. s133 permits bequeathment by will or the involuntary assignment e.g. by bankruptcy.

- A covenant not to assign has been held not to restrict the tenant’s right to sublet: Sweet & Maxwell v Universal News.

- A covenant against subletting is not breached if tenant sublets only part of premises: Cook v Shoesmith. - Covenant against assignment or subletting will not be breached if tenant merely parts with possession

pursuant to the grant of revocable license: Stenning v Abrahams. - Absolute covenant against assignment or subletting does not render the assignment void: assignment or

subletting remains valid until LL forfeits lease: Massart v Blight. - Any assignment by the tenant is in breach of the covenant, even if the assignee is proved to be a solvent and

respectable person and no reasonable objection could be taken to the assignment. - Always open to the LL to waive the application of the covenant in a particular case by specifically consenting

to the proposed assignment. - Acceptance of rent from assignee or sublease = implied consent to an assignment or subletting in breach of

covenant. (ii) Qualified prohibition - Under NSW ss120, 123, LL can assent to a particular assignment without prejudicing his/her rights as to the

future: i.e. prevents an assignment or other party of possession ‘without the consent of the lessor’. - LL cannot require the payment of a sum e.g. fine, for the granting of consent s128 CA. - Parties CANNOT contract out of this provision! - It is implied in every such covenant that consent is not to be withheld unreasonably: s 133B (1) (a) CA. Also, in

the case of a building lease for more than 40 years which has more than 7 years to run, an assignment may be made without the consent of the lessor provided that written notice is given of the assignment. This is so notwithstanding any contrary provision in the lease. Note that s 133B (1) has no operation where the covenant absolutely prohibits assignments: Re Giles and McConachy’s Lease.

- T must seek L’s consent where such covenant is in place and give reasonable time to LL for approval. If lessor has no time to consider, assignment constitutes a breach of the lease: Richardson v Somas

- Even if LL not entitled to refuse consent, tenant in breach of covenant if assigns without first seeking consent. - If LL is obliged not to withhold consent unreasonably, tenant must first seek consent. If LL refuses tenant can:(i) Can seek injunction: McKean. (ii) May apply to the court for a declaration that the LL is unreasonably withholding consent: s75 Supreme

Court. (iii) Tenant may proceed with the assignment w/o consent, accepting the risk that the court might hold that

consent was reasonable. If court holds that unreasonable, no liability for assignment against tenant, but will not be able to recover damages against the LL: Yared v Spier [1979].

- Unreasonable for the lessor to withhold consent if any disadvantage incurred by the lessor on an assignment is minimal and out of proportion to the harm that would be suffered by the lessee if the consent were refused. E.g. International Drilling Fluids v Loisville.

- If lessee seeks consent to an assignment of the lease and either the lessor refuses consent or does not respond, the lessee is not entitled to refuse to pay rent as a result of the lessors refusal or recalcitrance. (Look above to what T should do!). The rent covenant is an independent covenant and is enforceable by the lessor notwithstanding that the lessor ought to not unreasonably withhold consent to an assignment: Haberercht v Chapman (1992).

Consideration in determining reasonableness: Lee v K Carter Ltd [1949]- One of fact and depends on the circumstances- The effect the transaction might have on future letting of property- Whether a reasonable person in LL position would anticipate an adverse impact from the transaction

Examples of cases where LL has unreasonably withheld consent:- where proposed use of office block was likely to be unattractive to investors: International Drilling Fluids v

Loisville- where tenant was a respectable and responsible person: McKenzie v McAllum - Where there was only a possibility that assignee might breach user covenant: Killick

Examples were withholding of consent was reasonable: - where the assignee would obtain a tenancy protected by rent restriction legislation- Where proposed sublease would necessarily involve breach of user covenant in principal lease (i.e. use

premises for purpose prohibited by user covenant): Barina v Benard [1979].

- Where LL has serious concerns about assignee’s financial ability

** Held that a grant of a license does not amount to a sublease: Chaplin v Smith and that an equitable mortgage by deposit of title deeds does not infringe a covenant not to assign or underlet: Doe d Pitt v Hogg (1824). Covenant as to user (express)

- Lessee is free to use the demised premises in any way thought fit unless lease restricts use (subject to planning and enviro restrictions).

- Where a lease contains a covenant not to alter the use of the premises without the L’s consent, the L cannot charge a premium (fine) WRT to that consent. However, the L can demand payment for the diminution in the value of the premises and legal expenses: s133B.

Covenant to pay rent (express) - L has common law right to recover a reasonable sum from any person occupying the land as tenant for the

use and occupation of that land: Gibson v Kirk. - Rent need not be fixed, but may vary with circumstances: Walsh v Lonsdale. But it must be capable of being

rendered certain: Daniel v Grace.- Note that an agreement as to rent is crucial to the enforceability of an agreement to lease/ equitable lease:

Walsh v Lonsdale.- S 84(1) CA: T must pay rent reserved in lease and must pay it on time. - Occupation of the premises does not, w/o more, render the occupier liable to pay rent by way of restitution

for unjust enrichment: National Mutual Life Nominees Ltd v Trevellers NSW Pty Ltd (1993) NSW.- If tenant doesn’t pay rent (coz fundamental breach): (i) repudiate: therefore terminate can sue for

damages. LL can include damages for unexpired rent (ii) sues tenants for amount not paid (debt owed). - Not every non-payment of rent is repudiation: Shevil. - Tenant should not withhold rent coz your obligations are independent from LL/T relationship, otherwise T will

be in breach: Chapman. Instead, sue LL for debt/expense incurred.

WEEK 6 (Class 2): Leases: Assignment refer to class hand out! S51 RPA creates privity of contract and privity of estate. As the assignor, can sue for future breaches only if UNREGISTERED (Ashmore). Enforceability of covenants after assignment2 distinctions: (i) land that operates under old system (ii) land under RPA (not registered e.g. some leases. Q: can you enforce covenants after assignment?

Privity of contract A lease is a contractual arrangement b/w L and T which has the effect of crating an interest in the land in T. Privity of contract remains even after L assigns the reversion or T assigns the lease. As between the original parties to a lease: privity of contract means that all covenants specified in the lease

(contract) will be enforceable. Without assignment, there is also privity of estate between the two parties. Assignment of either the lease or reversion will terminate the privity of estate (the LL/T relationship) between L and T, but any liability which arises from the contractual relationship remains. All covenants in lease remain contractually enforceable as between these original parties after assignment. T will therefore be liable for future breaches by assignees. But T can usually seek indemnity from the assignee that breached the covenant.

EG: if L leases land to T for 25 years, T covenanting to observe the lese on behalf of himself/herself and successors in title, and T assign to A after 2 yrs, T will be contractually obliged to pay L the rent if A defaults. L cannot recover rent from both T and A, and T will be entitled to be indemnified by A (i.e. get money from them). Nevertheless, T remains contractually liable despite the assignment. Liability is not affected if the term of the lease has been extended by the assignee’s exercise of an option to renew the lease: Baker v Merkel [1960]. If the rent is increased pursuant to a rent review provision during the assignee’s term, the original tenant is liable to pay the increased rent: Picton-Warlow v Allendale Holdings Pty Ltd [1988].

L R (reversion) |

|T A (assigns of lease)

- If A breaches covenant, L can sue T. T is liable on the basis of privity of contract (which survives assignment). So when T T is still liable for his contractual obligations. But can have indemnity clause b/w T and A so that if A breaches covenant and T needs money, A has to give to T so T can pay L. - If T stops paying rent, L can sue T. if A stops, L can sue A coz privity of estate. - T can sue R if breach of covenant of quiet enjoyment coz privity of estate: Stuart v Joy. - L and T don’t have privity of estate anymore coz assigned (but originally had privity of estate and of contract!).- So b/w T and A, only contract. B/w L and A, privity of estate. So! Where there is privity of estate you can enforce covenants e.g. can’t enforce all, can only enforce those that ‘touch and concern the land’ (not personal covenants). Covenant that touches and concerns the land have to relate to premises in question. Covenants that touch and concern the land Options to renew = run with the land and is thus enforceable by the assignee upon an assignment: Mercantile

Credits Ltd v Shell Co of Aust Ltd (1976). Option to purchase (the reversion) does NOT run with the land: Woodall v Clifton [1905].

In order for the assignee of the lease to obtain the benefit of an option to purchase the reversion, the option should be separately assigned as property and as a chose in action, although courts will sometimes recognize such an assignment as effective by implication: Griffith v Pelton [1958]. S53 (2) RPA: option to purchase has to be therefore enforceable under indefeasibility: Mercantile.

The option to purchase should be separately assigned as property, to make it “run with the land”. S 53(3) RPA provides for registration of options to purchase.

Privity of estate Exists between the parties who stand in the relationship of L and T, not restricted to the original parties to the

lease.Where there is neither privity of contract or privity of estate This would be the position of a subtenant (S). This means that the head landlord will not be able to sue the

subtenant for breaches of covenants, and vice versa. But both L and S can sue T. L & T: privity of contract, T&S: privity of estate; but L&S: no privity of contract or estate.

Assignment of the leaseThe requirement that covenants must touch and concern the land to be binding upon successors in title where the relationship of privity of estate exists, does not apply to Torrens Title Land.Karacominakis v Big Country Developments Pty Ltd (2000): Facts: BC leased premises covered by the RPA to W. before the lease was registered, W assigned the lease to A1, who registered it. A1 then assigned to A2 and this assignment was also registered. A2 assigned to K (not registered). K defaulted in rent payments, and BC brought an action for arrears of rent and damages for repudiation against W, A1, A2 & K. Held:

- Section 51 of the RPA 1900 NSW provides that upon the registration of any transfer, the transferee shall become subject to be liable for the same requirements and liabilities to which he/she would have been liable if names in the original instrument as lessee.

- The effect of s51 is that the transfer of a lease creates privity of estate and privity of contract b/w the lessor and the transferee of the lease: a statutory replication of the privity of contract co-existent b/w the lessor and the original lessee. S 51 subjects the transferee of a lease to the lessee’s obligations only while the transferee is registered as proprietor of the lease, so that following further transfer the transferee is no longer liable under the lease.

- All the obligations in the original contract, whether they touch and concern the land or not, are enforceable by and against the registered assignee, for as long as there is privity of estate b/w the assignee and the LL.

Moule v Garrett (1872)

Facts The plaintiff was lessee of premises under a lease containing a covenant to repair. He assigned the lease to B, who assigned it to the defendants. In each assignment, the assignees expressly covenanted with the assignors to indemnify then against all subsequent breaches of the covenants in the lease. Whilst the defendants were in possession they breached the covenant to repair. The lessor recovered damages from the plaintiff in respect of this breach. The plaintiff brought an action against the defendants to recover the damages he had paid. T covenants to repair for the period of the lease regardless of whether there will be an assignment or not (i.e.

covenants for the whole term of the lease). Question is whether the T is liable for breaches by subsequent assignees? Can T be reimbursed by the guilty assignee?

Held: • Since it is now recognised that there is privity of estate between assignees and the L, L can sue T in contract or sue A via privity of estate should A breach a covenant. L may prefer to sue T if A defaults on rent, assuming that A may not have the money. • If the T (assignor) gets sued for A’s default, then T may sue A to recover the money. This applies to all subsequent As which are not contractually linked with the T anymore. Ie A2 and A3, etc. • The court held that the indemnity that A2 extends to A1 extends all the way back to T, such that T could sue to recover any damages paid to L as a result of A2’s breach. Note however that A1 cannot be sued for A2’s breach since A1 would not have committed any legal default in that circumstance. Hence, intermediate As cannot be sued by anyone for breaches of covenants by subsequent assignee as they have committed no legal default and their privity of estate with the L has been terminated upon assignment to the subsequent assignee. L T A1 A2 A3If A3 is in breach, L can sue A3 directly or sue T. T can recover from A3 but neither T nor L may sue A1 or A2.

•“where one person is compelled to pay damages by the legal default of another, he is entitled to recover from the person by whose default the damage was occasioned, the sum so paid”. •Therefore, since T was sued by L as a result of the breach (legal default) by A2 (the def), T could recover from A2. Lessor Lessee (Plaintiff) B Assignee (Defendant)

- The defendants, as the ultimate assignees, acquired the same estate as the plaintiff, who was the original lessee, and therefore they were bound by the covenants in the lease.

- As the ultimate assignees, it was the defendant’s duty to follow the covenants (to repair). By their default, the lessee become liable to the lessor. Principles of contract law state that ‘where one person is compelled to pay damages by the legal default of another, he is entitled to recover from the person by whose default the damage was occasioned, the sum so paid’.

Note that the Moule v Garrett principle only applies to assignments and NOT to subleases. There is no privity of estate or privity of contract between sublessee and head landlord, since a sublease does not terminate the privity of estate between the T and the L.

Assignment: T transfers the entire interest in the land (the unexpired portion of the leasehold estate) to the assignee, who steps into the original tenants shoes as the new T of the LL. The original T ceases to have any interest in the land. Destroys privity of estate b/w the LL and the assignor and creates privity of estate b/w the assignee and the LL.Sublease: T granting a sublease retains the leasehold interest but creates a new leasehold estate in the land of lesser duration dependent on the continuance of the tenant’s interest. Does not affect privity of estate b/w LL and sublessor, nor does it create privity of estate b/w LL and sublessee. Although the LL cannot directly enforce covenants against the sublessee, he/she may enforce those covenants indirectly by exercising the right of forfeiture conferred by the head lease.

Chronopoulos v Caltex Oil (1982) - Held that 23B of the CA applied to land under the Torrens system and since the assignment was not by deed,

it was ineffective at law. - Also, lessor could not enforce a rent review clause in the lease against the assignee since there was no privity

of estate b/w the lessor and the assignee. - Assignment of a s 23D (2) lease: must be by deed: s 23B to be legal.- This is so even though the original lease was a s 23D (2) exception to deed requirement. This is because s 23B

requires that all grants of interest in land must be by deed.

Equitable assignments and enforceability of covenants If the assignment was equitable: i.e. not registered (Torrens) then assignee merely has an equitable interest and

NO privity of estate and hence cannot be sued by the landlord (i.e. does not apply in relation to 3rd parties). However, the benefit of the covenants may be passed to the assignee by contract: this gives the assignee a right

to sue the L for breaches by the L. Equitable doctrine may operate as b/w assignors and assignees so as to overcome the lack of formality.

** CA came after RPA. CA will override RPA! But, not s42 (fraud, indefeasibility, notice). If take w/o notice and w/o fraud, don’t take subject to lease!

Assignment of the reversion- SS 117 & 118 CA: the benefit (s 117) and burden (s118) of every covenant in the lease having reference to the

“subject matter of the lease” runs with the reversion. S117 is parallel to the common law. s118: apply to legal and equitable leases, but not oral: Ex parte Anderson v Green.

- The phrase “having reference to the subject matter of the lease” = “touch and concern the land”: Davis v Town Properties Investment Corp.

Re Hunter’s Lease; Giles v Hutchings (1942) (Chancery Division) Facts: The lease had a provision that stated that at the expiration of the term of 5 years, the lessor was obliged to pay lessee $500, unless the lessee acquiesced to non-payment, in which case the lessor was bound to grant the lessee a further 5 year lease with the same provisions.Issue: Is the reversioner (lessor) bound by the covenant to pay the $500 when, after the end of the 2nd term the lessee no longer wanted to stay in occupation? Does the burden pass on the assignment of the reversion?Held:

Question: Does the covenant touch and concern the thing demised? Definition of ‘touch and concern the thing demised: Thomas v Hayward (1869) “touches and concerns only

when its operations directly, not merely collaterally, affects the thing demised” Woodall v Clifton (1905) – an option to purchase in a lease is not a covenant concerning the tenancy or its

terms, it is a covenant aimed at creating in future the position of vendor and purchaser of the reversion. Covenant to renew runs with the reversion though this is an anomaly (too late to question), but it is not the same. A notice to determine or a right of re-entry are examples of those affecting the land.

- Can T demand from R to pay 500 pounds? NO! WHY? Doesn’t touch and concern the land. The obligation on the original L to pay T 500 pounds was held to be a personal/ collateral obligation and did not run with the land, hence unenforceable against the subsequent assignee of the reversion.

Ashmore Developments Pty Ltd v Eaton (1992) SCQLD (Refer to pp 820 for s117) A (unregistered assignor) - - - - - > T | |L2 (Assignee of reversion; A1So when lease expires they become |LL) A2

- L2 can enforce covenants on A1 and A2 coz it was rent and it ‘touched & concerned the land. - An assignee of the reversion acquires the right to sue for breaches of covenant committed before the

assignment, and the assignor loses that right. - Can A get unpaid rent after he assigned to L2? NO! WHY? when assign reversion, assign ability to sue

for past breaches and any other benefits therefore coz s117 any rights passed on with reversion so covenant to sue passes on to L2!

- If A (original LL) wants to keep right to sue for past breaches, needs choose in action (i.e. sue in own name). But need 2 things!

(i) need assignment to be in writing (satisfied in this case)(ii) need NOTICE i.e. notice to be given to the tenant to say that past breaches needs to be given to A. (Not

satisfied in this case, therefore right to sue was ineffective!).

- Even though E defaulted on rent during Ashmore’s ownership, upon assigning the reversion to the assignee, Ashmore parts with the right to sue for unpaid rent: s 117 provides that all benefits of covenants are passed on to the assignee.

- However, in this case, clause 14 of the contract of assignment specifies that the right to sue for unpaid rent was to remain with Ashmore after the assignment. This is calculated to defeat the operation of s 117.

- Normally, it would have been permissible to expressly exclude the operation of s117. However, the problem in this case is that cl14 represented an assignment of debt by the assignee to Ashmore, and there are complicated technicalities involved with such an assignment. Cl14 failed to meet these technicalities (namely to notify Eaton) and failed for that reason only.

- agreement (contract) unregistered! BUT if REGISTERED, s51 changes this! it give the LL a right to sue for past breaches (as and when they accrue) and future breaches.

Dalegrove v Isles Parking Stn (1988) - S117 CA introduced a substantive change to the common law in that any person entitled to the income of the

leased land had the benefit of every covenant having reference to the subject matter of the lease. Admitted a right to the benefit of a covenant as a right not limited to association with the legal estate in the land but including an entitlement to income based upon an equitable or even contractual interest in the leasehold land.

Enforcement of a guarantee:Sacher Investments v Forma Stereo Consulting P/L (1976)Yeldham J: Guarantee contained in a lease does not run with the land, therefore is not enforceable by assignee of reversion unless expressly assigned in compliance with those legislative provisions dealing with assignment of choses in action, i.e. s12 C.A.

Landlord may choose not to assign the reversion in its entirety, but may sever the reversion by:(i) Grant a concurrent lease so that the assignee becomes lessee of the reversion . This creates no

difficulties, as the lessee of the reversion becomes the LL of the original tenant and is entitled to the ‘reversionary estate immediately expectant upon the term granted by the lease’. The effect is that the lessee of the reversion may sue and be sued on all covenants in the lease which have reference to the subject matter of the lease.

(ii) Assign the LL’s interest in part only of the lease land. Legislation not provides for apportionment of conditions in the case of assignment by the LL of an interest in part of land. Also permits the assignee to give notice to quit to, or exercise a right of re-entry against, the T of that land assigned to the assignee. The T has a reciprocal right to decide to terminate the tenancy of the whole land: NSW s119.

WEEK 7 (Class 1): Leases – enforceability/remedies Damages, injunction and forfeiture. Forfeiture: to give up/end the lease. Forfeiture of LeaseDefinition of Forfeiture: The lessees failure to observe the obligations stated in the covenants of the lease give rise to the lessors right to terminate the lease prior to its expiration. The Right to Forfeit The lessor has no right to forfeit for breach of covenant unless the lease expressly or impliedly gives that right, or

the L has a statutory right to do so. That is, the right arises from: An express “proviso for re-entry”. A statutory right under s85(1)(d) Landlord and Tenant Act 1899 NSW for the L to re-enter and determine the

T’s interest if the T is in arrears for rent for 1 month, or if the T defaults for 2 months performing any stipulation in the lease, or T fails to comply with a notice to repair. For s85 (1) (d) have to give notice (Bank of Ireland), unless expressly agreed that don’t have to, thus can override s85. For breach of rental and non rental covenants. If someone hasn’t paid rent for half a year, don’t have to give notice.

Where the T breaches a covenant other than a covenant to pay rent, s129 CA provides for the service of a notice as a condition to the exercise of the L’s right.

The Procedure for Forfeiture

1. The L must show that the T’s breach has triggered the right to forfeit.2. The L must not waive the breach.3. The L must comply with any formal requirements expressed in the lease or by statute. This might include giving

notice under s129 CA. 4. The L must exercise the right by: (a) Physically re-entering, or (b) Serving an unequivocal writ for possession.5. Even after the lease is validly forfeited, the T may approach the court for relief against forfeiture.

Forfeiture can be on one of 3 bases:1) At common law if a condition or fundamental term of lease is breached. E.g. abandonment/non payment of

rent.2) Power to forfeit in s 129 Conveyancing Act 1919 (NSW)3) Express forfeiture clause in lease entitling re-entry on default.

Moore v Ullcoats Mining Co. Ltd [1908] (CD) instituting re-entry through court proceedings. Facts: There was an express provision for forfeiture by re-entry on breach by the T. Issue: What is necessary to constitute re-entry?Held: A writ claiming possession would be equivalent to a re-entry.

- If a lessor is to forfeit a lease by issuing a writ to reclaim possession, the writ must be clear and unequivocal demand for possession.

- The L’s writ was equivocal. The claims for an injuction and permission to inspect the mines are inconsistent with a termination of the lease, thus P cannot obtain possession. Haven’t evinced a clear intention to end/forfeit the lease. How can you go and inspect when you want to bring the contract to an end?

- A notice to the T demanding possession does not constitute re-entry. All they have done is give notice of their intention to re-enter, founded on a statement that the lease had determined.

- So! When LL knows of T breach, he is put to an election: (i) proceed to forfeit the lease or (ii) treat the lease as still continuing.

So! 2 ways to exercise forfeiture: (i) peaceful re-entry (Howard v Fanshawe [1895]) (no more than is necessary) (ii) Through court proceedings ie a writ containing an unequivocal demand for possession. Canas

Property Co Ltd v K L Television Services Ltd [1970]: held that the re-entry is affected by issue and service of the write, not merely by the issue of the writ. Thus the LL is entitled to claim rent until the date of service of the write and mesne profits thereafter until possession is relinquished.

* If the LL elects to treat the lease as still in force the LL is said to waive the breach. Waiver may be expressed or implied. Implied if the LL is aware of the T breach of covenant and performs some act clearly recognizing the continuance of the tenancy, such as accepting rent after learning of the breach: Lidsdale Nominees Pty Ltd v Elkharadly. Once waiver occurs, the L cannot thereafter forfeit the lease for the same breach.

The effect of a proviso for forfeiture or re –entry on breach by the tenant is to render the lease voidable at the option of the LL should the tenant breach one of the covenants. A breach as such never renders the lease void even if it is expressly stated that upon forfeiture the lease shall be void: Jones v Carter (1846).

In the absence of an express proviso for forfeiture a breach of covenant does not entitle the LL to re-enter unless the covenant breached is a fundamental term of the contract or unless the breach amounts to repudiation. If break condition: forfeiture even if not expressed: Rede v Farr (1817).

If the LEASE does not contain a proviso for re-entry, the LL is not entitled to forfeit for breach unless the covenant breached is a fundamental term of the agreement. A proviso for re-entry may be implied. Doe d Darke v Bowditch (1846): the obligation to pat rent, if breached, will allow the LL to re-enter even in the absence of an express proviso for re-entry.

Elliot v Boynton [1924]: If a landlord decides to forfeit a lease upon a breach by a tenant the lease is determined from the date that the L unequivocally elects to forfeit the lease. From that day forth the T is a trespasser liable to pay mesne profits for occupation of the premises.

Where a lessee assigns the lease, taking covenants from the assignee, the lessee may reserve a right of re-entry for breach of those covenants. The right of re-entry so reserved is enforceable even against subsequent lessees or subtenants of the premises against whom the covenants are not directly enforceable by the original lessee: Shiloh Spinners Ltd v Harding [1973].

Enforcement of the right of re-entry May be exercised in 3 ways:

1) Physically re-taking possession.2) Serving of writ on tenant making unequivocal demand for possession.3) Making unequivocal demand for immediate possession.

NB S129 Conveyancing Act 1919 (NSW) = Notice of re-entry 2 exceptions: (i) only for non rental covenants do not need to give notice (ii) if implied and breach occurs after 1 month (iii) s129 (5): if more than 1/2 year, don’t have to give notice. i

- If the T breaches the covenant to pay rent, the LL is NOT entitled to forfeit the lease unless a formal demand is made for the rent or unless the LL is exempted from the requirement of making a formal demand by express stipulation in the lease.

- Normally lease has a clause for formal demand.- Even where the lease doesn’t have formal demand, legislation provides that where one-half years rent is in

arrears, re-entry may be affected w/o formal demand: Landlord and Tenant Act 1899 NSW s8. Also NSW s85 (1) (d); 85(2) providing that where the rent is more than one month in arrears no demand is necessary.

- Where the T breached a covenant other than to pay rent, legislation provides for the service of a NOTICE as a condition to the exercise of the LL’s right of re-entry: NSW 129. This does not affect the law relating to forfeiture in case of non-payment of rent.

- The requirement of demanding compensation is not mandatory, as the LL is not obliged to claim compensation if he/she does not want it: Rugby School (Governors) v Tarnnahill [1935].

- In the case of an assignment w/o consent, the notice must be directed to the assignee, since the assignment is effective notwithstanding the breach: Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd [1979].

- Holden v Blaiklock [1974]: a residential lease in standard form provided that upon breach by the tenant, the tenancy should, at the option of the LL, become a tenancy from week to week, terminable upon one week’s notice. This provision was held to be within NSW s129 and therefore could be enforced unless the LL complied with the requirements of the section.

Relief Against Forfeiture Puts rights and obligations back on foot. A tenant has a right to relief against forfeiture even if the LL has a right to forfeiture. For example if the T pays their rent, the courts will allow the T to keep possession. S85 distinguishes b/w rental (fundamental term) and non rental covenants. Before want relief, need to rectify wrongdoing eg pay rent. But relief is not an automatic right: Pioner case.

Relief for non-payment of rent Stieper v Deviot Pty Ltd (1977) (NSW Court of Appeal) Issue: can you take into account other types of conduct not in covenant i.e. other than the breach of covenant to pay rent? YES. Held: • Not an automatic right once the T pays the rent and costs due. Relief is granted on equitable principles. The court has an unlimited discretion in awarding relief, and will consider the conduct of the parties. That is, the court can consider other breaches (subject to s129 CA notice) in deciding whether to grant relief.

- Equity can refuse relief in exceptional cases, such as in Gill v Lewis, where the T was using the premises as a disorderly house (based on public policy not to further the immoral purpose).

- Here, the conduct of the T in storing dangerous liquids showed a disregard for the L, and it would be unjust/inequitable to grant the T’s application for relief. So, the use might adversely affect the premises and hence

the interest of the owner, so refusal is based upon the detriment to the owner if the lease is restored (based on respective analysis i.e. what will happen in the future as well as what happened in the past). To obtain relief a person seeking it must show that relief is ‘appropriate’ and that ‘involves consideration of the conduct of the applicant for relief in particular:

(i) Look at T conduct and whether his default was willful (i.e. was it an intentional breach? Need to show contrition).

(ii) gravity of the breaches; and (iii) Of the disparity of the value of the property of which forfeiture is claimed as compared with the

damage caused by the breach (i.e. disparity of damage caused by breach to value of property). - if the T owed to the LL an obligation at law or in equity in relation to the leased premises, then a relevant

non-fulfillment of that obligation could provide a basis in equity to refuse equitable relief ie doesn’t matter if conduct not in covenant e.g. in this case insurance of premises.

- Love v Gemma Nominees Pty Ltd (1983): relief from forfeiture was granted notwithstanding what the court termed as grave breached of the lease by the T. This was because of the disparity between the value of the work performed by the T on the demised premises resulting in an improvement of the reversion and the damage caused by the T’s breach.

- Ladies Sanctuary v Parramatta (1997): The statutory right to relief against forfeiture (s129(2) CA) is a broad one (applied to equitable lease. Gave court wide discretion

- A willful breach of a covenant is not determinative in granting relief under either the statute or in equity, though it will be taken into account in determining whether or not relief ought to be granted.

Equitable jurisdiction to relieve against forfeiture for non-payment of rent: LL and T Act 1899 NSW ss8-10. This extends to the jurisdiction to application by subtenants.

Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976]: if T, although it has paid all arrears of rent, has entered a scheme of arrangement with creditors and may not be able to pay future rent a court will not refuse to grant relief against forfeiture for non-payment of rent as there was no evidence that rent would not be paid in the future i.e. T position was not hopeless. Direct Food Supplies (Victoris) Pty Ltd v DL V Pt Ltd [1975]: the lessee’s position was said to be quite hopeless and where there was no or little prospect of rent being paid in the future (T was insolvent: q was how likely T was going to pay rent).

Hayes v Gunbola (1986) NSW s 128 CA by referring to an agreement to lease ‘where the lessee became entitled to have lease

granted’, gave the court jurisdiction to grant relief from forfeiture of an equitable lease. Breaches of a lease requiring service of a notice under s129 CA ought not be taken into account when

considering relief against forfeiture for non-payment of rent. Where s129 notice is required and is defective, relief will be granted: Dalla Costa v Beydoun (1991). Ie if gave

crappy notice, can get relief against forfeiture!

The jurisdiction of the court to grant relief has now been extended to cases where the T has breached other covenants in the lease: NSW s129(2) under this section the application for relief must be made prior to the LL obtaining possession of the premises by way of execution of the courts order: Rodgers v Rice [1892]. There is not such time limit if the LL has enforced the right of re-entry w/o the aid of the court. The court has a broad discretion on such terms as it thinks fit.

Gill v Lewis [1956] QB- Acknowledged the general principle that relief against forfeiture will not be granted so as to prejudice the

rights of innocent 3 rd parties who have acquired an interest in the demised premises after forfeiture: where there has been an interference by 3rd parties no RAF. Exception: when 3rd parties have notice about your lease therefore take subject to lease.

- Where the court is prepared to grant relief to the T or mortgagee notwithstanding the intervention of 3rd parties, relief may take the form of a lease subject to the new interest, so that the T’s lease becomes a reversionary lease or the T’s lease may take priority over the 3rd party interest. Form of relief will depend to some extent on whether or not the 3rd party has notice of the T’s application for relief. Bank of Ireland

Home Mortgages v South Lodge Developments [1996]: new lease was granted after the mortgagee commences proceedings for relief against forfeiture. It was held that the new T should have known of the mortgagee’s entitlement to claim relief and was, therefore, judged to have had sufficient notice. The mortgagee was entitled to have, at its election, either a reversionary lease or a lease unencumbered by the new lease.

- Legione v Hateley (1983): court ordered relief against forfeiture of a purchaser’s equitable interest under a contract for sale of land.

- Commonwealth Development Bank of Australia v Eagle Hotels (1990): the mortgagee of a lease forfeited pursuant to the lessee’s default may be granted from forfeiture in appropriate circumstances.

- General principle is that if the head lease if forfeited (i.e. head lease breach) any sublease falls with it. Legislation now confers a broad discretion on the court to grant relief to subtenants where the LL ‘is proceeding by action or otherwise to enforce or has enforced a right of re-entry or forfeiture under any covenant, proviso or stipulation in a lease, or for non-payment of rent’.

- If a T (the subtenants immediate LL) breaches a lease but a subtenant hasn’t, a court may vest the lease in the subtenant (but not for a period exceeding that of the sublease, on such conditions as the court thinks fit, if they can prove that they have not participated in the breach and has acted reasonably: s130 CA; Imray v Oakshette [1891] if forfeit head lease and have sublease, then per s130 (1): sublease can apply for RAF.

- Courts have allowed relief from forfeiture of a license (contractural) provided that on general equitable principles an equitable interest in the land is coupled with the license. These interests commonly arise by estoppel in circumstances where it would be unconscionable (eg licensor contributed to breach) for the licensor to terminate the licensee’s right to occupy the land. Eg Proctor v Milton (1989) NSW can get RAF for a license coz unconscionable not to give RAF: Licensor made representation to licensee that she could remain on property for life. Licensee therefore expended money making improvements on reliance of this promise. It would have been unconscionable for Licensor to terminate license. Licensee has equitable rights. Gives rise to an estoppel.

Self Help- A landlord can enter the premises and physically retake possession of the premises with a show of force,

(after the termination or expiration of the lease) but he/she runs the risk of being prosecuted.- Argyle Art Centre Pty Ltd v Bond & Freestores Co Pty Ltd [1976] right to get physical possession: the

institution of the court proceedings to obtain possession against an overholding tenant may preclude the physical taking of possession by the LL.

Bonds - LL is usually given power by such a clause to forfeit the security deposit in the event of breach by the T: NLS

Pty Ltd v Hughes (1966). - A lessor is not to demand or receive a rental bond in a form other than money and the maximum amount of

rental bond the lessor may demand or receive is an amount equivalent to 4 weeks rental in the case of unfurnished premises and 6 weeks rental in the case of furnished premises. Although the regulation creates an exception for premises with a high rental value: s9 NSW Landlord and Tenant (Rental Bonds) Act 1977:

- Where one party applies for payment of the bond, the board cannot consent to the application until the termination of the lease: s11 (2) (b).

Relief against forfeiture for breach of non rental covenants - s129(2)- Assignees of lease can ask for RAF. - S128 lease and agreement for lease (if lease is specifically enforceable) - Relief will normally be granted if can compensate with money: can you compensate with cash and can it be

remedied? - Consider circumstances and conduct of parties: 3 principles above in Stieper.

Time limits - s129 (2): relief possible @ any time until LL orders an order of possession. So, even if forceful entry, LL still

has possession therefore no RAF.

WEEK 8 (Class 1): Leases – Remedies The Plea of Set off Allows the defendant to set off any moneys owing to the defendant from the plaintiff against monies owed to the plaintiff by the defendant. Its effect is to reduce or extinguish the plaintiffs demand. E.g. when landlord breaches a covenant in the lease and tenant does not pay rent because of this. If landlord then brings action against the tenant for non-payment of rent, then tenant may be able to plead set off.Where the L breaches a covenant in the lease, the tenant may: Bring an action at law for damages, or Have rent in arrears set off, or Withhold rent, and plead set-off when the L demands rent.

British Anzani (Felixstone) Ltd v International Marine Management (UK) Ltd [1979] QB Facts: The T admitted to owing rent, but argued for a set-off, based on the L breach of the covenant to make good defects in the premises. Held:

Common Law Set-off (Taylor v Beal)There are two circumstances at common law in which set-off against rent owing may be granted:1. The T has expended money on repairs to the demised premises which the L has covenanted to carry out, but in breach has failed to do so.2. The T has paid money at the request of the L in respect of some obligation of the L connected with the land demised. There are two conditions that must be satisfied:1. The L’s obligation to repair does not arise until the T has notified the L of want of repair. 2. The set off must be for a sum which is not to be regarded as unliquidated damages ie The sum has already been paid and is of a certain amount and the L has acknowledged this or cannot dispute it. Lee-Praker v Izzet [1971]: it is a question of fact whether and to what extent the expenditure was proper. Right could only be exercised when the sum was certain and its amount could not disputed by the LL before it

could be regarded as deductible. Defence to a claim for rent. Such a defence not open to defendants as they had not in fact paid anything. Their

cross claim is for damages go to equitable right to set off the unliquidated damages. Equitable Set-off1. Is only available when common law set-off is unavailable. Set off against a claim for rent is by no means a defence that is available in all circumstances. The important qualification is that equity must impeach the title to the legal demand, or in other words go to the very foundation of the landlords claim. The tenants cross claim must arise under the lease itself, or directly from the relationship of landlord and tenant created by the lease. Tenants claim based on agreement rather than lease.2. Can be unliquidated damages (of an uncertain amount) and remain unquantified until an award by a court is made. 3. The T’s cross claim must arise directly from the relationship of L and T created by the lease.

- Here, the T’s claim was based on the agreement rather than the sublease. - However it is not necessary that the T’s claim arise under the sublease or the same contract as the L’s

claim. (Question however was whether the agreement and the lease were so closely connected that principles affecting equitable set-off apply). The solution was to be determined by what was ‘obviously fair or manifestly just’.

- There is a close enough connection between the claim and the cross claim in this case. The defendant was entitled to defend the plaintiff’s claim by raising equitable set-off. It would be manifestly unjust to allow the LL to recover the rent w/o taking into account the damages which it alleged the tenants have suffered through the failure by the LL to perform their part of the agreement. Also, the breach by the LL is said to render the premises unfit at lease in part for the purpose for which they were let. Thus, defendants cross claim can be said to impeach the title to the plaintiff’s legal demand.

Q: A T was awarded damages against the LL for breach of the covenant of quiet enjoyment. Before these damages were paid, the LL defaulted under its mortgage and the mortgagee went into possession. Does the T have a right to set off the damages against rent owed to the mortgagee in possession? A: Since the right to damages is a personal right and not an interest in land, such a right cannot defeat the mortgagee’s statutory right to rent consequent upon taking possession: Citibank Pty Ltd v Simon Fredricks Pty Ltd [1993].

Hon Kong and Shanghai Banking Corp v Kloeckner & Co AG [1990]: the right of equitable set off may be excluded by agreement b/w the parties (clear and unequivocal provision). Grant v NZMC Ltd [1989]: clear and explicit words must be used so that a provision in a lease to the effect that rent is to be paid ‘free and clear of exchange or any deduction whatsoever’ is not sufficient to exclude set off.

REMEDIES Summary of remedies available to a landlordContractual (also available to a T) Recission of contract Damages for loss of bargainProprietary Compensation for the uses of the land

Rent in arrears Mesne profits

Damages and injunction Forfeiture

By re-entry By service of a writ

Progressive Mailing House v Tabali P/L (1985) HC (the general law) FACTS: Appellant = lessee under unregistered memorandum of lease under RPA; did not pay rent for 2 mths at commencement of lease. Respondent = statement of claim for possession, outstanding rent and interest, mesne profits and damages.HeldMason J:

- Notwithstanding the failure to register the memorandum of lease, it brought into existence and equitable term of the duration which it specified and subject to the conditions which it contained.

- The ordinary principles of contract law, including the termination for repudiation or fundamental breach apply to leases: Highway Properties Ltd v Kelly; Leitz Leeholme Stud Pty Ltd v Robinson.

- The appellants various breaches of covenants in addition to the failure to pay rent amounted to repudiatory conduct.

SUMMARY OF MASON J: L can terminate for actual breach and anticipatory breach L can then receive damages for the breach and for the loss of the bargain itself. The situation is governed by contractual rights purely and that there need not even be a re-entry clause in order to terminate the contract and that you hence can just show the Tenant that all promises are at an end.

Brennan J:- Once a lease has been determined, a lessee is under no obligation (thus no breach of covenant) to pay rent

for the unexpired portion of the lease: Jones v Carter. However a lessor is entitled to mesne profits for the period in which the lessee remains in possession (coz no obligation to pay rent now) of the property after the service of a writ for the recovery of possession: Canas Property v K L Television Services Ltd. The lessor may recover an amount equal to the rent in respect of that period. If L asks for rent then this can be seen as either an affirmation of the contract or as giving rise to a s127 implied statutory tenancy.

- A lessor can recover damages for loss of the benefit only where the lessee has repudiated the lease before determination of the term. Such repudiation is not necessarily established by proving a default in the payment.

- The rules of contract apply to both registered and unregistered memorandums of leases that do not convey a legal leasehold interest: Leitz Leeholme Stud v Robinson

- Breaches of covenant that show an intention to act only in a manner substantially inconsistent with their obligations under the lease amount to repudiatory conduct.

- Contractual principles relating to anticipatory breach apply to leases, thus can sue for anticipatory breach.- If you accept ant. breach (and terminate contract) then this ends the contract (shield). Sword: immediate

right to damages. - If the lessee unequivocally repudiates the lease and abandons the land, the lessor may bring an immediate

action for breach of covenant in which he is entitled to recover the full amount of the agreed rent for the full term, less an amount that the jury thinks he/she is likely to derive as profits from use of the land during the remainder of the term: Buchanan v Byrnes. Until surrender, the lessor can sue for rent; after surrender, he is limited to damages for loss of rent flowing from the lessee’s breach of contract: Buchanan v Byrnes.

- Until a promisee accepts the repudiation, the contract and its obligations remain on foot: McDonald v Denny Lascelles Ltd and right of action for damages doesn’t arise.

- Acceptance of surrender by a lessee who has repudiated a lease is at once an acceptance of the repudiation and a determination of the lessee’s interest in the land.

- “Where the lease is liable to forfeiture, enforcing the forfeiture both determines the lessee’s interest and constitutes the lessors election to accept the repudiation. Conversely, a waiver of the forfeiture constitutes the lessor’s election to keep the lease on foot.”

- lessee’s land liable to forfeiture – 2 components:o There needs to be provision in lease (re entry clause). If not, then need to look to ss 84 & 85 (which

only apply to limited group pf covenants, and which are often expressly negatived away).o There must be a breach.

SUMMARY OF BRENNAN J:Leases are governed by contract BUT you need actual breach and provision in lease for re-entry (either ss 84, 85 – which can be expressly negatived – or a re-entry clasue itself). If this is fulfilled, you must re-enter properly, then can recover damages for both breach and loss of bargain.

- When you re-enter, must abide by s 129 of Convey Act. (NB s129 only applies to non-rent covenant breaches)

So! where T has repudiated the obligations under the lease, the LL may accept the repudiation as discharging both parties from further performance, terminate the lease and recover loss of bargain damages for the loss of the lease. The source of the parties rights and obligations was an agreement for lease. There is no difference in principle b/w an agreement for lease and an executed lease: Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) principles of contract law will generally apply to leases and if the lessee’s breaches of covenants in the lease are, in all circumstances, repudiatory, the lessor will be entitled to damages for the loss of the lease.

Shevill v Builder’s Licensing Board HCFACTS: tenant frequently fell into arrears with rent. L reentered and determined lease pursuant to re-entry clause. No dispute re validity of termination, but T resisted L’s claim for damages for loss of leaseHELD: If a contract is terminated pursuant to express power, damages for loss of bargain will only be recoverable if there is some nexus b/w promisor’s breach and loss of contract – ie breach must have effectively deprived L of whole or substantial part of the benefit of performance. Here, T’s conduct fell short of repudiation. Court found that the lease was lost as a result of the landlord’s election to re-enter pursuant to re-entry clause rather than any conduct of T.* After this case, the LL will not be able to recover loss of bargain damages unless the parties have either agreed to such a course or the T’s breach has been repudiatory.

J & C Reid Pty Ltd v Abau Holdings Pty Ltd [1988] NSW: a covenant to pay rent in advance is not, w/o more, an essential obligation of the lease and a failure to pay rent will not entitle the LL to terminate the lease and recover loss of bargain damages unless the T’s breach is of such a magnitude as to have effectively deprived the LL of the substance of the bargain or is demonstrative of an intention not to be bound by the lease.

Marshall v Council of the Shire of Snowy River (1994) SCNSWCA

Facts: The appellant (tenant) entered into an agreement to lease for a term of 5 years, with options to renew the lease. The lease was not registered. The tenant failed to pay rent for a period of 7 years. The landlord sent a notice requiring the T to vacate the premises, which was not complied with. The landlord then sent the tenant a notice of the termination of the statutory tenancy at will.Held Conveyancing Act A landlord is required to give a tenant s129 notice for equitable leases (equ coz unreg!) s129 (1) A right of re-entry or forfeiture under a provision in a lease, for a breach of any covenant, condition or agreement (express of implied) in the lease, shall not be enforceable until the lessor serves on the lessee a notice - (a) specifying the particular breach complained of; and(b) if the breach is capable of remedy, requiring the tenant to remedy the breach; and (c) in the case the lessor claims compensation in money for the breach, requiring the tenant to pay compensation within a reasonable time

o Applies to agreements to lease as well as to leases: s128.s128 Defines a lease for the purposes of s129 as including “an agreement for a lease where the lessee has become entitled to have his lease granted”, that is, equitable leases.

Agreement for lease was never registered pursuant to the terms of the RPA, thus only a statutory tenancy at will, which is determinable at one month’s notice: s127. s129 is not relevant with respect to s127 leases.

S128 states that s129 applied to an ‘agreement for a lease where the lessee has become entitled to have his lease granted ie where the agreement for a lease is susceptible to an order for specific performance.

B/c T’s behaviour (persistent refusal to pay rates which constituted a continuing repudiation of his obligations under the agreement to lease), is unlikely ct of equity would grant specific performance (which is necessary for the Walsh v Lonsdale interest) and thus s129 would not apply.

S129 (8): section does not apply to re-entry or forfeiture or relief in case of non-payment of rent. Meagher JIf repudiate or commit fundamental breach of lease, party may accept repudiation or breach and terminate lease. 2 options for lessor:

(i) contractual right to terminate the lease by re-entry for breach of covenant(ii) On application of ordinary principles of contract law, to terminate the breach.

If rely on (i), must comply with s129 before re-entering. If rely on (ii) s129 is irrelevant. Section 129(10) states that s129 notice cannot be expressly excluded.

WEEK 8 (Class 2): Co-ownership – creation Two forms of co-ownerships (apply to realty as well as personalty):

(i) Joint tenancy - The 2 distinguishing features of a joint tenancy are the right of survivorship and the 4 unities. - No joint tenant has any individual share but each has a right, with the other joint tenants, to the

whole of the property.- Joint tenants can freely dispose of their interest to another person by ‘serving’ his/her share.

Right of Survivorship˙ When one joint tenant dies the whole of the estate remains with the surviving joint tenant(s).˙ Where joint tenants die together, deaths are presumed to have occurred in order of seniority, if there is no

evidence to the contrary: S35 Conveyancing Act 1919.˙ The interest of a joint tenant cannot be bequeathed or disposed of by will.˙ Joint tenancy may be severed during the lifetime of any joint tenant. If severance does take place, this

creates tenancy in common and the interests in the property will devolve in accordance with the provisions of that person’s will or be otherwise distributed in accordance with the rules of intestacy.

˙ The Common Law traditionally did not permit corporations to be joint tenants because a corporation does not ‘die’. NSW CA s25 provides that a body corporate can hold any real or personal property in joint tenancy, as if it were an individual. Now statute provides that dissolution of a company is equated to death and companies can be joint tenants: S25 Conveyancing Act 1919.

˙ To create JT evince intention – use express words e.g. ‘jointly’ as opposed 2 ‘share = severance. Four Unities

˙ Possession – each co-owner is entitled to possession of the whole of the property, not exclusively for himself or herself but to be enjoyed together with the other joint tenants.

˙ Interest – each co-owner’s interest must be the same in nature, extent and duration.˙ Title – All joint tenants must derive their interests from the same document or the same act.˙ Time – interests of all joint tenants must vest at the same time (except any conveyance to a trustee for

beneficiaries or any disposition in a will; which may give rise to joint tenancy in grantees, even where unity of time does not exist: (M’Gregor v MGregor (1859)).

(ii) Tenancy in common - Joint tenants hold a single title, whereas each tenant in common has a separate title. - Each tenant has a distinct yet undivided (hasn’t formally been divided) share in the property, ie each tenant is

entitled to the possession of the whole of the land, but only ‘owns’ a distinct share. - There is no right of survivorship - each tenant’s share can be dealt with at his/her liberty. The share may be

transferred/ alienated inter vivos through a conveyance, or upon death a tenant’s share passes to the beneficiary nominated by will or to the persons entitled upon his intestacy. The undivided share may itself become the subject matter of co-ownership.

- The benefit of survivorship may be expressly attached to the estate at the time of creation of the tenancy in common: Haddelsey v Adams (1856).

- The only unity which is essential is unity of possession. egs on p640. NSWs26 Conveyancing Act 1919: Tenancy in common is presumed; unless the persons are executors, administrators, trustees or mortgagees, or a joint tenancy is expressly provided for (coz hold property for someone else so would want a right of survivorship).

Creation of co-ownership – Joint tenancy or tenancy in common? AT LAW

- Words of severance were words which showed an intention that each of the co-owners should take a distinct share in the property.

- Re Estate of Leaver (SC (QLD): held that the use of the word ‘equally’ indicated that A, B and C should take as tenants in common.

- Dennis v Dennis [1972]: concurrent ownership may exist in other forms of property besides land. E.g. co-owner of a horse as a tenant in common.

IN EQUITY 3 situations where joint tenants at law were held to take as tenants in common:

(1) Business partners Lake v Craddock (1733): Although joint tenants at law, they were tenants in common in equity. The main reason for this was because it would be unfair to permit the principle of survivorship to operate in an undertaking designed to produce a profit, since the partner who happened to die first would lose all his investment.

(2) Money advanced on mortgage - Where two or more persons advance money on mortgage, whether in equal or unequal shares = TIC: Re

Jacksons (1887). Hold in the amount contributed to the mortgage. - A surviving mortgagee who received repayment of the whole of the money lent would hold the relevant

portion of it in trust for the personal representative of the deceased mortgagee.- CA 1919 NSW s96A: provides that a person dealing in good faith with a mortgagee is entitled to assume that

the mortgagees, if more than one, were entitled to the money on a joint account and that the mortgagee can give a valid receipt for the money.

(3) Unequal contributions to purchase price - If two or more persons acquire an interest in land (or any other object), having contributed unequally to the

purchase price, they are presumed in equity to hold as tenants in common in proportion to their respective contributions: Robinson v Preston (1858).

- Bull v Bull [1955]: held that mother and son were tenant’s in common in equity in proportion to their contributions and that the son could NOT evict the mother from the house since she was entitled to concurrent possession of the premises.

- The presumption has been extended to the case where a person assumes joint liability under a mortgage, rather than making a contribution to the purchase price: Calverley v Green (1984).

- The presumption will not arise where a conveyance to the parties expressly declares their beneficial interests in the property: Goodman v Gallant [1986].

- Where parties contribute equally to the purchase price: s26 Conveyancing Act 1919tenancy in common: Delehunt v Carmody. So! if only one persons name on COT, but you have contributed to purchase, person on COT will hold on TRUST.

- Where equitable tenants in common of certain property later acquire the legal interest in the same property as joint tenants, the parties will hold as tenants in common both in law and equity, unless they otherwise agree. s27 Conveyancing Act 1919.

Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] PC Facts: Plaintiff and defendant both leased a floor of a building. Prior to the lease, plaintiff and defendant had worked out allocation of floor space and rent. Held:

- AT LAW, as the lease itself contains no words of severance, it takes effect as a grant to the lessees as joint tenants.

Regarding equitable position three alternatives exist:- A : The lessees at the inception of the lease hold the beneficial interest therein as JT in equity;- B : The lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in

equal shares;- C: The lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in

unequal shares.- Where premises are held by 2 persons as joint tenants at law for their several business purposes, it is unlikely

that they would intend to hold as joint tenants in equity. - Will assume tenants in common in equity where purchasers contribute unequally, co-mortgagees, partners,

business operators with separate individual purposes. But not limited to these categories.- Applies to leases broadening the rule.

From the facts of this case, a tenancy in common in unequal shares can be seen. This is because of:1. Lease was clearly taken to serve the separate commercial interests of plaintiff and defendant;2. Prior to grant of the lease the parties had settled between themselves what space they would respectively occupy;4. Unequal apportionment of deposit;5. Stamp duty and survey fees paid unequally;6. Rent and service charges paid in unequal shares.

STATUTORY REFORM NSW common law presumption in favour of a joint tenancy has been reversed by legislation:

CONVEYANCING ACT 1919 (NSW) s 26 Construction of conveyance etc of any property beneficially to two or more persons together (1) a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants. (2) This section does not apply to persons who by the terms or by the tenor of the instrument are executors, administrators, trustees, or mortgagees, nor in any case where the instrument expressly provides that persons are to take as joint tenants or tenant by entireties. Applies to dispositions of real and personal property.

Mitchell v Arlaster [1964-65] SCNSW Facts:˙ Property left to ‘Harry Mitchell and Nellie Mitchell’, who were also named as executors of the will.˙ Harry died before the testator, but the will was not amended.˙ Issue was whether Nellie gets all of the property, or whether she only gets half with the other half passing to

beneficiaries of Harry’s estate. Note: not registered so s100 doesn’t apply!

Held:- Nellie Mitchell sought to rely on s26(2) Conveyancing Act 1919 to negate the presumption that she and Harry

were tenants in common. However, as she and Harry were both beneficiaries as well as executors, s26(2) doesn’t apply.

- Language of the will found to give the residuary estate to Harry and Nellie as tenants in common in equal shares.

- His Honour was satisfied that the sub-section has no application to interest which they take as beneficiaries and not as executors. Hence, gift was not appropriate to create a joint tenancy. Ie doesn’t matter if executor, coz taking the gift as a beneficiary, so s26 doesn’t apply. So as a beneficiary she is getting a TIC (only gets half).

** The principle that tenancies in common should be favoured over joint tenancies was applied in Delehunt v Carmody 1986. In that case, a man and a women were living together in a de-facto relationship for 31 years, in a house registered under the man’s name. Both had contributed equally to the purchase price. In equity, where equal contributions are made to the purchase price, the person with the legal title holds on trust for himself or herself and other contributors as joint tenants. However, it was held that equity should follow the principles established by the Conveyancing Act s26, so that the property was held on trust for the man and de facto spouse as tenants in common. On death of the man, his de facto received only her own half share and his estranged wife was entitled to his half share in the property (coz as TIC, husbands half goes to his estate).

Schmeling v Stankovic (1984): held that s26 did not apply to a provision for redemption contained in a mortgage of general law land. Since the mortgagors were joint tenants, the equity of redemption remained in them as joint tenants throughout the period of the mortgage. On the death of one mortgagor, the principle of survivorship operated in favour of the remaining mortgagor.

Co-ownership and the Torrens system - In NSW, the Torrens legislation provides that if two or more persons are registered as joint proprietors of an

estate or interest in land, they are deemed to be entitled as joint tenants: s100 Real Property Act 1900 (NSW). So! s100 only applied to things that are registered!

- Want to get registered for indefeasibility reasons. - The Registrar General requires instruments presented for registration to state expressly whether co-owners

are to take as joint tenants or tenants in common. An instrument which does not state the nature of co-ownership must not be reregistered.

- S26 introduces a REBUTABLE presumption in favour of TIC. Need to rebut this presumption if want to create a JT. Applies to legal and equitable interests: Delehunt. So even if name not on COT, can get something.

The interaction between RPA 1900 S100 (1) and s26 of the Conveyancing Act wasn’t clear until the decision in Hircock v Windsor Homes.

Hircock v Windsor Homes (Development No 3) Pty Ltd [1979]Facts: man wanted to renew lease, but wife died. Issue: Whether he was entitled to do so as surviving joint lessee, or whether the option could only be exercised with the participation of the representatives of the estate of Mrs Hircock. Ie was it JT (passed to him w/o need of wife signature) or TIC (need wife). Held:

- Common sense interpretation so that s100 RPA can coexist with s26 CA.- S100 has effect only on the registration of the instrument. Before registration, the presumption is that of

tenants in common. So if JT before reg, you will be JT after reg – so! same rights prior to reg. - The section means “if two or more persons are registered as joint proprietors of an estate or interest in land

under the provisions of this Act, they shall have the same rights as if they were joint tenants of a similar estate or interest at common law.”

- Joint proprietorship = JT. - S100 does not necessarily follow that all registered co-owners are joint tenants. In practice have to specify:

so only if expressly stated that JT.

- Registration of persons as joint tenants conclusively determines the nature of their interest, so far as 3rd parties are concerned. However, s100 doesn’t prevent joint tenants establishing that in equity, the parties hold as tenants in common between themselves: Re Foley (Deceased), Public Trustee v Foley [1955]; Calverely v Green (1984).

- Under s26, the parties were presumed to hold the beneficial estate as tenants in common. This, however, was only a rule of construction and the proper interpretation of the lease, taking into account the surrounding circumstances, was that the option was to be exercisable by the surviving lessee. Thus, the presumption established by s26 was rebutted and the option had been effectively exercised. Even if the lessees held as tenants in common, the option, as a matter of construction, could be exercised by one of the lessees.

- S26 provides a reputable presumption of TIC but in this case, intention of JT coz they were registered as reg proprietors therefore presumption was rebutted! Thus could exercise option in his own right.

WEEK 9 (Class 1): Co- Ownership- rights inter se User (current occupier) non owner claims for (i) occupation fee (ii) rents/profits. Non- occupier: claims by occupier for improvements. Also, claimed from occupier for rent/ profit from 3rd

party. Rights of occupation

- Each co-owner has the right to possess and enjoy the whole of the land.- This right can be transferred to a third party, but the transferee cannot be given a right which the co-owner

does not have, such as right to exclude other co-owners: Frueze v Unger. - Each co-owner cannot bring an action for trespass unless the co-owners occupation has excluded the other

co-owner from possession (ousted) OR where a co-owner does something preventing common enjoyment of the land: Steadman v Smith.

- The right to possess and enjoy the whole of the land includes the right to invite someone to live on the premises: Thrift v Thrift (1975).

(1) Occupation Rent - General rule: a co-owner who elects not to exercise his/her right of possession is not entitled to claim

compensation from the occupying co-owner/s. - Three exceptions: (@ common law): (i) if a co-owner was ousted by a co-owner (i.e. co-owner has been

excluded from possession), an occupation fee could be charged; (ii) if the parties agreed on the payment of an occupation of rent; (iii) where the occupying co-owner is claiming an allowance for improvements to the property ie set off for improvements (cross claim): if the occupying co-owner has carried out improvements to the property, and they have increased its value, equity would allow him/her to claim some contribution because it would be otherwise unjust for the non-occupying co-owner to benefit- but ‘he who seeks equity must do equity’ – meaning the improving co-owner is under a duty to pay an occupation fee (Teasdale v Sanderson).

Luke v Luke (1936) (NSW) Facts: TIC under their father’s will. Laura died interstate and thereafter Ada remained in possession of the land. She did not exclude Laura’s next of kin and they did not attempt to exercise their rights of possession. Q: whether Ada should pay occupation rent? Held: Occupation rent not payable unless an ouster is established OR unless the other party is claiming improvements when occupation rent can be used as a set off. The principle that a co-owner in sole occupation of property is not normally chargeable for occupational rent was applied (does not apply when an association similar to a matrimonial association has broken down and one party is, for practical purposed, excluded from the family home: Dennis v McDonald [1982]. Compare above with:Jones v Jones [1977] Facts: The defendant’s father bought a house in his name. However, the defendant contributed 1/4 of the purchase price and understood that his father intended to give him the house. After the father’s death, his widow brought proceedings claiming possession of the house.

Held: The defendant had a 1/4 beneficial interest as TIC and accordingly refused to make an order for possession against him. - Proprietary estoppel was used to modify the relationship b/w co-owners: The Court of Appeal held that one tenant in common could not claim rent from the other even though that other occupied the whole. Moreover, the plaintiff could not obtain an order for sale and division of proceeds, since the father’s conduct led the son reasonably to believe he could stay in the house for his lifetime. The D, having acted on this expectation, could not be turned out of possession or subjected to an order for sale. - Where co-owners agree that one or more of them should occupy the premises, such an agreement can provide for payment of occupation rent: (Leigh v Dickson) (1884): for example, the co-owners may agree that one of their number will manage the property but that the co-owner must pay rent, or one co-owner may lease his/her interest to another.

Ouster - If one co-owner prevents another co-owner from exercising their right to possess the entire property, the

‘ousted’ party may sue for an occupation rent, or fee i.e. mesne profits: Chieco v Evans (1990). - Merely telling one’s co-owner to ‘get out’ does not constitute ouster in the event that the addressee leaves:

Cardinaels- Hooper v Tierney [1996]. - Courts increasingly willing to impose an obligation to pay occupation rent where it is unreasonable to expect

the parties to continue to live together: Chhokar v Chhokar. - A temporary disturbance to an access way to the property would not constitute ouster: Ferguson v Miller ie

the inconvenience caused by one joint tenant’s renovations to a driveway do not amount to an ouster: Ferguson v Miller [1978].

Biviano v Natoli (1998) NSWCA - Williams v Sinclair Refining Co Inc: an ouster is an express denial of the title and right to possession of fellow

tenants, brought home to the latter openly and unequivocally. - Where one co-owner leave the property in consequence of an AVO which prevents a co-owner going near the

property will NOT be an ouster for the reason that to do so is not a legal wrong, and therefore gives no right to sue in ejectment. Ie there was no wrongful exclusion, thus no ouster.

- Mere failure to respond to a non-occupiers request to sell the premises is NOT ouster; however, the subsequent denial of the legitimate title of the non-occupying owner in legal proceedings did constitute ouster ie the appellant’s persistent denial of respondents interest in property amounted to an express denial of his rights as co-tenant and constituted an ouster.

- If respondent left voluntarily and never sought to return, no ouster. - Thus, appellant liable to pay an occupation fee from the date of filing the defence.

The Quantum of occupation rent Forgeard v Shanahan (1994) NSWCA Facts: (F) and (S) were JT of a property in which they had lived during the course of their de facto relationship. The relationship ended. F brought proceedings in the SC for the appointment of statutory trustees for sale of the property and division of the proceeds under Conveyancing Act 1919 (NSW) s66G. After the relationship broke down, S had remained in occupation of the property with the children, made mortgage payments as they fell due, and paid rates, insurance and expenses for pest control. Issue: Whether S was liable for an occupation rent and whether any allowance should be made in her favour for the mortgage repayments, rates, insurance and other expenses.Held: Meagher JA:

- Don’t have to pay insurance coz that’s maintenance. Have to pay mortgage and improvements as a set off to occupation fee. Can only claim for improvements where dividing the pool of money e.g. selling it.

- Sometimes can claim occupation fee as a set off for improvements which have increased value of land: 3 rd

party scenario. - S was not liable to pay occupation fee unless she excluded the other co-owner.

- As far as equity is concerned, an occupation fee will be exacted in 2 circumstances: (i) partition suit: where there has been an ouster (equity following the law) (ii) if the owner in occupation claims an allowance in respect of improvements effected by him, equity will permit such an allowance only on terms that he is accountable for an occupation fee to the non-occupying owner. It is an amount by which the value of the property has been increased, not exceeding the amount expended, ‘value’ to be ascertained at the commencement of the action. (He, who comes to equity, must do equity).

- A tenant who effects repairs, is entitled to an allowance for the lesser of the value of the enhancement of the property and the cost of effecting the repairs.

- Squire v Rogers: where the co-owner in occupation has been in receipt of rents and profits from the property and used them to finance improvements, if his other co-owner seeks an allowance equal to a proportion of the rent and profits he must make the occupying co-owner an allowance in respect of all moneys spent, not simply so much of them as results in an advancement of the value of the land.

- Improvements are something more than mere repairs and maintenance, for which no allowance can be made: Leigh v Dickeson (1884).

- If the co-owners are joint-debtors: if one co-owner pays the debt in full he is entitled to require the other co-owner to contribute a rateable amount.

- S was entitled to an allowance for 1/2 the cost of the mortgage repayments and the rates, but not for 1/2 the costs of insurance and pest control which were neither improvements to the property nor payments for debts jointly owing.

- The basis for recovery was that the mortgage payments and rates were payments made by one debtor of a debt jointly owned by both debtors.

- He also held that the claim for an occupational fee should not be allowed in excess of the value of improvements.

Ryan v Dries [2003] NSWCA (demonstrates the way the court will assess damages where mortgage payments and occupation rent are claimed). Facts: R and D had relationship (not de facto). Property was purchased by the appellant and the respondent, and the title noted them as tenants in common holding interest of 6/7 and 1/7 respectively. Appellant used the property for his business and his residence and the respondent generally stayed there each weekend. The locks on the premises were changed, and respondent did not have access to the premises after that time. Issue: whether the appellants claim for contribution to payments of mortgage principal and/ or interest should be treated as a claim for expenditure. How the principle of paying occupation rents should be applied when the occupation by one co-owner is not exclusive because the other co-owner used the property on weekends. Held: Can’t get for repairs and maintenance but if increase value of property, then you can!Mortgage repayments increase your equity. Disagrees with some points made by Meagher JA in Forgeard v Shanahan:

1. A co-owner collects rent paid for the use of property does so as an agent for all co-owners and is liable to account to other co-owners.

2. If the value of the property is increased by repairs, a co-owner who paid for repairs is entitled, in partition proceedings, for an allowance in respect of that increase in value ie treating repairs as no different from improvements.

3. The contribution to mortgage payments did not amount to improvements, but as a discharging of a joint debt. The payment of mortgage repayments could be equated to improvements because the effect of them is to increase the value of the equity of the parties in the property and hence the amount of the proceeds distributable to them. Entitled to an allowance in respect of such improvements made through the mortgage payments.

- The appellant was not charged with full occupation rent. There was a 10% deduction owing to the respondent using the premises 10% of the time.

(2) Accounting for profits and rents (need to take possession)Can’t claim when: (i) labour and initiative (ii) if person leaves (only have to account for profit when you kicked person out).

Statute of Anne has been repealed in NSW; however it seems that Strelly v Winson has preserved the equitable rule that allowed a co-owner to claim a share of rents collected by another: Ryan v Dries. The non-occupying co-owner can therefore claim rents and profits despite the repeal of the Statute of Anne. - A right to recover a share of rents and profits does not create a lien over the land: Brickwood v Yound.

(3) Compensation for repairs and improvements to land by one co-owner Brickwood v Young (1905)Facts: Brickwood was a successor in title to the person who originally built houses on the land. Issue: Was he entitled to have the value of improvements taken into account in determining his share of the compensation paid when the land was compulsorily acquired from himself and the other co-owners.High Court:

- A co-owners’ right to recover compensation for improvements was a ‘defensive’ or ‘passive’ equity which could only be exercised in actions involving the rights of other co-owners e.g. in an action for partition or sale, for administration or for division of the proceeds of compulsory acquisition of the land.

- Brickwood (successor in title) was entitled to have the value of the improvements taken into account in determining his share of the compensation paid when the land was acquired.

- He who seeks equity must do equity: B’s entitlements were conditional upon him accounting for occupation rents and profits he had received in excess of this share.

Torrens lamd: a purchaser who registers an interest in the land against which the charge is enforceable will take free of it (ie compo for improvements): McMahon v Public Curator of Queensland [1952].

Ryan v Dries [2002]: any repairs, including maintenance, which increased the value of the property, would be compensable.

Squire v Rogers (1979)Issue: Is the compensation to be calculated by reference to the cost of the improvements or to the value of the improvements at the time the court of equity hears the matter?Deane J:

- Boulter v Boulter (1898): in no case can the co-owner who has improved the property obtain more than this outlay although such outlay may have trebled the value of the property. And, on the other hand, the increase in the price obtained is the limit of what he can receive, through his actual outlay may be far larger.

- Thus, only compensation of $15000. - However, on the taking of account, the plaintiff could only claim rents and profits attributable to the

defendant’s improvements if she were willing to make an allowance for their cost, over and above that to which the defendant was entitled on the principle of Boulter v Boulter; i.e. must credit them with $100,000 not $15,000!

- So! Amount you can claim for improvements is capped to the value that it increases your property. Exception: can get share of rents/profits if not going to make allowance for costs over and above mere increase in value of property: modified: Immer: pay on a more generous basis ie on what they have spent.

Forgeard v Shanahan (1994): where the co-owner uses the rent to finance the improvements, the other co-owner cannot claim a share of the rents w/o making an allowance for all the moneys spent.

LIMITS to what improving co-owner can claim: either the actual amount spent on improvements OR the increase in the value of the land, whichever is the LESS (Boulter v Boulter) – Thus where a co-owner spent $100 000 on improvements, but the property increased in value attributable to improvements was only $15 000, he was only entitled to $15 000: Squire v Rogers.

Boulter v Boulter (1898) was modified to allow the improving co-owner the right to participate in the increase in value of the property over and above the cost of improvements: Houghton v Immer (No 155) Pty Ltd (1997): the co-owner was allowed both the costs of improvement and a proportionate share of the increase in value of the property. Also, no reimbursement is available for the expenditure of time and effort, or for expenses incurred in relation to loans to finance the improvements.

Compensation for repairs as well as improvements may be recoverable if the repairs as well as improvements are more than mere maintenance: Leigh v Dickeson.

If mortgage are considered improvements (Ryan v Dries), then the principle of Brickwood v Young should apply in the case where a co-owner has made mortgage payments for the other co-owner.

Liability for waste A co-owner can bring an action against another co-owner for voluntary waste: Ferguson v Miller, a co-owner was held to be entitled to an injunction to prevent another co-owner from destroying the character of a driveway by removing ornamental trees planted along it, but not to an injunction to prevent a resealing and widening of the driveway, which was regarded as an act of repair.

Dispositions of interests by co-owners- A joint tenant or tenant in common may sell or give his interest to another person provided this does not

interfere with the right of the other co-owner to possession of the land: Frieze v Unger [1960].- If a joint tenant of a fee simple dies after leasing premises, the lessee’s rights are not extinguished. Instead,

the joint tenancy is suspended during the period of the lease and the surviving joint tenant(s) are entitled to the reversion upon it: Frieze v Unger [1960].

- Hedley v Roberts: question was whether one or two tenants in common could create an easement, binding on the other tenant in common and successors in title, under which a neighbour was permitted to erect and use a toilet on the co-owner land. Held that such an easement could be created “if the incumbrance does not interfere with the right of the other co-owner…to possession of the land and his other rights with respect to the land’.

- Fulton v 523 Nominees Pty Ltd [1984]: held that a mortgage granted by a co-owner, w/o the consent of the other co-owner, bound only the undivided share of the mortgagor.

- A period tenancy held by joint tenants can be determined, by anyone of the joint tenants giving the landlord a notice ending the tenancy: Crawley Borough Council v Ure [1996].

- In Elton v Caville (No 2) (1993), Young J held that a deed made between co-owners of home units, which contained a clause prohibiting sale, transfer, lease or licence of the whole part of each co-owner’s interest in the property without the written consent of the other co-owners was an invalid restriction on alienations. But if the clause had provided that such consent could not be unreasonably withheld, it would have been valid on the ground that it served the legitimate purpose of giving the co-owners the right to control who should own other shares in the same property.

WEEK 9 (Class 2): Co-ownership: Severance/termination 6 ways to sever: 1. The joint tenant may sever by unilateral action (unilateral agreement).2. Joint tenant may agree with the co-joint tenants to sever the interest or all of the interest held by all joint tenants, at which point the joint tenancy will come to an end (Mutual agreement). 3. Joint tenants may embark on a course of dealing, short of an agreement, which evinces an intention that they treated the joint tenancy as at an end.4. Independently of action by the joint tenants, a joint tenancy may be severed by order of the court5. Homicide committed by one joint tenant against another.6. Bankruptcy.

1. Severance by unilateral act Don’t have to notify JT @ Equity

(1) alienation to 3rd party (self or gift)(2) alienate to yourself (3) Declare a trust (can declare a trust w/o telling JT).

Severance @ LAW - to severe JT @ law: need to register it (s42 RPA)- Can severe @ EQUITY w/o asking JT permission. But register general will inform them. - If sever JT of sale (ie a transaction) need specifically enforceable contract (ie a kind of contract that the court

of equity will enforce). Under Torrens title, to sever need:

(i) signed transfer

(ii) COT When equity refuses to sever, can’t escape obligations by virtue of s42.

Torrens system: mortgage does not sever the JT as it is not a transfer, just a charge on land therefore the 4 unities are undisturbed.

If one of the party dies that you left money to (you loose the money). So if a person dies, and haven’t paid, can’t get money back.

LEASES: - Do not severe, it suspends it! - Defers the right of survivorship till the lease terminates. If LL dies during the lease, right to survivorship

suspended therefore expectant reversion. So pay the money to the estate (coz LL dead). So once you (tenant) leaves, survivorship operates.

- You can co-own a lease. If this is the case, and you sub lease severe the lease. - But, if own property, and leave no severance suspended (refer above).

Corin v Patton (1990) HCA Issue : Whether a unilateral declaration of intention or other act inconsistent with the continuation of a joint tenancy may suffice for the purpose of severance? Did Mrs P effectively dispose of a legal or equitable interest in property thus severing the joint tenancy and defeating her husband’s right of survivorship? Held: Mason CJ and McHugh J: A joint tenancy can be severed in three ways:

- an act of any one of the persons interested operating upon his own share may create a severance as to that share (issue relevant to this);

- mutual agreement; or- Any course of dealings sufficient to intimate that the interests of all were mutually treated as constituting a

tenancy in common.Thus it is necessary to demonstrate that Mrs Patton effectively alienated the property in equity. The issue is primarily whether or not the property was alienated. Mrs P had not done everything necessary under equity because she had not put C in a position to register the transfer (she didn’t produce the COT). Since equity will not perfect an imperfect gift; the transfer did not effectively the joint tenancy. BUT now s97 RPA changes this: can register to YOURSELF w/o COT or would have re-registered it to herself and leave it in her will. 100% A (sole owner) + B (JT) But B dies and it goes to C (so A holds 50% on trust for C in equity).

- Unilateral decision of intention is not sufficient to effect severance of joint tenancy.- Mason & McHugh JJ: if you want to show severance by a unilateral act of a joint tenant, you must effect

alienation of a vestment of a legal or equitable tenants. Unilateral action can’t destroy the unity of time, of possession or of the interest UNLESS the unity of title is also destroyed, and it can only destroy the unity of title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property. A statement of intention, without more, does not affect the unity of title.

- Where alienation at law has not occurred, a specifically enforceable contract (ie one for valuable consideration) severs the joint tenancy in equity: Corin v Patton (1990).

- A voluntary alienation to a 3rd party, however, will be effective to sever the joint tenancy only if the donor (person making the gift) has done all that is necessary to be done on their part to allow the donee to obtain the legal title. This is an illustration of the maxim that “equity does not assist a volunteer”: Corin v Patton (1990).

Costin v Costin (1997): Gift was imperfect- to produce COT need permission of title so son got to keep property. In NSW position change! s97: don’t need COT to transfer to yourself S97(5): need NOTICE (one months) so can give other tenant an opportunity to object!

NSW permits severance of Torrens title land by unilateral act of a joint tenant.

So, a joint tenant of Torrens system land is now able to sever by registering a transfer to himself/herself. Section 97 of the RPA 1900 (NSW) now provides that a joint tenant may register a transfer to himself or herself in order to sever the joint tenancy. No accompanying certificate of title is required.

Section 97 (5) RPA stipulates that the other co-joint tenants must be notified by the Register when such a transfer is made, but this notice requirement does not exist at common law.

Severance by transfer to a stranger In Wright v Gibbons (1949) there were 3 sisters (O, E, B) who were all joint tenants. O and E transferred and registered their interest to each other to attempt to sever the joint tenancy without the knowledge of B (so that B would not get the entire estate upon their death). B survived O and E and sought a court order that the actions of her sisters didn’t sever the joint tenancy.

HCA held that upon registration under the Torrens system, the joint tenancy was severed and from that time on, all sisters held equal shares in a tenancy in common. Hence the interests were disposed of under wills not all to B. Thus, the registration of the transfer was effective to bring about a severance, so that B’s right of survivorship was defeated.Also, where a JT alienates his interest to a stranger, the joint tenancy is severed and the alienee becomes a tenant in common as to an undivided share of the land. If there were only one other JT, the alienee and the continuing JT hold as tenants in common. So! Alienation of the interest of joint tenants breaks unity of title, thereby severing the joint tenancy and transforming it into tenancy in common:

Severance by Declaration of trust Converyancing Act s23C (1) (b) entitles a person to declare that they henceforth hold the property on trust for designated beneficiaries as long as the requite formalities are met; the beneficiary will have a valid interest in equity in the property so the interest will be effectively severed in equity. This mode of severance is a way of circumventing the Torrens requirements of registration. S23C(1)(b): old system When declare a trust, you destroy the unity of TITLE ie the document b/w you and JT severance in EQUITY, even if not @ LAW when register it.

Does grant of a mortgage or a lease sever? - McInerney AJ in Lyons v Lyons [1967] held that a mortgage of Torrens systems land by a joint tenant did not

of itself sever the joint tenancy.- If a joint tenant grants a fixed term lease to a stranger this will sever the joint tenancy: Re Shannon’s Transfer

[1967].

(2) Severance by agreement - need agreement - equity looks for intention- hold it on trust for themselves - ie @ LAW JT, EQUITY TIC ie who ever A was going to leave it to in their will. So CBD held on trust for E coz A holds it on trust for himself. A B C D A is crossed out! So @ LAW JT coz have agreement but not registered | @ Equity TIC EIf the go and register mutual agreement to severe, therefore severed @ LAW therefore don’t need all that trust stuff. The agreement DOESN’T need to be specifically enforceable ie informal document is enough! Coz everybody agrees. Severance IRREVOCABLE even when repudiated agreement.

- In order for the agreement to be effective, it does not have to meet the statutory requirements of s54A of the Conveyancing Act 1919: Abela v Public Trustee [1983].

Re Pozzi [1982]: The court applied the principle that a joint tenancy can be severed by agreement b/w the parties. Calabrese v Miuccio [1985] Court held that the oral agreement severed the joint tenancy. Evidenced an intention to sever

Abela v Public Trustee [1983] Held: although the parties had not agreed on the precise shares (after sell property), they had indeed severed the joint tenancy by agreement. They therefore took equal shares of the sale proceeds.

(3) Severance following a course of dealing Need to show mutual intention to sever. CorrespondenceImplied form of agreement. Course of dealing does not have to be evidenced in writing. Severance can occur if there is conduct showing that the parties intended to treat their interests as separate

(ie operating on his/her own share), seeing themselves as tenants in common: Williams v Hensman (1861). Payments of proceeds of sale from a joint tenancy into separate bank accounts will indicate a course of

dealing sufficient to sever: Abela v Public Trustees. The mere negotiation about terminating a joint tenancy was not sufficient to do so, even though there was

reference in solicitors letters to the parties having half shares: Magill v Magill Merely splitting the tenancy into separate parts is not sufficient to sever. In Greenfield v Greenfield, the

tenants each occupied a separate floor of the building and paid individually for the maintenance and improvement of their own premises, but they evinced an intention that survivorship would continue.

The fact that joint tenants have treated property as part of partnership assets for taxation purposes does not of itself bring about a severance: Barton v Morris [1985].

(4) Severance following homicide Equity will impose a constructive trust on wrongdoer. So prevents him to hold victims interest (in survivorship) But if for eg driving accident: ABC hold property – 3rd party can benefit from right of survivorship.

- At law, the principle of survivorship will continue to operate, so that the wrongdoer will be entitled to the whole interest (ie JT), but in equity, a constructive trust will be imposed under which the legal owner will hold a 1/2 interest on trust as TIC for the deceased joint tenant: Rasmanis v Jurewitsch [1968]: but! In this case, the killing prevented the husband from benefiting from the death, but not the 3 rd party! (so they still get right of survivorship).

- Courts have modified this rule where the death was not as clearly wrongful. Rule does not apply: in a suicide pact where there is no intention to benefit from the killing: Permanent Trustee Co Ltd v Freedom

from Hunger Campaign (1991) Where there is self defence or extreme provocation, as where a woman kills her partner after many years of

violent treatment: Public Trustee v Evans (1985). where death results from negligent driving, the right of survivorship remains unaffected: Gardner v Moore

[1984] In contrast, where the offender is mentally ill, although not to the extent that he/she cannot be held guilty of

manslaughter, the rule has been held to apply: Public Trustee v Fraser (1987). - Forfeiture Act 1995 (NSW) give court discretion: s5 (2). But not in case of murder.

(5) Severance by court order - A judicial decree or order that one joint tenant transfer his share to his co-tenants operates to sever the

jointure: Harris v Walker (1969). - Under the Family Law Act 1975 (NSW), the court has power to make orders in relation to property but a mere

application under s79 to the court for severance is not enough.

(6) Severance by bankruptcy A court order declaring a joint tenant bankrupt will sever the joint tenancy, and the joint tenant’s interest is vested in the Official Trustee in Bankruptcy. By section 58(2) of the Bankruptcy Act 1966 (Cth), the property does not vest in the trustee until the statutory registration requirements have been met, but in equity severance occurs on the declaration of bankruptcy: Re Holland [1985] TERMINATION OF CO-OWNERSHIP

1. Death : Where all but one of a number of joint tenants have died, survivorship operates. In the case of land, the Torrens legislation usually provides for registration of the surviving joint tenant as the sole proprietor of the fee simple: RPA ss100.

2. By action of the parties:

- If all co-owners join in a transfer or assignment of their interests to another person, that person will acquire sole ownership of the object assigned.

- A tenancy in common or joint tenancy may also be terminated if one co-owner purchases or otherwise acquires the interest of all other co-owners.

- Co-owners may agree amongst themselves to divide the property in accordance with their respective shares. E.g. 2 joint tenants of land may agree that each shall become the sole proprietor of a designated half of the land.

3. By order or sale or partition by the court: The court acting pursuant to powers conferred by statute, on the application of one or more co-owners, may compel the unwilling co-owners to divide the property or, more usually, join in a sale and division of the proceeds.

Conveyancing Act s66G(1): allows any co-owner who wishes to terminate the co-ownership to apply to the court for a trust for sale (the court will appoint trustees to sell the property) or for a partition order.

‘Co owner’ s66F: ownership whether at law or in equity in possession by two or more persons as joint tenants or TIC …and includes an incumberance of the interest of a joint tenant in common’.

Darrington v Caldbeck (1990) (NSW): an applicant under s 66G must be a co-owner at the date of making the application. An application by the executors of a deceased co-owner (prior to the grant of probate of the deceased persons will) does not come within the section. (would vest in the Public Trustee instead)

ANZ v Scott (1993): a bank m'ee, who had the m'ge granted by the joint tenants, did not come within the section. If the m'ge had been granted by only one of the co-owners, they would have come within the section.

Woodson v Woodson (1996) NSW SC: in the case of an application for appointment of trustees for sale there is an onus in favour of sale.

WEEK 11 (Class 1): Easements – Substantive requirements - Easements are property interests which run with land. If land which is burdened by an easement (the

‘servient land’) is transferred, the seller is no longer bound personally. The owner of the dominant land does not gain such an interest in the servient land that he or she can restrain a trespass to that land.

- May be positive or negative in nature. Positive: gives the owner of the dominant tenement the right to do something on his/her neighbour’s land i.e. the servient land. Phipps v Pears [1965]: positive easements e.g. right of way, which give the owner of land a right himself to so something on or to his neighbours land. Negative easement = right of light, which gives him a right to stop his neighbour doing something on his (the neighbour’s) own land

- If land which is benefited by an easement (the ‘dominant land’) is sold, the benefit of the easement passes to each new owner.

Examples: Easements of way: allow access to the dominant land by foot or by vehicle depending upon the terms

or basis upon which the easement is created. Service easements: include drainage and sewerage easements and also easements for services such

as telephone and electricity. - An easement only gives the owner of the dominant tenement limited rights in relation to the servient

tenement, in accordance with the terms of the easement.

The characteristics of easements Re Ellenborough Park [1956] identified 4 substantive requirements for the creation of an easement:

(1) There must be a dominant and servient tenement. (2) The easement must ‘accommodate’ the dominant tenement. (3) The dominant and servient tenement must not be held and occupied by the same person. (4) The right must be capable of forming the subject matter of a grant.

(1) Dominant and servient tenements Benefit one person to the detriment of the other. Easement must benefit the person and the land. Gas & Fuel Corporation of Victoria v Barba [1976] SCVIC

- If no reference to land is made, can look @ extrinsic evidence (‘evidence of all material facts at time of execution of deed’) to work out dominant tenement.

- Dominant tenement can be incorporeal (intangible) and need not be contiguous (adjacent; i.e. does not have to be close): Re Salvin’s Indenture.

- The Shannon Ltd v Venner Ltd: court held that extrinsic evidence was admissible to prove both the intention that there should be, and the identity of, a dominant tenement but also that the easement may, when the dominant tenement is not specified in the grant, be appurtenant to other land besides that conveyed by the deed.

- Gapes v Fish [1927]: reservation of a right of way that made no reference to a dominant tenement for the advantage of which the way might be reserved imposed no servitude (a right possessed by one person to use another's property) on the D’s land i.e. reference to the dominant tenement disqualified the alleged easement.

- This case distinguishable from Gapes: there was a reference in the option agreement (by reference in turn to the specimen form of easement attached to it) to unidentified land to which it was intended that the enjoyment of the easement should be annexed.

- The evidence admitted identified the land (dominant tenement) and hence upon exercise of the option, the easement came into existence. (So can still exclude if didn’t exercise option). V’s interest under creation of the easement prevailed over B’s interest under ct of sale of land, due to conditions contained in ct of sale of land.

- V granted injunction restraining B from further obstruction. Re Maiorana and the Conveyancing Act (1970): the court could have regard to surrounding

circumstances, as well as the terms of the document, to identify the dominant tenement and to determine whether an easement was validly created.

Formal requirements - Execution of formal documents and registration.- S88(1) Conveyancing Act 1919 (NSW): easement is not enforceable against a person interested in the

servient tenement, not being a patty to its creation, unless the instrument clearly indicates:(a) the land to which the benefit of the easement is appurtenant (i.e. dominant land);(b) the land which is subject to the burden of the easement or restriction (i.e. servient

land).(c) the persons (if any) whose consent to a release, variation or modification of the

easement is required. - s88(1A): provides that land (including the site of the easement) is ‘clearly indicated’ if it is shown:(a) in the manner prescribed by regulations made under (the CA) or the RPA, OR(b) in any other manner satisfactory to the Registrar General in the particular case or class of cases concerned. - This section does not apply to easements in favour of the Crown, or any public or local authority, or a

corporation prescribed by regulations: ss88 (4), 88A (1).- Papadopoulos v Goodwin [1982]: permissible to look at registered plans to determine the location of

easement (rights of way) where the dominant and servient tenements were in different subdivisions.

Easements in gross (can exist only in statute!)- s 88A provides for easements in gross i.e. w/o a dominant tenement, but only in favour of a ‘prescribed

authority’ e.g. supply of utility service to public. Refer pp 984. - S 88A(2) and (2A) allow drafters to use short forms of words to create various easements in gross in favour

of the Crown or local or public authority e.g. easement to enter on land in order to repair a structure.

(2) Accommodation of dominant tenement Needs to be a necessary connection with the land. Hill v Tupper (1863) where a lease can support an easement Facts: C were proprietors of a canal and surrounding land. C lease to H land on the banks and the lease provided that H have ‘the sole and exclusive rights’ to use the boats on the canal. H brought an action against T, claiming T had interfered with this right. T claimed (1) that C had no power to grant these exclusive rights, and (2) that T could not bring an action against T for infringement of these rights. Issue:

(i) whether C is competent to grant these exclusive rights?

(ii) Whether H may bring an action against T for infringement of these rights?Held: (in favour of T).

(i) One is not competent to cerate rights unconnected with the use and enjoyment of land and annex them to it so as to constitute a property in the grantee: Ackroyd v Smith (1850). Grant operates as a license or covenant on the part of the grantors and is binding as b/t themselves and the grantee, but gives him not right of action in his own name for any infringement of the supposed exclusive right.

(ii) H could only sue in C’s name, and he must obtain their permission to do so. So! rights over canal were personal rights UNCONNECTED with occupation of land, therefore invalid easement.

Moody c Steggles (1879): held that an easement can accommodate the dominant tenement if it benefits a business carried on upon that tenement. Signboard on the wall of the defendant’s house = valid easement: benefits only business: this was sufficient to create an easement.

Todrick v Western National Omnibus Co [1934]: an easement may accommodate the dominant tenement even where the dominant and servient tenements are not contiguous, provided they are sufficiently close. In this case, the tenements were separated by a field, but an easement was nonetheless held to exist. Some degree of physical propinquity is required emphasizing that if the distance b/w the tenements was so great that no benefit to the land was present, there would be no easement. So intervening field in the middle of dominant and servient land not a problem.

R V Registrar of Titles; Ex parte Waddington [1917]: : so long as it does not appear that the right claimed is not wholly unconnected with the beneficial use of the land, that it is in no way connected with the enjoyment of the dominant tenements valid easement.

Clos Farming Estates v Easton (2002) NSWCAIssue: did the easement comply with the condition ‘accommodating the dominant tenement’? Held: easement NOT valid.

- Merely a convenience to use the lot for farming, and the lot was not the only place that the work could be carried out, so the required connection b/w the land and the business was not made out. In this case, the connection was only contractual.

- So! The 2nd condition is that the land that accommodates the dominant tenement must have a connection that makes the property better and more convenient, but convenience and efficiency alone are not enough.

- Whether the right granted accommodated and served the dominant tenement depended on whether right granted was connected with the normal enjoyment of the dominant tenement. This is a Q of fact dependent on the nature of the dominant tenement and the right granted.

- Facilitation of the business or commercial use in which the dominant land is involved may create the requisite nexus. This is provided that the conduct of the trade is a necessary incident to the normal enjoyment of the land, not merely an independent business exercise.

Not benefiting the land, but the business does not amount to accommodating dominating tenement. Benefit was to the business, not dominant benefit. So distinguish MOODY case coz not benefiting! TEST of reasonably necessary for normal use and enjoyment of land! In CLOS case it was purely personal in nature.

Gallagher v Rainbow (1994) HCAFacts: new lots were created by subdivisions of the existing lots which were the recipients of the easements. Issue: the subdivision of the land which has the benefit of an easement raises the question whether the easement continues to benefit the individual lots into which the dominant land is later divided. Held:

- The easements accommodated the lots.- Majority relied on a presumption that an easement is appurtenant to the dominant tenement and each part of

it. Held that presumption was not rebutted, so that the easements would accommodate the new lots.

London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1994]

Facts: A sold land to B. A granted an easement to B over a protion of land, with the agreement that if B purchased more land and notified A, the easement would be extended to the extra land. B bought more land and sold to W who sought a declaration that the easement applied to the extra land. Issue: Did the easement apply?Held: The easement was too uncertain to apply.

- For an easement to come into existence, the dominant tenement had to be identified before the grant or the contract to grant the easement. It was an incident and not an easement.

(3) The dominant and servient tenements must not be owned and occupied by the same person - Person cannot acquire rights against himself or herself.- The rule requiring separate ownership and occupation of the dominant and servient land does not apply

unless both pieces of land are owned and occupied by the same person. - It is possible for e.g. that the tenant may acquire an easement over neighboring land owned by his or her

landlord, notwithstanding that the LL holds the fee simple estate in both pieces of land: Borman v Griffith [1930].

- Rule may have the effect of extinguishing an existing easement in the case where the dominant and servient tenements fall into the ownership and occupation of a single person.

- S88B(3) (c) (ii): an easement may be created by registration of a plan of subdivision in the office of the Registrar – General, even though at the time of registration both the land benefited and the land burdened are in the same ownership.

(5) The easement must be capable of forming the subject matter of a grant Re Ellenborough Park [1956]Issue: The 2nd and 4th conditions of easements are in issue i.e. (i) whether easement accommodates the dominant tenement i.e. whether there exists the required ‘connection’ b/w the one and the other (ii) whether the easement is capable of forming the subject matter of a grant. Held: Legal easement upheld.

- If rights constitute mere rights of recreation and amusement, possessing no quality of utility or benefit does not qualify as easement.

- (i) It is not sufficient to show that the right increased the value of the property conveyed, unless it is also shown that it was connected with the normal enjoyment of that property. A garden is connected to the use and enjoyment of a house to which it belongs. The park became a communal garden. That some houses were neighboring and not adjacent to the park does not negative the nexus b/w the subject matter and the premises.

- (ii) As to whether the right became part of the subject matter of the grant, the court held that the right was NOT too wide or vague in character as it is limited to a number of houses, that it is not inconsistent with ownership (of serveient owners) as no exclusive rights were given by the easement (i.e. do the rights amount to joint occupation or would substantially deprive the park owners of proprietorship or legal possession?), and that it is a right more than for mere recreation possessing quality of utility or benefit. Also as in Clos Farming Estates v Easton (2002): in relation to the 4th condition, it is necessary to assess the degree to which the rights conferred interfere with the servient owner’s exclusive possession of the site. The fact that the rights only touch part of the lot is insufficient to preclude the finding that the rights so vastly interfere with the servient owner’s rights, were they exercised, as to preclude them constituting an easement.

- So! An easement can be created for a communal garden with a limited number of houses.

Riley v Penttila [1974]Facts: A subdivision for recreation or garden or park land. Held: Enjoyment of a defined area for recreation not given to the public, but given to a limited number of lot holders is certain.Phipps v Pears [1965] QB Held: No easement to be protected from the weather (negative right).

- A negative right (e.g. not to cut down trees, so neighbour doesn’t pull down his house) can be enforced by a covenant in contract, and to their successors in title who have notice to it. Not binding on one who took w/o notice. But the law is wary of creating new negative rights.

- A right to wind and air, coming in an undefined channel is not a right known to the law: Webb v Bird (1862).

WEEK 11 (Class 2): Easements: Creation Types of easements:

- London & Blenheim Estates Ltd v Landbroke Retail Parks Ltd [1994]: the right to park cars.- Hedley v Roberts [1977]: a right to enter a neighbours land to use a toilet located there. - Beck v Auerbach (1986): the right to enter on land for the purposes of maintaining an external wall and

fixtures on the wall. In NSW such as easement is explicitly recognized by CA s181A, Sch 8, Pt 5. - Cable v Bryant [1908]: a right of access to air to a defined aperture. - Electricity Commission of Victoria and Joshua’s Contract [1940]: a right to cause a nuisance on the servient

tenement e.g. noise. - Pwllbach Collierty Co Ltd v Woodman [1915]: right to cause a nuisance by depositing noxious waster on

servient tenement. BUT, right to spread coal dust by wind too indefinite.- Dowty Bolton Paul Ltd v Wolverhampton Corporation (No 2) [1976]: a right to use an airfield for testing

aeroplanes.- Wilcox v Richardson (1997): the right to bring goods through the doorway of an adjacent shop. - Jones v Pritchard [1908]: the holder of the dominant tenement has ancillary rights to ensue enjoyment of the

easement, such as the right to repair pathways and pipes. Rights that have been held not to qualify as easements:

- Aldred’s CASE (1610): rights to a view or prospect.- Harris v DePinna (1885): rights to an undefined flow of air.- Miller v Jackson [1977]: the right to hit cricket balls onto neighbouring property.

- Re Ellenborough: principle that a right cannot amount to an easement if to confer on the owner of the dominant tenement the power to co-occupy part of the servient tenement. Illustrated in Copeland v Greenhalf [1952]: a claim to possession of the servient tenement, to the exclusion of the owner = no easement. Thus, an easement cannot amount to exclusive use!

Clos Farming Estates v Easton (2002) NSWCA - The restriction to the servient land = like exclusive possession therefore can’t be easement therefore no

rights of owner: rights illusory if give easement.- So the restriction should not be detrimental to the claim to easement.

Frater v Finlay (1968): held that the grantor of an easement can validly attach to his or her grant a condition that the grantee shall expend certain sums of money on the dominant tenement.

Rights of support - At common law, rights of support from one’s neighbour’s land are not easements, but are natural rights

issuing from the land: Dalton v Anhus (1881). - Rights to support a building, however, may be an express easement: Dalton v Anhus (1881).- S177CA: mutual easements of support. Can’t remove walls or bricks, party walls etc.

Party walls - Position in NSW is governed by statute so that where a wall is described as a party wall in transfer documents,

mutual cross-easements of support arise: CA NSW s181 B(1).

In NSW, the distinction b/w easements and covenants has been blurred by the CA s88BA(1), which permits the creation of a covenant requiring maintained or repair of the site of an easement or other land that is subject to the easement or both. The covenant may bind the person from time to time having either the benefit or burden of the easement. The covenant may be imposed by registration of the relevant instrument under the RPA or under the deeds registration system: s88BA (2). The instrument including the covenant must clearly indicate the land to be maintained

or repaired, the land to which the benefit of the covenant is appurtenant and the land which is subject to the burden of the covenant: s88BA(3). When registered it binds the land.

Creation of easements Express and implied grants

- An easement may be created, or granted by the holder of the fee simple estate in the servient tenement in favour of the person holding an estate in the dominant tenement.

- A person holding an estate less than fee simple in the servient tenement may create an easement for a duration less than or equal to the duration of his/her own estate. E.g. if have lease for life, can create an easement for life.

- Legislation may permit a person to create an easement extending beyond the duration of his/her lease.

Easements can be created in 4 ways:(i) Whether in the form of grants or reservations, they may be expressly created by the parties to a

transaction.(ii) By implication.(iii) Acquitted by ‘long user’ or prescription.(iv) By the court where reasonably necessary.

(i) Expressly created Express grant:

- Equity: Walsh v Londsdale (1882): If an easement is created by oral contract or by an informal document, preceded by a contract, equity regards the easement as enforceable, provided the agreement satisfies formalities requirements or is supported by sufficient acts of part performance: Talga Investments Pty Ltd v Tweed Canal Estates Pty Ltd [1974] and s54D CA.

- Torrens land: registration takes the place of the deed. Registration of easements make it indefeasible. So E created by transfer and registration. S88B (3) (c) (ii): provides that on registration of a plan indicating an easement, the easement vests in the owner of the benefited land. Recorded on folios of the register of the benefited and burdened land: s88B(3A) CA; RPA s47.

- McManus v Cooke (1887): equitable easement. The owner of the dominant tenement, relying on his neighbour’s oral agreement to grant an easement of light, put in a skylight. Held that the neighbour could not obstruct the access of light to the skylight.

- Easements can also arise by acquiescence: ER Ives Investments Ltd v High [1967]; or estoppel: Crabb v ARUN District Council [1976].

Express reservation: - An easement may be ‘reserved’, as where an owner transfers part of his/her land, but retains a right of way

over the land transferred land. - S45A: a reservation of a legal shall w/o any execution of the conveyance by the grantee of the legal estate out

of which the reservation is made, or any regrant, operate at law to create the legal estate reserve, and to vest it in possession in the person for whose benefit the reservation is made.

- Can also be created when vendor declares a use of the easement intended to be reserved. The use was executed by virtue of legislation in the following form: s45(1): pp 1005.

- Any reservation of an easement or profit a prendre must comply with the provisions of NSW s88, if it is to be enforceable against persons other than parties to the dealing.

(ii) Implication – implied grants1. the rule in Wheeldon v Burrows2. by general words3. by necessity4. by common intention5. by the manner of description of the property.

1. Continuous and apparent easements: the rule in Wheeldin v Burrows - ‘Quasi easements’: refers to rights which someone habitually exercises over his/her own land, but which in

another’s hands after a grant become easements.

4 conditions Wheeldin v Burrows: (apply when using easement)1. Severance of grantors land.2. At the time of severance, there is a continuous and apparent ‘quasi easement’.3. The quasi easement is necessary for the reasonable enjoyment of land.4. At the time of severance, the quasi easement was used by the grantor for the benefit of the land granted.

Wilcox v Richardson (1997) NSWCA (example of the operation of the rule in Wheeldon v Burrows) BUT apply when don’t have to use easement first! Look to intention: if access was to be given easement. Easements have to be reasonably necessary for enjoyment i.e. give business efficacy.

- Principle in Wheeldin v Burrows: the easements which will be passed on (implied) are those which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted.

- The rules reflects the principle ‘that a grantor shall not derogate from his grant’. - More liberal test: So, rights which are not necessary for the operation of a business may be necessary for its

reasonable operation and hence for the reasonable enjoyment of land leased for the business. I.e. such rights may be needed ‘to give business efficacy to the transaction as must have been intended at all events by both parties who are business men: The Moorcock (1889).

- ‘Necessary’ must not be taken in a rigid sense. Better phrase is ‘convenient and comfortable enjoyment of the property’. Thus the expression means needed or required for the reasonable enjoyment of the property granted.

Borman v Griffith [1930]: can built own staircase. But if couldn’t use your own, use theirs. Not just coz u enjoy it. Principle in Wheeldin v Burrows was applied to create an easement in favour of the lessee of a house over a drive which ran from the highway over the lessors’ land to the house. Principle: where 2 properties belonging to a single owner and about to be granted, are separated by a common road, or where a plainly visible road exists over the one for the apparent use of the other, and that road is necessary for the reasonable enjoyment of the property, a right to use the road will pass with the quasi-dominant tenement, unless by the terms of the contract that right is excluded.

(iii) Easements of necessity - Arises where an easement is necessary for the use of the land granted or retained.- Barry v Hasseldine [1952]: P’s predecessor in title purchased land which was surrounded by land either

retained by the vendor or owned by strangers. Held that the P was entitled to the easement by way of implied grant, since the easement was one of necessity.

- Bolton v Clutterbuck [1955]: easement of necessity will be implied only where the land cannot be used at all; such an easement will not be implied merely because it is ‘necessary to the reasonable enjoyment’ of the land. It was said that the vendor would be able to use the building by erecting a new wall and staircase.

- Titchmarsh v Royston Water Co Ltd (1899): a way of access of necessity was not implied despite the facts that the only access to the highway from the land purchased was by cutting 20 ft deep. It was held that the easement was not absolutely necessary, as the purchasers could construct a road through the cutting to the highway, albeit at considerable expense.

- Parish v Kelly (1980): more generous view, suggesting that ‘the existence of legal access does not necessarily exclude the implication of a way of necessity. The nature of the legal access is to be considered, in particular whether it is constructed, and if it is not, the problem and expense in constructing.

- North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971]: right of way by necessity only arises in order to give effect to the actual or presumed intention of the parties, and does not depend on any principle of public policy (but implied from circumstances) relating to landlocked land.

- Nickerson v Barraclough [1979]: whether an express term in a conveyance would negate the creation of an easement of necessity which would otherwise be implied in favour of the purchaser. No easement of way could be implied since the clear words of the conveyance negated such an easement.

- Abrahams v Flynn (1996): held that it was not strictly necessary for the enjoyment of the land for the easement to exist, in the sense that the land could not be used at all if it were not granted. Distinguished Auerbach v Beck (1985): where it was held that an easement to enter land for the purposes of repairing a wall had been impliedly granted.

(iv) Easements implied from common intention - Different to necessity (against will) v common intention of parties (willed).

(v) Easements implied from a description of the property - If grant of land described as ‘bounded by’ or ‘abutting on’ a road, the grantor is to be regarded as having

impliedly granted a right of way over the road: Mellow v Walmesley [1905]. - ‘Situated on the seashore’. But it was in fact separated from the shore by land owned by the vendor. The

purchaser was held to have an impliedly granted easement over the intervening land. This principle applies to the Torrens system: Dabbs v Seaman (1925).

Easements created by implication II – implied reservation Wheeldon v Burrows (1879) No express reservation in this case.

- If the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. BUT: exceptions! Ie general rule: easements cannot be impliedly reserved. But the grantor may rely upon an implied reservation in 2 exceptional cases: (i) easements of necessity; or (ii) common intention of the parties.

(iii) Acquisition by long user - The law provides means of legitimaising ‘rights’ which have been enjoyed de facto over long period.- One way of acquiring an easement by long user: in order to remedy the defects of common law prescription,

the courts developed the doctrine of lost modern grant i.e. the grant of an easement will be presumed irrebttably from 20 years user as of right (i.e. need to show that used for 20 yrs).. It is a substantive doctrine, independent of any inquiry as to whether an actual grant had been made. This doctrine applies in Aust: Delohery v Permanent Trustee Co of NSW (1904).

3 key features: (i) w/o force i.e. no physical violence.(ii) w/o secrecy Openly (iii) w/o permission express permission. Once someone gives you permission, than not a long term user! Doesn’t have to be continuous use, can be occasional. Periods acquired by different people can be added together.

WEEK 12 (Class 1): Easements – Torrens Jelbert v Davis [1968]

- Upon true construction of grant: ‘the right of way at all times and for all purposes’ the extent of the right when the land is changed from agricultural use to a caravan and camping site different kind of vehicle for different purposes that change is permissible as covered by grant.

- Excessive use is outside the grant of an easement. It is not a sole right, but ‘in common with all other persons having the like right’. It must not be used so as to interfere unreasonably with the use by those other persons, i.e. with their use of it as they do now, or as they may do lawfully in the future.

- So! no one who is entitled to the right of way must use it to an extent that goes beyond anything which was within the reasonable contemplation of the parties at the time of the grant this question turns on the facts and circumstances of the particular case.

S & M Ceramics Pty Ltd v Kin [1996]: issue is whether the easement included the right to park on the servient tenement for the purpose of loading and unloading good. Court held that it did not. When terms of the grant were being drafted, easy to include purpose of loading and unloading. Limited language of the grant which the parties employed. A right to park vehicles cannot be regarded as incidental to the express right to traverse. Butler v Muddle (1995): unless parking is a necessary part of an easement of passing and repassing, one does not normally conclude that parties intended to confer a right of parking in the grant of a right of way.

Prospect Country Council v Cross (1990): held there may be interference with the rights created by an easement even where there is no physical impediment to the exercise of those rights. In this case, council had a right to run electricity lines over defendant’s land. Court granted the council an injunction to remove structures from the defendants land as the risk imposed on the council’s by the potential danger to users of those structures was a substantial interference with the exercise of its rights under the easement. 2 remedies that a plaintiff can seek for interference with the enjoyment of an easement: (i) Bring an action fro nuisance: not trespass because an easement does not confer a right to possession : Paine & Co v St Neot’s Gas & Coke Co [1939]. The interference must be substantial: Petty v Parsons [1914]. Remedies may include legal damages, an injunction, or equitable damages. Issue for court will be whether the acts constitute an actionable interference with the plaintiff’s rights. (ii) The owner of an easement which is interfered with may exercise the self help remedy of abatement: Davis v Williams (1851). E.g. physically remove the construction. Use no more force than is reasonably necessary.

Extinguishment of easements 1. Easement may be abandoned2. Express release3. Alteration to the dominant tenement so extensive as to constitute excessive use. 4. Upon the unity of dominant and servient tenement.5. Statutory extinguishment.

(1) Abandonment - Test is twofold : (i) Owner must have ceased to use the easement and (ii) he/she must have positively

intended to abandon the easement.- S49 (2): non-use of the easement for a period of at lease 20 years constitutes a basis for the RG treating the

easement as having been abandoned.

Treweeke v 36 Wolseley Road Pty Ltd (1972-73) HCA Appellant argued that right of way had been abandoned (by dominant owner) as it had not been used for 40 years. Held: no abandonment

- It was impossible to use the right of way as there were fences. - Acquiescence on the part of the absolute owner of the dominant tenement is necessary to give effect to any

act of abandonment. In this case, no intention to abandon easement.- A right will not be extinguished by non-user alone. The duration of the period of non-user is only relevant as

one element from which the dominant owner’s intention to retain or abandon his easement may be inferred; and what period may be sufficient in any particularly case must depend on the strength of the other indications of intention and all other accompanying circumstances. If period of suspension of user is very long, suspension alone may raise a prima facie presumption of abandonment.

- Not reasonable to attribute non-user to renunciation of such a pleasant amenity (i.e. path to beach). - Evidence that the respondents agent informed them about easement when purchasing.

** An easement cannot be abandoned by a dominant tenement owner who does not know that the easement exists: Obadia v Morris (1974).

(2) Express release - The dominant owner may expressly release the servient owner from the easement. If the servient owner, in

reliance on an informal release by the dominant owner, acts to his/her prejudice; equity will hold the informal release to be effective: Waterlow v Bacon (1866).

- The Torrens legislation provides a means of removing easements from the certificate of title where they have been expressly release: RPA s47 (6), (6A).

- No precise period of non-user which will result in the extinguishment of an easement. But in NSW, non-user for a sufficient period (20 years) may constitute sufficient proof that the easement has been abandoned.

- Although the written consent of the owners of the dominant and servient land is normally required, it can be dispensed with in certain circumstances: s90 B (3)-(4).

(3) Alteration to the dominant tenement (i.e. person who has right to easement) - If the dominant tenement comes to assume a very different character, the easement may come to an end.

E.g. excessive use of an easement may lead to its extinguishment: Jelbert v Davis.

(4) Unity of dominant and servient tenement - One requirement of an easement is that the dominant and servient tenements must not be both owned and

occupied by the same person. - So, if one person acquires the fee simple estate in both the dominant and servient tenement, and is in

possession of both tenements, the easement is normally extinguished at common law. - Exception Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984]: the burdened and benefited land came into the

hands of a single owner bur the easement was the only means of access from the benefited land. The easement was held to continue in existence. ‘Unity in ownership or possession does not cause to disappear a right of way (or other easement) where that way or other easement is necessary to the use of the land which previously had the benefit of that easement’.

- Suspension of easements If one person acquires the fee simple estate in one tenement and a particular estate in the other, the easement is merely suspended during the period of unity of title. If there is only one unity of possession, but not unity of title, again the easement is merely suspended during the period of unity of possession and will revive upon that unity of possession terminating.

(5) Statutory extinguishment By s 89(1) of the CA, the SC is given power to modify or wholly or partially extinguish an easement. These provisions apply to Torrens system land by court order.

EASEMENTS AND THE TORRENS SYSTEM refer notes If have an unregistered easement, BUT then a new person purchasers property right to easement is lost.

- Easements over land under the Torrens leg may be expressly granted by registration of an instrument and expressly reserved in an instrument of transfer by which the land is transferred.

- Section 42 of the RPA: registration of easements on the CT of either dominant or servient tenement, or both. On registration, the easement will be indefeasible.

- If easements are not registered on CT of servient tenement question whether indefeasibility principle operates to defeat it.

- Easements that should have been created expressly may be created by implication only: Dabbs v Seaman (1925).

- 3 issues in relation to unregistered easements under Torrens system examined below. (i) does the easement in question (express, implied or prescriptive) come within one of the statutory exceptions to indefeasibility? (ii) if easement NOT within statutory exception, is it enforceable against the registered proprietor, or other unregistered interest holders? (iii) is the easement of a kind that, though not registered, is capable of taking advantage of a description of the land on the register: Dabbs v Seaman (1925).

Partial exemption to indefeasibility in favour of ‘omitted and misdesribed easements’ s42: Exceptions to indefeasibility e.g. easements that have been ‘omitted or misdescribed’.

- Exception in favour of ‘omitted and misdirected’ easements: James v Registrar General [1968]: NSWCA held that an easement which had been registered on the COT of the servient tenement, but mistakenly omitted when a new certificate was issued, came within the exception.

- Papadopoulos v Goodwin [1983]: the failure of the RG to record an easement created in a transfer of land lodged for registration, on the COT of the servient land (whether it was an existing title, or a new title issued at the time of the transaction), was an omission coming within the provision.

- Australian Hi-Fi Publications Pty Ltd v Gehl [1979]: Since there had been no failure on the part of the RG or his staff to record something which should have been recorded, the implied easement did not come within the ‘omitted or misdescribed’ provision.

- So, appears that in NSW, easements arising over Torrens system land could only bind the servient tenement if they had been created by registration of an instrument, but subsequently omitted from the register as the result of a mistake by the Registrar.

Dobbie v Davidson (1991) NSWCA (Meaning of the ‘omitted and misdescribed’ exception reconsidered). - ‘Omission’ = ‘left out’ or ‘not there’ This interpretation allows no contest that the appellants took their land

subject to the first respondent’s right of way.- This interpretation does not impute fault not praise for the omission. - Preferable approach to the construction of the RG’s obligations is to regard the applicant who wishes to bring

land under the Act as having the burden of making out title, so that the RG’s obligations is to examine the title so adduced. An applicant who then omits (whether intentionally or unintentionally) the disclosure of a right of way or other easement should be taken to do so at peril to the applicant’s title (and the title of successors) is subject to the right of way or other easement which is not extinguished by the mere issue of the COT omitting it.

- Such rights would be protected by the law, subject to proof of abandonment or the intervention of the rights of 3rd parties purchasing w/o notice upon the faith of the register.

In NSW the exception in relation to omitted or misdescribed easements is now narrower as the result of s42(1) (a1) inserted by Property Legislation Amendment (Easements) Act 1995, which now limits it to: ‘the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or an other Act or a Commonwealth Act’. There are 2 parts to the provision:

(i) All easements in existence at the time the land was brought under the Torrens system this preserved the ruling in Beck v Auerbach (1986) which held that the exception for omitted and misdescribed easements then contained in the RPA s42(b) covered easements in existence before the land was brought under the Torrens system and omitted from or misdescribed in the register. Implied easements, easements of necessity, and easements that arise by prescription existing immediately prior to the land being brought under the Torrens system will bind the registered proprietor, even if no fault can be established on the part of the RG: Dobbie v Davidson (1991).

(ii) Easements created at a time when the land was already under the Torrens system much more restrictive in scope. ‘Validly created’ refer to instruments which are executed, and registered, in accordance with s46. (so! refers to instruments. Doesn’t concern situation where formal requirements have not been complied with. e.g. where not registered properly. Only refers to those registered properly than omitted). Only express easements registered and subsequently omitted from or misdescribed on the register will be enforceable against a registered proprietor by force of this provision. No scope for implied easements, or prescriptive easements, to come within this paragraph they can never be ‘validly created’ and can therefore never bind RP’s who take w/o fraud. James v RG (1967) seems to be persevered (i.e. held that a registered easement over Torrens system land which was accidentally omitted when a new certificate of title was issued, was enforceable against a person who subsequently became a RP).

The indefeasibility principle does not prevent the RP of Torrens system land from having the benefit of an easement over general law land, even thought that benefit is not noted on the RP’s certificate of title: Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984].

Enforceability of easements that do not come within the statutory exception Distinction b/w unregistered express easements and unregistered implied easements and prescriptive easements.

(i) Unregistered express easements - Express easements, whether created by document or equitable doctrine of Walsh v Lonsdale or by, if they

remain unregistered they will be vulnerable to the registration of a subsequent proprietor w/o fraud. - If protected by a caveat they will prevent the registration of inconsistent interests; and they will take priority

over earlier or later equitable interests in accordance with general equitable principles. - The unregistered status of an easement will not prevent its enforcement of an easement against a RP on an in

personam basis: Bahr v Nicolay (No 2) (1988). - So, an easement may be enforceable as an in personam right where the purchaser of the servient tenement

acquired the property on the understanding that he/she will take subject to an easement crated by agreement b/w the vendor and a 3rd party: Goff v Albury Sailors, Soldiers and Airmes’s Club Ltd (1996).

(ii) Unregistered implied easements and prescriptive easements - Implied easements under the rule in Wheeldon v Burrows (1879), while not exceptions to indefeasibility

because of the restrictiveness of s42 (1) (a1), may still operate as b/w the parties to the transaction on an in personam basis.

- A Wheeldon v Burrows easement can arise on the severance of land held under Torrens title in a way that is binding upon the RP of the servient tenement at the time of severance.

- Such an interest would not be binding on a subsequent RP who would take an indefeasible title: Gehl. - While binding upon the earlier RP, grantee would be able to perfect the unregistered interests by bringing an

action for equitable relief that would require the registered proportion of the servient tenement to allow registration formalize in personam right: Dewhirst; Williams v STA.

- Wilcox v Richardson (1997): held that easements under the rule in Wheeldon v Burrows could exist under the Torrens system so as to bind the parties to the transaction. In determining whether possible to acquire easement over Torrens by long user, provision in Torrens restricting acquisition by adverse possession relevant (s45C).

- Golding v Tanner (1991): RP who had purchased property after user period had commenced, would not take subject to it. Where the same person was the RP throughout the period of use, this could give rise to a right in personam against that person, who could then be called upon to execute and lodge for registration a document creating the easement.

State Transit Authority v Australian Jockey Club [2003] NSWCA (prescribed easement). Facts: STA resumed a small parcel of land on the edge of Randwick Racecourse. STA sought order that 4 caveats on title to the land by AJC be removed so it could complete sale of the land to Anson. AJC argued that it used the Busway for purpose of access to and from the racecourse, claiming a serried of rights over the Busway or against the STA personally, including a claim that AJC had acquired an easement over the Busway for access to the Racecourse land by prescription. Held: Once you change RP loose easement. But if long user can assert right of easement.The law is unclear in this area. It is not evident whether in personam rights would be allowed more inclined that it wouldn’t be.

- Golding v Tanner: doctrine of lost modern grant was not inconsistent with the terms of the RPA unless there had been a change in the RP of the servient land during the period of adverse user.

- difficulty for AJC is to establish that prescriptive easements over Torrens land can exist in NSW.- easements by prescription are not upheld in NSW over Torrens land: Golding v Tanner. What needs to be

excluded is an in personam action to perfect a lost modern grant by an action in equity to compel a registered transfer.

- S 42(1)(a)(i): the only exception to indefeasibility wrt easements was those subsisting immediality before the land was brought under the Act or validly created after that time under the RPA or a Cwlth Act.

- The right to an easement by long user must carry with it an obligation on owner of servient land at beginning of requisite period of user to do what is necessary to give efficacy to the grant or right: Golding v Tanner orthodox reasoning.

- Easement which flows from a lost modern grant may be enforced in an in personam action (despite land being Torrens), where there has been no change in RP during the period.

- So, need to look for a personal equity or perhaps a right at law which can be asserted in an action, the result of which will be to compel the RP to grant an easement in proper form.

- Regarding easement for sewerage ordered caveats be lodged to protect right of way removed.

WEEK 12 (Class 2): Mortgages – nature McGrath v Cambell [2006] unregistered implied easements

- When land sold simultaneously and easement continuous and apparent. - S42 A (a1): need to be validly created easement; coz wasn’t registered thus doesn’t fall under exception. - If no change in servient tenement, can argue in personam exception. But, in this case, change of both owners

(both sold land) therefore no exception to indefeasibility – no conduct with servient tenement to create equity therefore no creation of implied easement. (not contributed to creation of implied easement).

- If you take knowing of implied easement, and servient and dominant tenement know coz its continuous and apparent that itself is not enough to create an in personam exception (strict approach).

- So! Mere knowledge of easement not enough. Thus title still indefeasible. - Conduct was not unconscionable e.g. didn’t say ‘you can have easement’.

- Grantee of the bill of sale (mortgagee); grantor (mortgagor) - Mortgage = legal interest in the form of a charge. - Mortgagor –the person who borrows money; mortgagee, the person who lends money- Where money has been advanced on agreement: equitable mortgage. E.g. deposit of title deeds, so in trying

to create a legal mortgage. Right to Redeem(i) Legal right to redeem: contractual right to redeem on the precise day fixed by the mortgage. (ii) Equitable right to redeem: right conferred by equity at any time after the stipulated day exercisable only on terms considered proper by equity since he who seeks equity must do equity.

Equity of Redemption (vested in the mortgagor) = Difference b/w the market value of the property and the amount outstanding under the loan: Bannerman Brydone Foster & Co v Murray [1972] i.e. the value of the mortgaged property – the amount of debt.

- Equitable right to redeem does not arise until the contractual date for redemption has passed, whereas the equity of redemption arises as soon as the mortgage is made.

- Since it is an equitable interest in land the mortgagor could enforce it against any one save a bona fide purchaser for value without notice.

- The equitable right to redeem is a particular right (an equity), whereas the equity of redemption is an equitable interest in the land consisting of the sum total of the mortgagors rights in the property.

- Thus the equity of redemption includes the equitable right to redeem and is an interest in the land which the mortgagor can convey, devise, settle, lease or mortgage, just like any other interest in land.

- Mortgagee @ law is the owner but in equity a mere encumbrancer.

The Torrens system mortgage - A Mortgage, when registered, takes effect as a security but does not operate as a transfer of the land

mortgaged or encumbered: s57(1).- A registered mortgagee is a registered proprietor of an interest in land for the purposes of the Torrens

legislation: Zafiropoulos v Recchi (1978).- Forsyth v Blundell (1973): in resolving the priority of the competing interests of the mortgagor and a

purchaser under a contract of sale made with the mortgagee as vendor, it was relevant to note that the mortgagor had the legal fee simple at all times and the purchaser only an equitable fee simple.

- Vukicevic v Alliance Acceptance (1987) NSW CA: Profit a prendre does NOT affect your interest as a mortgagee, but when give leases, may need to notify the mortgagee (may say ‘need consent of owner’). (A profit a prendre was granted over land which already was covered by a registered mortgage) whether a profit a prendre over land under RPA would take priority over the mortgagee's rights where the mortgage was registered before the p.a.p. Postponement of the priority of interests will occur where there has been fraud or breach of in personam obligations. It was held “the security given by the Act to the mortgagee is intended

to be a security over the whole of the mortgagers rights as registered proprietor as they appear on the register at the time of execution”. So the profit a prendre did not take priority over the registered mortgage.

The General principles relating to the creation of equitable mortgages apply to Torrens System Land: - An equitable mortgage may be created by a specifically enforceable agreement to grant a mortgage and an

unregistered mortgage creates an equitable mortgage before registration: Barry v Heider (1914). J & H Just (Holdings) v Bank of NSW an equitable mortgagee of Torrens system land may protect the interest by lodging a caveat.

- A mortgage by deposit of the certificate of title creates an equitable mortgage in Torrens system land. - A mortgagor of Torrens system land remains registered proprietor of the legal estate even after registration

of the mortgage, the latter operating by way of statutory charge: English, Scottish and Australia Bank v Phillips (1937)

- A second or subsequent mortgage, when registered, also operates to give the mortgagee a legal interest by statutory charge.

- Priority between registered mortgages will be determined according to the date of registration, subject to any special doctrines applicable to Torrens system mortgages: RPA s36 (9). When both unregistered Rice v Rice.

o Provision for variation in order of priority between registered mortgages by registration of a document in prescribed form: s56A.

o These provisions don’t undermine principles in Mercantile (below), because those principles are based on notions of equity and good conscience.

o Pp 1091: how money is to applied where the mortgagee exercises power of sale: s 58 (3): 1. In payment of expenses of selling land, 2. Mortgagees/encumbrancees, 3. Mortgagor/encumbrancer.

o RPA s 56A: allows the priority of mortgages to be changed according to memorandum.

TACKING and priorities b/w mortgagees Mercantile Credits v Australia and New Zealand Banking Group (1988) Registered mortgages. Mortgagee 1 creates legal mortgage with A. Mortgagee 2 creates equitable mortgage with A. Can Mortgagee 1 'tack' an additional advance, made after the creation of the second mortgage, to the legal mortgage? (The advantage of this would be to secure Mortgagee 1's priority of payment if A defaults)

General law: if Mortgagee 1 has no notice of the subsequent mortgage, the advance can be 'tacked' onto M1, thereby securing priority of Mortgagee 1's original loan AND the advance over that of Mortgagee 2's loan. If Mortgagee 1 has notice of M2, then Mortgagee 1's priority is limited to the amount at which the mortgage stood on the date of notice: Hopkinson v Rolt (Rule of equity based on considerations of fairness and justice.)Torrens System land: same rule applies to TS land as applies to common law land. In this case, Mortgagee 1 had notice of M2 and so could not 'tack' an advance onto M1. Thus, priority of payment

was M1, M2, M1(advance). S56: substitutes the ordinary rule that instruments have priority according to date, a rule that they are to have

priority according to date of registration. This section would operate to determine which of 2 registered instruments of mortgage is the prior instrument but it could not determine the amount for which the priority is effective.

The mortgagee’s interest in the land is a charge giving him security for the mortgagor’s indebtness. - Central Mortgage Registry of Australia v Donemore [1984] held that actual notice was required before

the mortgagee could be prevented from tacking further advances.- Lodgment of a caveat after registration of the first mortgage did not constitute constructive notice of the

later unregistered mortgage to the registered mortgagee, as the caveat's purpose is security. NB obiter dicta from High Court in Sibbles v Highfern (1987) stating that the notice could be ACTUAL OR

CONSTRUCTIVE.- Where the mortgage imposes a duty to make advances, the mortgagee has a measure of protection.

Knowledge of the later mortgage relieves the mortgagee of the duty to make further advances: West v Williams [1899].

Exception to tacking Matzner v Clyde Securities [1975]: Facts: The first registered mortgagee of land under RPA consented to a 2nd and 3rd mortgage. After the date of the 3rd mortgage, the 1st mortgagee made further advances under the mortgage and upon default of the mortgagor, expended money in the completion of the building. Issue: What is the prirotiy of the advances made? Held:

- No grounds for denying to the mortgagee first priority for advances made. Mortgagee 1 could have first priority for all advances made up to the total amount of the principle sum, or the amount required to complete the buildings, whichever less.

- Advances made after notice of the subsequent mortgages were not designed or liable to diminish the value of the security given to the subsequent mortgagees

- Completion of the building puts the mortgaged property into a saleable condition and serves the interest of all parties.

- If buildings incomplete, then the security is incomplete (in the interest of all parties to finish them). The advances made the value of the security higher, thus making the security of the later mortgages better. Reasons rest on notions of equity and fair dealing between the parties.

- So! if improvement has increased the value of the property, that’s OK, not unjust to tack on! (But, has to be bigger than amount you paid for).

Consistent with Mercantile. o Chase Corp v North Sydney Brick and Tile (1994) NSW: the right to tack is only available to the mortgagee

who holds a legal (or registered) interest. So! equitable mortgages do NOT have a right to tack on. o Rules against tacking are equitable and are founded on notions of fairness and good conscience. Thus, there

is no recourse (for mortgagee) to the principle of indefeasibility in attempting to gain supremacy through an 'all moneys' covenant in the mortgage.

o Just as equitable principles may bind the mortgagee, they bind the conscience of the mortgagor. E.g. Rule in Otter v Lord Vaux (1856): rule prohibits a mortgagor from setting up an encumbrance that he/she has acquired against the rights of the mortgagee. A purchaser from a mortgage exercising the power of sale will take free of later ranking mortgages, their rights being confined to the purchase moneys. Applies to Torrens system land. Rationale for the rule Sussman v AGC (Advances) (1991): the mortgagor cannot set up an encumbrance owned by the mortgagor against the rights of the mortgagee: pp 1093.

Covenants in mortgages- Must specify the essential terms of the agreement: amount of loan, rate of interest, date of repayment as well as

provide a legal framework for the preservation of the mortgagee's security.- Mortgagor of Torrens title land: mortgagor retains the status as RP of fee simple, so entitled to remain in

possession during the term of the mortgage. Mortgagee must rely on specific statutory provisions for power of sale. As the mortgagee does not have possession of property, the mortgagee must rely on the mortgagor to maintain and repair it and to take those steps necessary to preserve its value. Thus, a typical mortgage will include covenants obliging the mortgagor to repair, maintain, and insure the property and to pay the mortgagee’s costs in relation to the mortgage as well as all rates and taxes. May forbid mortgagor to lease or grant further mortgages without consent of mortgagee

- The covenants may be contained in the mortgage itself or may be implied by statute. - NSW Conveyancing Act s 81: the use of certain short forms of words implies covenants set out at length in the

schedule. - S75: Certain covenants are implied in Torrens system mortgages.- S 80: where the mortgage is made by deed or registered mortgage, covenants to keep the premises in repair and

to permit the mortgagee to enter and view are implied (whether mortgage under Common law or Torrens). - See also s78 (1) (c): ‘that the mortgagor conveys as beneficial owner’ implies certain covenants for title in the

general law mortgage. - Legislation implies certain powers in the mortgagee where the mortgage is made by deed including the power to

sell in the event of default and to appoint a receiver of the income of the mortgaged property after the mortgage moneys fall due.

WEEK 13 (Class 1): Mortgages - Clogs Equitable doctrines protecting the mortgagor Clogs on the equity of redemption- Equity has developed ways to protect the right of the mortgagor to redeem the land once the loan was repaid. - Can’t override TPA. - Collateral advantage and postponement. Rules designed to prevent clogging of the equity of redemption

(a) Provisions directed to the total extinguishment f the right to redeem; Fairclough v Swan Brewery Co [1912]. (b) Provisions directed to its limitation, in terms of time, either by restriction to a period or postponement;(c) Provisions directed to making the right dependent upon conditions; and(d) Provisions involving covenants affecting the future of the property both before and after redemption.

Knightsbridge Estates Trust Ltd v Byrne [1939] CHFacts: Respondents mortgaged estate to appellants. The land was to be paid back over a period of 40 yrs.Respondents issued writ claiming entitlement to redemption based on argument that the right to redeem after 40 yrs was a clog because it was unnecessarily long. Held: - Length of time for the contractual right to redeem, does not have to be reasonable. So in this case, nothing

unreasonable in the mere extension of the period of 40 years (mortgage term). - Any provision that hampers redemption after contractual date for redemption has passed will not be permitted. - Where the contractual right of redemption is illusory (thus invalid), equity will grant relief by allowing

redemption. E.g., if lease for 15 yrs and want to pay back in 10, allowed to do this. - Equity does not reform mortgage transactions because they are unreasonable. Concerned with 2 things: (i) that

the essential requirements of a mortgage transaction are observed, and (ii) oppressive or unconscionable terms are not enforced (if they are, equity provides relief).

- So! Time period alone is insufficient to get back equity of redemption. So whether a clog, look for: oppressive, unconscionable conduct; illusory? If not, right of redemption is real and valid!

- Following this decision, it is clear that postponement of the right to redeem for a long period is not of itself invalid as a clog or otherwise and it is not true that the postponement of the right of redemption is permissible only where there is a comparable postponement of the mortgagee’s right to demand payment of the mortgage moneys.

Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] HL (collateral advantage)Facts: Appellants had a lot of sheep skin. Respondent advanced money to them charging their property as a floating security. Respondent’s claim that by paying off the loan, option of the appellants to buy the respondents sheepskin, has been put to an end. The stipulation restricted their freedom and was a clog on their right of redemption. Held: - Q: has the right to redeem been interfered with (because of inserting an ordinary commercial contract for the sale

of skins extending over a period, into the formal instrument signed when the money was borrowed)? Is collateral advantage part of agreement?

- Need to ask: whether, in substance (as opposed to form), there was a single and undivided contract, or two. - Intention of parties was that the grant of security should not affect the power to enter into the commercial

contract for sheepskin, either with strangers, or with the appellants, thus equity of redemption NOT affected! - There is no rule in equity which prevents a mortgagee, (whether loan or otherwise) from creating a collateral

advantage (or seeks to purchase a mortgage property) , provided that the collateral advantage is not either (unfair and unconscionable, OR (2) in the nature of a penalty clogging the equity of redemption, OR (3) inconsistent with or repugnant to the contractual and equitable right to redeem = 3 grounds upon which courts of Equity would hold stipulations for collateral advantages invalid.

- Even though all in one document- it was 2 separate ones no collateral benefit, no collateral benefit, no unfairness/no unconscionability, therefore, right to redeem NOT clogged. Bargain must stand!

Bradley c Carritt [1903]: The covenant in this case was a personal one, affecting only the mortgagee in a personal capacity and not burdening or fettering the ownership of the shares. In Kreglinger, the covenant

affected the mortgaged property itself. So in order to reconcile these 2 cases, necessary to apply test that if the collateral advantage were the subject of a separate transaction (even if contained in the same document) from the mortgage transaction, then the clogging principle did not apply to invalidate the covenant containing the collateral advantage.

Citylands and Property (Holdings) Ltd v Dabrah [1968]Facts: P buys house from V paying part of it and borrowing the rest on mortgage. The premium to be repaid was an annual rate of 19%. Market rate was 7%. P defaults and V claims repayment of all moneys. Held: The size of the premium and the fact that both premium and loan became payable on default in the payment of installments, made the collateral advantage represented by the premium unreasonable.

Multiservice Bookbinding Ltd v Maren [1979] Facts: Plaintiff Company executed mortgage and stipulated that the amount to be paid was to be linked to the rise and fall of the Swiss frank. Held: - Mere unreasonableness does not make a term of the mortgage unfair or unconscionable. A bargain is not

unreasonable or oppressive unless one of the parties had imposed the objectionable term in a morally reprehensible manner i.e. in a way which affects his conscience. So! Swiss frank NOT invalid. Not VOID unless oppressive, unconscionable conduct/terms. Just coz something is unreasonable, in it, is insufficient.

- In this case, the parties had agreed, being fully aware of the terms. Defendant acted fairly. Thus, the whole of the provisions of the mortgage were valid and enforceable.

** While a mortgagor of Torrens system land has a legal estate in the land and not an equity of redemption, the rules prohibiting the clogging of the equity apply to Torrens system mortgages.

Charmelyn Enterprises Pty Ltd v Klonis (1981)Facts: Respondent bought a house from the appellants where the sum paid was provided by 2 mortgages. The 1 st

mortgage provided that repayment be based on the CPI. Respondent claims this was a clog on the equity of redemption and thus void (rejected). Held: - The provision is a collateral advantage meant to protect mortgagee from the effects of inflation.- A collateral advantage may be stipulated for and the right to redeem on payment only of principal, interest and

costs no longer existed. - Terms of the mortgage not unconscionabile. The parties were represented by solicitors and are assumed to have

received proper advice. - Stanwell Park Hotel Co Ltd v Leslie: no principle preventing parties adopting a fixed figure as the primary

monetary expression of a liability. Unfairness and unconscionability must be judged at the date of the mortgage and not retrospectively.

Westfield Holdings Ltd Australian Capital Television Pty Ltd (1992) Issue: whether options granted over certain parcels of land, were void as being contained in the same transactions as mortgages over the same land.Held: - Critical of the rule preventing a mortgagee from acquiring an option to buy the mortgaged property.- The vitiating rule only applied where the mortgagee obtains a collateral advantage which, in all the

circumstances, is either unfair or unconscionable. The court may presume mere fact of collateral advantage that transaction is unconscionable unless there is evidence to the contrary. The principle does not extend to invalidate automatically cases in which the mortgagee has obtained the right to purchase the whole or part of the mortgaged property in certain circumstances or has obtained a collateral advantage where there is unfair or unconscionable conduct.

Samuel v Jarrah Timber and Wood Paving Corp Ltd [1904]: the 1st question to ask is, what is the true nature of the agreement? Is it a mortgage with an option to purchase, or is it a conditional sale? If it is a mortgage with an option to

purchase, if exercised by the mortgagee, it would out an end to the mortgagor’s right to redeem i.e. would prevent him from getting back his mortgaged property.

Baker v Biddle (1923) HCAFacts: Defendant mortgaged her hotel to the P and gave P the right to purchase the hotel. After P repaid, P asked the D to transfer the land to him. Held: HC refused to grant P specific performance. - Held that the right to buy subsisted whilst the debt remained. - Once loan repaid, no more option to repurchase! - Not clear whether invalid in every case! Need to look at the circumstances! I.e. (i) oppressive conduct? (ii) arms

length dealing? (iii) went into transaction with eyes open? Matter of construction

o Re Modular Design Group Pty Ltd (1994): equity will intervene where the assignment involves no consent on the mortgagor’s part. Consent should require the clearest of language and not just ‘all obligations’ clause. ‘All obligations’ clause is to impede the mortgagor in exercising its equity of redemption and thus to constitute a clog. It is also unfair or unconscionable for the assignee, as mortgagee, thereby to obtain such a collateral advantage.

o Lile v Reeve: If mortgage and option are granted in separate transactions in substance, the vitiating rule will NOT apply.

Willy v Endeavour Health Care Services Pty Ltd and Ors [2003] NSWCAThis case demonstrates how the principle of unconscionability remains a consideration for courts in determining whether or not a covenant represents a clog.Facts: E entered into a secured loan with M, with an option to purchase. So! took loan with option to purchase. Argued that the option was a collateral advantage which is a clog on the equity of redemption and therefore unenforceable. Issue: Was the loan an option or a mortgage, and was the agreement unconscionable? Held: for respondents. Held: - The parties intended to enter into an option purchase, and the secured loan was only ancillary to that. Thus no

clog on equity of redemption. So the court enquired into the real (true) nature of the transaction, not merely its nominal form look at substance of transaction.

- Agreement was not unconscionable as the contestable terms came from M’s side and no attempt was made to discover whether the purchase price was undervalued. M were astute business men and understood the deal.

Devlin v Surfers Paradise Investments Pty Ltd [1998]: Facts: D held one of two shares in a company, and borrowed some money from SPI with D’s shares in the company as security. Also, as par of the agreement, D gave SPII his voting rights. Before the loan was repaid, SPI bought the other share in the company, appointed 2 new directors who issued and allotted SPI with 5000 shares in the company.Held: The acquisition of the shares was a clog on the equity of redemption and was unenforceable – D entitled to redeem his share in the capital of the company freed from effect of 5000 new shares.

Epic Feast Ltd v Mawson KLM Holdings Pty Ltd Facts: E borrowed money from KLM, giving KLM a mortgage over its land. On the same day, but in a different document, E gave KLM an option to purchase the land, exercisable before due date for the redemption of the loan. Agreed purchase prices is the amount needed to repay the loan. Held:- The interest rate was found to be usurious (65%). Option would very likely amount to a clog. Note: no final

conclusion on this point as it was raised very late in the proceedings. - Just because in different document, may still be unconscionable.

Penal Provisions in mortgages - Cannot have penal provision inequitable.

- A provision in the mortgage requiring the mortgagor, in the event of a default, to repay a sum greater than the loan, or interest at a higher rate than that specified in the document, may be invalid, as equity regards the clause as a penalty.

- If default (under mortgage) can’t make loan bigger (coz penalty!). BUT, can increase interest rate (coz you view at as no longer a secure risk).

Wanner v Caruana [1974]Facts: principle and interest repaid monthly. Mortgage provided that in the event that any monthly installment in default for 14 days, the whole balance and interest would be due immediately. Held: Held that accelerated liability to pay both principal and interest w/o a discount to the present value for early repayment, was not a genuine pre-estimate of the mortgagee’s loss and was therefore penal. Exceptions: - Provision for the payment of compound interest is not per se void as a penalty: Belmore Pty Ltd AGC. - Penalty rules do NOT apply in the case of a genuine indulgence by a creditor to allow a debtor to pay a presently

owing debt by instalments on condition that payments are regularly and punctually made in default of which the entire debt becomes due and payable: Protector Endowment Loan and Annuity Co v Grice (1880).

Restrictive trade practices and misleading or deceptive conduct – The Trade Practices Act 1974 (Cth)Some of the law relating to clogs has been superseded by the TPA. In particular, Pt IV- Restrictive trade practices and Pt V – consumer protection.

Commonwealth Bank of Australia v Mehta (1991) Facts: M sues CBA for losses arising from an off-shore loan, relying upon breach of 252 TPA.Issue: Once CBA started to explain the intricacies of offshore borrowings, did it have a duty to make the explanation full and complete? So, was the conduct of CBA misleading or deceptive or likely to mislead or deceive? Held:- A duty to speak was imposed under s52 (misleading and deceptive conduct), to an extent that was ‘adequate in all

the circumstances’.- Silence is not misleading only where there is a duty to disclose at common law or in equity. - However, facts did not show that M relied on the explanation as a full exposition and therefore failed.

o Powell J held that expressions of opinion cannot be misleading for the purposes of infringement of s52 unless it can be shown that the persons uttering the opinion did not themselves hold the opinion or that there was NO reasonable basis to support such an opinion: MCP Muswellbrook Pty Ltd v Detsche Bank (Asia) Ag (1998).

The scope of s52 was extended by the enactment of s51A of the TPA: pp 1119. Undue influence and procedural and substantive unconscionability - ss 51AA and 51AB were added to the TPA to stop undue influence in mortgage contracts. - A corporation must not, in trade or commerce, engage in conduct that is unconscionable according to the written

law of a state or territory: s51AA and shall not in connection with the supply of goods or services, engage in conduct that is unconscionable: s51AB.

- There is doubt about the extent of protection offered to guarantors and sureties under s51AB, given that relief is only available in respect of loans for the provision of services of a personal, domestic or household kind: s51AB(5). Thus, guarantors of business loans are denied the benefits of s51AB even though the guarantor might have provided the surety as a result of personal ties and affection for the debtor: Begbie v State of NSW (1994).

- S51AC: affords greater protection to small business sector in their dealings with large corporations.

WEEK 13 (Class 2): Mortgages – Remedies of mortgagee Power of sale The right to sue on the personal covenants in the mortgage Foreclosure Right to possession

In exercising these rights the mortgagee is subject to a range of duties to ensure fairness to the mortgagor. Power of Sale If no express clause for power of sale, rises by implication. RPA s 57(1): provides that the mortgage takes effect as a statutory chargeRPA s 57(2): s 58 may be exercised so long as there has been a default and there has been a notice served on the m'orRPA s 57(3): says what constitutes a notice for the purposes of s 57(2) (written notice)

- requires the m'or to observe the required payments- state that unless the requirements of the notice are met within one month, the power of sale will be exercised.

S 58(1): mortgagee has power of sale so long as s 57 has been metS 58(2): provides protection to purchasers buying from m'eeS 58A: parties may agree to dispense with notice requirementsS 59: requires RG to register the transfer of sale of the fee simple to the m'ee

- Effect is to convey the fee simple estate to the purchaser free of the mortgagor’s right of redemption. - If the sale does not satisfy the mortgagor’s indebtedness to the mortgagee, the mortgagee may the mortgagor for

the balance on the personal covenant contained in the mortgage (no notice needed).- A power of sale on default by the mortgagor is implied in general and Torrens mortgages and may be exercised

subject to conditions laid down by legislation: NSW ss109 (1) (a), (5), 111. - So may exercise the power if (i) default in payment of principal or interest or other money secured by mortgage;

(ii) breach of some other covenant in mortgage; (iii) failure to remedy breach for a specified period after notice given.

- Contract to sell Torrens title land is not invalidated notwithstanding that it may have been entered into before the mortgage or a transfer of the mortgage had been registered: Carretta Stud Nominees Pty Ltd v White and Finniss River Pty Ltd and the National Bank of Australasia Ltd (1982).

Statutory duty: notice to the mortgagor

Websdale v S & JD Investments P/L (1991) (NSWCA)Facts: a notice was served under s 57 RPA correctly stating the default in payment of interest, but incorrectly stating that the full amount of the principle was due and payable. The mortgagee submitted that the notice was invalid.Clarke JA: Have to assess whether such a notice, ie making a correct assertion that the mortgagor has a default in the

payment of interets and an incorrect assertion that the principal is outstanding, still complies with s 57 --> NOTICE INVALID! (Contrary to s57).

The purpose of the notice is to bring to the mortgagor's attention to the existence of particular defaults, and to give them the opportunity to remedy them. Thus, it cannot be said that a notice requiring the mortgagor to remedy a non-existent default complies with the section. But, provided that the default is correctly identified, the specification of a greater or lesser amount than actually due, does not affect the validity of the notice. Also, overstatement of the amount owing in a notice given by a mortgagee will not invalidate it.

Campbell v Commercial Banking of Sydney (1881) was correct: it said that a mistake as to the quantity of the amount to be paid was OK. S 57 requires the default in payment of interest or principle, but does not require the particular amount

outstanding to be specified - thus, if the wrong amount is specified but correctly identifies the defaults, the section is still be complied with. But if huge overstatement, can’t exercise power of sale – nemo dat rule – can’t sell what you don’t have. Also, if u refuses to take an amount which is correct invalid.

Thus, the notice did not comply with s 57. Held: a notice issued under RPA s 57 incorrectly stating that the full principle is due when it is not, does not comply with s 57, and is thus invalid.

o Clare Morris Ltd v hunter BNZ Finance Ltd (1988): held that a notice under s57 of the RPA was valid, even where it erroneously stated the amount due, whether the amount claimed was more or less than the amount due.

o AGC (Advances Limited) v Tweed Canal Estates Pty Limited (1988): notice is not invalid if the amount demanded is not stated.

o Lamshed v Plakakis (1988): a notice should distinguish b/w principal and interest given that default in the payment of interest only gave rise to an accelerated liability to pay principal after notice of default in the payment of interest had been served: referred to s57 (3).

o Upton v Baron (2000): held that although the mortgagee did not need to specify the amount in a notice to a mortgagor, it was a duty to do so in respect to guarantors.

o Nemeth v Reachrod Pty Ltd (1998): a notice that merely noted the mortgagor’s defaults, but failed to require the mortgagor to remedy them, was invalid. Consequently, the power of sale was not exercisable.

o NRMA Insurance Limited v Individual Homes Pty Limited (1988): where the power of sale has become exercisable, it is an implied term of the mortgage that the mortgagor facilitate the mortgagee’s entry upon the property e.g. by handing over the keys, and in the case the property be tenanted, making available a copy of the lease.

o If want injunction against power of sale have to lodge the whole amount to the court. This reflects the equity maxim: ‘he, who comes to equity, must come with clean hands’.

o If waive power of sale, have to give new notice. (Barns). o Give notice remedy fault no more power of sale.

Equitable duty – conduct of sale - Once the notice period has expired and the notice has met the statutory requirements, the mortgagee becomes

subject to a separate duty: the equitable duty to ensure that the sale is conducted in a way that fairly balances the interests of mortgagors and mortgagees.

- Farrar v Farrars Ltd (1888): the mortgagee may not sell the property to himself or herself or to someone acting on the mortgagee’s behalf.

- Sale to Associate : disfavor of the courts of a sale by a mortgagee to a related individual (e.g. relatives, friends) or corporation, but no absolute prohibition, grey area: Tse Kwong Lam v Wong Chit Sen [1983]. If corporation: Corporation Act applies: s420A Corp Act.

- High burden: need a clear demonstration that trying to obtain an absolute preference for the best price. Examples that evince conduct of not obtaining the best price: haven’t advertised property, or advertised it in a newspaper in a different location. Aim is NOT to reduce the number of purchasers.

- Australian and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978): if certain associations exist, e.g. where the purchaser is trustee for the mortgagee, sale not allowed. But, sometimes allowed need to show no shortcoming by the mortgagee or someone acting on his behalf. Not ok to set low reserve price then sell to associate. But, didn’t turn on this point. Other factors that indicated a poor sale: not advertised, timing: Christmas (TIMING) LATEC, : thus not that many purchasers.

- Mortgagee only entitled to recover the debt plus interest and costs, whatever the selling price. The mortgagor is entitled to any excess which remains after the mortgagee has been paid (thus wants the highest price).

Summary: look for: adv, public auction (timing), valuation of property. Damages if not exercised in good faith: Price actually obtained vs. what could have got).

Auction SalesSouthern Goldfields Ltd v General Credits Ltd (1991) WA SC (FC) This case concerns the courts finding a balance between the mortgagee's interest in selling the property quickly (i.e. at a low price) and the mortgagor's interest in securing the highest possible price, so as to retain as much money as possible.Facts: 1st mortgagee, upon default of mortgagor, exercised power of sale. 2nd mortgagee brought action claiming 1st

mortgagee had acted in bad faith by selling the property at too low a price (alleged 1st mortgagee had not taken into account two valuations, and had set the reserve price for the auction too low).Held: The reserve price is set anonymously and is irrelevant for the purposes of the duties of the mortgagee. The

reserve price has no effect on the amounts bid (and thus has nothing to do with the duty to act fairly in order to secure a fair price). Setting of a reserve price could not, in itself, amount to the wilful or reckless sacrificing of the

interests of the mortgagor and plaintiff. I.e. not, in itself, acting in bad faith. Did all other relevant things, e.g. advertised, sold it to the highest bidder reasonable steps taken to conduct a sale.

The mortgagee has a duty to act 'bona fide'. Upheld Pendlebury: recklessness is 'a disregard for the mortgagor's interest... not caring whether its fair and

proper value was obtained or not' as distinguished from the mere want of care or prudence in the course of honestly trying to conserve it.

Q to ask: whether the mortgagee, in the sale of property, acted bona fide to obtain best price reasonably available, consistent to his right to realize his security. This inquiry is directed to whether the mortgagee recklessly scarified the interests of the plaintiff. Look at conduct of sale, rights or mortgagee and whether in exercising them it had confined its attention to its own interests.

The sale was OK because it was made at the highest price bid at a properly conducted and advertised auction. Whether a sale price amounts to a wilful sacrifice of the interests of a mortgagor depends upon the circumstances of the sale. No evidence that a better offer could be obtained if the mortgagee rejected the highest bid at the auction -

thus, it would be a risk for the mortgagee to take to reject the bid in hope of a better offer. The mortgagee is not required to take this risk.

The test is whether the mortgagee has acted bona fide (i.e. did he take reasonable precautions to obtain a proper price?). If the mortgagee has, then even if the price obtained is below market value, the sale is still OK.

o Nilrem Nominees Pty Ltd & Ors v Karaley Pty Ltd [2000]: failure to obtain a valuation of the property was held to indicate a lack of prudence in the conduct of the sale if the land were not to be sold at auction. Such a lack of prudence would be remedied if the sale were subsequently to be well advertised.

o Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002): a mortgagee exercising the power of sale who deliberately keeps a seriously interested purchase away from the auction will be guilty of a reckless disregard for the interests of the mortgagor and subsequent mortgagees.

o Note: There is disagreement in the courts as to which test, Pendlebury (that a mortgagee will be regarded as reckless if he/she ‘omits to take obvious precautions to ensure a fair price, and the facts show that he was absolutely careless whether a fair price was obtained or not’) or Cuckmere (Sets the higher standard of negligence for the breach of duty of the mortgagee in failing to advertise that the land on sale had been approved for the building of 100 flats as well as 35 houses) to apply, and whether there is any real difference. There is general agreement that until the High Court decides the issue, the Pendlebury test must apply (see, e.g., Westpac and Kingsland (1991) NSW). So look at interests of both parties and attempt to recoup more than is owed to you.

o Parker Tweedale v Dunbar Bank plc [1991]: held that the mortgagee owed no duty of care to a beneficiary under a trust when exercising the power of sale. Rationale: duty owed by the mortgagee on sale was derived from equitable doctrine and was not part of the law of negligence.

Timing of sale Westpac Banking Corporation Ltd v Kingsland (1991) NSWLR Facts: The plaintiff bank appointed receivers and managers, pursuant to an equitable charge. Neither the bank nor receivers exercised a power of sale over the mortgagor’s asset. The defendant (as guarantor) claimed bank should have accepted offer for purchase of asset. It alleged that the bank exercised its power of sale; the liability of the guarantor would have been extinguished.Issue: Was there a duty to take reasonable care to obtain best price for asset as was reasonably obtainable in the circumstances.Cole J: referred to ‘China and South Sea Bank Ltd and Tan Soon Gin [1990] which held that there is no duty owed by a mortgagee to a guarantor to exercise the power of sale at any point in time. The mortgagee may exercise that power if it so chooses and when it so chooses. If a surety believes he is suffering damage by failure of the mortgagee to exercise the power of sale in that the surety believes that the value of the mortgaged property may decline, his entitlement is to pay out the mortgage, obtain the security and sell it.

Failure to assess any offers prior to a decision having been taken to exercise the power of sale cannot constitute a breach of duty.

Followed principle espoused in ‘Pendlebury v Colonial Mutual Assurance Society (1912) which stated that the obligation of a mortgagee exercising a power of sale is to act in good faith. I.e. do not have to exercise a power of sale, only act in good faith. No obligation to sell @ good market price.

o So! Given that once the power to sell has arisen, the mortgagee is entitled to exercise it at any time; even if the time is unpropitious, the market value must be the value at that time.

o Although a mortgagee is under no general duty to sell the security, it is otherwise if the mortgagee chooses to exercise the power of sale and in doing so, breaches the duty owed to the mortgagor and sells to the purchaser who cannot complete sale. If the mortgagee resells at a later date when the market has fallen it is not appropriate for the mortgagee to deny the loss suffered by recourse to the principle that the mortgagee is under no duty to sell at a particular time – Highton Enterprises P/L v BFC Finance [1997] sale w/o advertising, below market, tried to sell to shelf co. court held: breached their duty to take reasonable care to ensure @ market value. Generally no obligation to sell when ,market is good, but really dodgy in this case in other areas.

WEEK 14 (Class 1): Mortgages – remedies/ mortgagor protection Protection of purchaser from mortgagee in cases of breach of statutory and equitable duties - If break equitable duty – still valid, but pay back the difference. - Purchasers who deal with the mortgagee are offered protection to ensure that they take free of the mortgagor’s

equitable interest, even in cases where the power of sale has not been conducted properly.- Distinguish b/w 2 breaches: (i) Mortgagee not having the power of sale to begin with (i.e. no default, or the

statutory notice requirements (s57) have not been followed) thus, if don’t have notice, the dealing is never registrable! Thus the purchaser does not have the protection of indefeasibility! ; (ii) where the power of sale has already arisen but not exercised properly (e.g. sold to associate, sold during Christmas) If Purchaser will get protection of s42 and s58 so! purchaser in a different position in these 2 cases!

- S 58 (2) RPA 1900 (NSW): “No such purchaser (from the mortgagee) shall be answerable for the loss, misapplication, or non-application, or be obliged to see to the application of the purchase money by the purchaser paid, nor shall the purchaser be concerned to inquire as to the fact of any default or notice having been made or given as aforesaid or served as referred to in section 57(2)’ gives protection to purchaser when power of sale have NOT been exercised correctly. Gives right to get accounts of profits. Doesn’t make purchasers title indefeasible (like s42) BUT protects against constructive notice i.e. done have to make enquiries. BUT if you have actual notice s57 wouldn’t help you! So, if you had actual notice, that amounts to fraud, but if had constructive, it doesn’t amount to fraud. Can’t get registered if haven’t complies with s57 notice.

- This section offers no protection where the equitable duty is breached. Sonly appears to protect the purchase from constructive notice of a mortgagor’s possible non-default or the mortgagee’s failure to provide adequate notice. Protect the purchase not from the date of the contract with the mortgagee, but the date of settlement.

- In NSW, the protection of the purchaser from a mortgagee in the interval b/w completion of the contract and registration of the purchaser’s transfer may be governed by the provisions of s 43A of the RPA.

- Where the purchaser completes the purchase from the mortgagee w/o notice of any impropriety by the mortgagee, the purchaser may be protected from action by the mortgagor taken before registration of the purchaser’s transfer, in so far as the mortgagor’s action is based upon the assertion of an equity or equitable right.

- But if the mortgagor is asserting a right based on non-compliance by mortgagor, the protection of purchaser is dependent on the provisions of s 58(2) and s59. Register general only register those transfers which have met the notice requirements in s 57. Thus, if non-compliance, the dealing is not ‘registrable’ for the purposes of s 43A, so no protection for purchaser.

- Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965): a purchaser will not receive an indefeasible title if they knew of a breach by the mortgagee in exercising the sale.

- Applications of proceeds of sale: s 58(3) pp 1149.

1. NO power of sale (no s57 notice or no default) If mortgagee sell to purchaser but NOT registered, and have actual notice s58 will NOT protect you (i.e. purchaser). Take property if constructive notice.

Can’t get registered (coz s 57 hasn’t been complied with) thus no protection and NO s43/42 indefeasibility. Therefore property goes back to the original owner.

NO s58 protection (b/w completion and registration) 2. Power of sale not exercised correctly

S 57 has been complied with and there has been a default but e.g. sold to associate or during Christmas. Person Registered The Title of the purchaser by virtue of s42/43 is indefeasible. Completion occurred but NO (thus NOT indefeasible) registration

(i) Actual notice: i.e. purchaser knew of the improper exercise. NOT protected by s58 thus, has to give property back.

(ii) No notice OR constructive notice: Protected by s58(2), therefore can register, and thus gain and indefeasibility of title and thus does NOT have to give the property back.

** If registered and ACTUAL notice OK indefeasible.

Application by mortgagor for injunctive relief to restrain exercise of power of sale Where the power of sale has arisen the usual practice is the mortgagor must pay into court the amount of money they owe before the court will grant an injunction. This requirement is grounded in the maxim that you must come to equity with clean hands. Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) - There was no dispute that the power of sale had arisen. - If mortgagor trying to restrain power of sale need to lodge money with the court. - Exceptions: (i) if amount claimed is excessive, don’t need to lodge the amount.(ii) If the mortgagee has no right to

sell (e.g. s 57 notice hasn’t been adhered to, or no default), don’t have to because the mortgagee has not done equity i.e. if you seek equity, you must do equity. (iii) Where the mortgagor is seeking orders under TPA 1974 s 52 misleading and deceptive conduct on the part of the mortgagee: Town and Country Sport Resorts v Partnership Pacific (1988).

- General rule: mortgagee will not be restrained from exercising power of sale merely because the amount due is in dispute, or the mortgagor has commenced a redemption action, or mortgagor objects to the manner in which a sale has been/being arranged. Mortgagee will only be restrained if the mortgagor pays the amount claimed into court, unless it is excessive.

Exceptions to general rule:(a) The validly of the mortgage is in issue(b) Availability of power of sale is in issue, because either –(i) alleged breach of covenant which is relied upon by the mortgagee is challenged; or (ii) Occurrence of some other pre-condition, whether statutory, or otherwise, to the arising of the power of

sale is in issue. - If challenge is based on no power of sale by mortgagee: auxiliary jurisdiction in Equity i.e. an injunction to

prevent interference with one’s legal rights mortgagor is not required, as a condition of obtaining relied, ‘to do equity’, i.e. to bring money into court, or to offer to redeem.

- If challenge based on improper exercise of sale by mortgagee of the duties which Equity imposes on him invokes the exclusive jurisdiction in Equity in which the mortgagor is required ‘to do equity’ i.e. to bring money into court, and to seek redemption, as a condition of obtaining relief. But, mortgagor will still be entitled to seek an account on a willful neglect and default basis, and, if, on that account being taken, a balance be found due to it, to have an order for the payment of that balance to it, the only basis upon which a mortgagor may have an account on a willful neglect and default basis is that he offers, in his turn, to pay to the mortgagee such amount on the taking of the account, be found to be due him to the mortgagee.

Jeanswest Corporation Pty Ltd v JWD Pty Ltd (1991): noted exceptions to the general rule above as including cases where the amount claimed by the mortgagee is obviously wrong and where there is an issue as to whether the mortgagee’s power of sale has become exercisable at all.Kinjella Pty Ltd v Jay (1996): an injunction was issued to restrain the sale on the ground that there existed a real risk that the property would be sold for less than its true value. Exceptions to the requirement of payment into court

Where the mortgagor charges the mortgagee with an improper exercise of the power of sale or other ‘equitable delinquency’ and seeks an account after the sale has been completed, the mortgagor is not normally required to pay into court the balance of the mortgage debt as a condition of seeking the remedy. Scandinavian Pacific Ltd v Burke (1991) - A mortgagor wishing to restrain a mortgagee from exercising an admitted power of sale must, as a general rule,

pay the amount of any undisputed or disputed debt to the court. - Once the power of sale exercised – mortgagee = unsecured creditor for balance – personal covenant for not

recouped amount.- Power of sale exercised- if mortgagor sues for outstanding amount it flows from ‘equitable delinquency’. - A mortgagor claiming accounts, must offer to pay such sum as may be found to be payable by him by those taken

accounts - must do equity.