Australian property law : cases and materials [Fifth edition.] 9780455237886, 0455237883

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AUSTRALIAN PROPERTY LAW Cases and Materials

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AUSTRALIAN PROPERTY LAW: CASES AND MATERIALS ANTHONY P MOORE JD (Chicago), LLM (Melb) Adjunct Associate Professor of Law, Adelaide and Flinders Universities

SCOTT GRATTAN BA LLB (Hons) (Macquarie), LLM (British Columbia), PhD (UNSW) Senior Lecturer, University of Sydney

LYNDEN GRIGGS LLB (Hons), LLM by Research (Tasmania) Fellow, Higher Education Research and Development Society of Australasia Senior Lecturer, University of Tasmania

FIFTH EDITION

LAWBOOK CO.2016

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW First edition ............................................... Second edition .......................................... Third edition ............................................. Fourth edition ...........................................

1996 2003 2007 2011

National Library of Australia Cataloguing-in-Publication entry Australian property law : cases and materials / Anthony Moore, Scott Grattan and Lynden Griggs. 5th edition. 9780455237886 (pbk.) Includes index. Real property – Australia. Real property – Australia – Cases. 346.94043 © 2016 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be submitted online at www.ag.gov.au/cca, faxed to (02) 6250 5989 or mailed to Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600. Editor: Zoe Haynes Product Developer: Vickie Ma Publisher: Robert Wilson Printed by Ligare Pty Ltd, Riverwood, NSW

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PREFACE The fifth edition of this book continues to provide a comprehensive collection of materials to enable any student of property law in Australia to gain a knowledge and understanding of that law. Property law is a required area of practice for admission to the legal profession in Australia, with the description for admission purposes encompassing both real and personal property. This book seeks to meet those admission needs through its analysis and coverage of real and personal property. The book also recognises that property law students in Australia undertake a wide variety of courses in terms of length and scope. For shorter courses, key chapters can be selected for that course and the material is self-sufficient. For longer courses all material traditionally included is covered. A basis is provided for specialist courses in areas such as native title, housing or land dealings. The book deals equally with all eight Australian jurisdictions so that reference is made to statutes and cases for each jurisdiction. The book is divided into five parts which examine the nature of property, obtaining title to property (including the range of property interests and the way in which ownership is obtained), property dealings (sales and gifts), coping with shared property interests (including co-ownership and rights of holders of lesser interests such as tenants) and relations between neighbouring land-holders. The book emphasises the role of the Torrens system in Australian land law, not only as the means for the transfer of land but as the definitional basis of all interests in land. This edition marks an evolution in the authorship. Adrian Bradbrook and Susan MacCallum have ended their ongoing involvement, with authorship now divided between Tony Moore (University of Adelaide; Flinders University), Scott Grattan (University of Sydney) and Lynden Griggs (University of Tasmania). The current authors are indebted to the work and scholarship of Adrian and Susan, whose significant intellectual contribution is acknowledged. Again all current authors accept responsibility for the totality of the work. In turn the authors have personal debts to their partners and families. The work could not have been accomplished without the support of the facilities, colleagues and students of the home universities. The publishers have also given unstinting support to the continuation of the book. Some substantive corrections have flowed from reader comments and modern technology assists this welcome feedback. Again this work fully covers and explains all material but is designed to be able to be used in conjunction with Australian Real Property Law whose publication precedes it by six months. The authors continue to seek to develop a critical understanding from the knowledge provided by these materials. The authors no longer have to argue that property law has an influence beyond the means of transferring land and other items from one person to another. Since the first edition the role of property law as an essential part of a free market economy has been almost universally accepted and property concepts have been relied upon to deliver energy supplies, ration water between human and environmental claims and to reduce carbon emissions. At the same time, inequalities of wealth in Australian and global society have increased, and through the selection of materials embodied in this text, we intend students to consider matters such as the relationship between those events.

ANTHONY MOORE SCOTT GRATTAN LYNDEN GRIGGS March 2016

v

TABLE OF CONTENTS Preface ............................................................................................................................................. v Table of Cases .................................................................................................................................. ix Table of Statutes ........................................................................................................................ xxxvii

Part 1: Context of Property Law Chapter 1: Concept of Property ................................................................................ 3

Part 2: Title to Goods and Land Chapter 2: Foundational Concepts of Land Ownership: Tenures, Estates, Trusts and Priorities ............................................................................. 91 Chapter 3: Possession ............................................................................................. 149 Chapter 4: Title to Personal Property .................................................................. 201 Chapter 5: The Torrens System: The Principle of Indefeasibility ..................... 257 Chapter 6: Unregistered Interests in Torrens Land: Nature and Priorities .... 407 Chapter 7: Public Lands and Land Rights of Indigenous Peoples .................... 511 Chapter 8: Security Interests in Land and Personal Property .......................... 595

Part 3: Dealings in Goods and Land Chapter 9: Dispositions of Land and Goods ........................................................ 659 Chapter 10: Defeasible Transactions .................................................................... 735

Part 4: Division of Ownership of Goods and Land Chapter 11: Future Interests and Perpetuities ................................................... 803 Chapter 12: Co-ownership ..................................................................................... 845 Chapter 13: Management Where Ownership is Divided ................................... 917 Chapter 14: Leases .................................................................................................. 971 Chapter 15: Housing ............................................................................................. 1065

vii

Australian Property Law: Cases and Materials

Part 5: Relations Between Neighbouring Landholders Chapter 16: Scope and Meaning of Real Property ........................................... 1129 Chapter 17: Easements and Related Interests .................................................. 1183 Chapter 18: Land Use Agreements: Restrictive and Positive Covenants ...... 1271 Index ..................................................................... .................................................................. 1341

viii

TABLE OF CASES [Where an extract from a case is reproduced the citation and paragraph number at which the extract appears is in bold.] A AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2010] QCA 83 ...................... 2.135, 2.140, 6.90 ANZ Banking Group Ltd v Alirezai (2004) Q ConvR 54-601; [2004] QCA 6 .................. 5.265, 10.115 ANZ Banking Group Ltd v Barns (1994) 13 ACSR 592 ................................................................ 5.85 ANZ Banking Group Ltd v Dzienciol [2001] WASC 305 ............................................................. 5.265 ANZ Banking Group Ltd v Widin (1990) 102 ALR 289 .................................................... 9.35 Abbiss v Burney (1881) LR 17 Ch D 211 ................................................................................... 11.55 Abela v Public Trustee [1983] 1 NSWLR 308 ........................................................................... 12.185 Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58 .................. 6.90, 6.95, 6.100, 6.105, 6.155 Abjornson v Urban Newspapers Ltd [1989] WAR 191 ................................................................. 9.25 Accordent Pty Ltd & Portellos v Breismark Nominees Pty Ltd (2008) 101 SASR 286 ................ 14.235 Ace Property Holdings Pty Ltd v Australian Postal Corporation [2010] QCA 55 ....................... 14.260 Ackroyd v Smith (1850) 10 CB 164; 138 ER 68 ........................................................................ 17.20 Adami v Lincoln Grange Management Ltd [1998] 17 EG 1; [1997] EWCA 4760 ..................... 14.150 Adamson v Hayes (1973) 130 CLR 276 ....................................................................................... 9.25 Adler v Blackman [1953] 1 QB 146 ........................................................................................... 14.70 Advance Investment Finance No 1 Pty Ltd v Commissioner for Consumer Affairs [1992] ASC 57 .......................................................................................................................................... 4.65 Agripower Barraba Pty Ltd v Blomfield (2015) 317 ALR 202 ..................................................... 16.22 Akiba v Commonwealth (2013) 250 CLR 209 ................................................................... 7.95 Akici v LR Butlin Ltd [2005] EWCA Civ 1296 ........................................................................... 14.205 Aldin v Latimer, Clark, Muirhead & Co [1894] 2 Ch 437 ........................................... 14.170, 14.190 Alfred F Beckett Ltd v Lyons [1967] Ch 449 ............................................................................ 17.190 Allen v Proprietors of Strata Plan No 2110 [1970] 3 NSWR 339 .................. 13.105, 13.110 Allen v Roughley (1955) 94 CLR 98 ............................................................................................ 3.80 Allen v Snyder [1977] 2 NSWLR 685 ................................................................................ 2.85, 5.275 Amad v Grant (1947) 74 CLR 327 ............................................................................... 14.60, 14.250 Amatek Ltd v Googoorewon Pty Ltd (1993) 176 CLR 471 ...................................................... 16.125 Amber (Eastern Suburbs) Pty Ltd v Herman (1986) 5 BPR 11,188 .................................. 5.130, 14.85 Ambrose v Hodgson (1781) 1 ER 1405; 3 Bro Parl Cas 416 ...................................................... 11.20 Anchor Brewhouse Developments Ltd v Berkley House (Docklands Development) Ltd [1987] 2 EGLR 173; (1987) 284 EG 625 ............................................................................... 16.60 Andel Pty Ltd & Century Car Care Pty Ltd, Re (1989) Q ConvR 54-315 ...................................... 6.50 Anderson v Bowles (1951) 84 CLR 310 ..................................................................................... 14.05 Anderson v O’Donnell (2000) 10 BPR 18,501 ......................................................................... 12.185 Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30 .............. 8.100 Andrews v Partington (1791) 29 ER 610; 3 Bro CC 401 ............................................................ 11.90 Andrews v Superannuation Fund (1985) 124 LSJS 153 ............................................................. 5.165 Annen v Rattee (1985) 273 EG 503 ........................................................................................ 12.155 Anson v Anson (2004) 12 BPR 22,303 .................................................................................... 12.100 Anthony v Commonwealth (1973) 47 ALJR 83; 29 LGRA 61; [1973] ALR 769 ........................... 16.22 Aoun Investments Pty Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1394 .................................................................................................................... 12.05 Application of Poltara Pty Ltd, Re [1982] 2 NSWLR 161 ............................................................ 18.75 Apriaden v Seacrest Pty Ltd (2005) 12 VR 319; [2005] VSCA 139 ........................................... 14.295 Arab Bank Ltd v Ross [1952] 2 QB 216 ................................................................... 1.65, 4.185 Arcade Hotel Pty Ltd, Re [1962] VR 274 ......................................................................... 18.10, 18.45 Arcadi v Whittem (1992) 59 SASR 515 ................................................................. 5.295, 5.300 Argyle Art Centre v Argyle Bond & Free Stores Co Pty Ltd [1976] 1 NSWLR 377 .... 14.265 Armory v Delamirie (1722) 1 Str 506; 93 ER 664 ........................................................................ 3.55 Arscott v Coal Authority [2005] Env LR 6; [2004] EWCA (Civ) 892 .......................................... 16.100 ix

Australian Property Law: Cases and Materials

Ashburn Anstald v Arnold [1988] 2 WLR 706 ................................................................. 1.140 Asher v Whitlock (1865) LR 1 QB 1 ........................................................................... 3.75, 3.80 Ashoil Holdings Pty Ltd v Fassoulas [2005] NSWCA 80 .............................................. 17.180, 18.105 Ashworth v Gloucester City Council [2002] 1 All ER 377; [2001] 1 WLR 2180 ......................... 14.215 Assets Company Ltd v Mere Roihi [1905] AC 176 ..................................................................... 5.150 Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395 ............................................................................................................................. 4.65, 4.80 Astley Industrial Trust Ltd, The v Miller [1968] 2 All ER 36 ................................... 4.70, 4.75 Atkins’ Will Trusts, Re [1974] 1 WLR 761 ................................................................................... 11.75 Atlantic 3-Financial (Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1 .................................... 5.130 Atler Pty Ltd v CDFC Australia Ltd (1982) 103 LSJS 70 .............................................................. 14.70 Attorney-General v Chambers (1854) 43 ER 406; 4 De GM & G 206; [1859] All ER Rep 559 .... 16.100 Attorney-General v Great Cobar Copper Mining Co (1900) 21 LR (NSW) 351; 6 ALR (CN) 91 ........................................................................................................................................ 16.75 Attorney-General v Morgan [1891] 1 Ch 432 ........................................................................... 16.75 Attorney-General (Cth) v RT Co Pty Ltd (No 2) (1957) 97 CLR 146; 31 ALJR 504 ...................... 16.22 Attorney-General (Hong Kong) v Reid [1994] 1 AC 324 .............................................................. 2.85 Attorney-General (NSW) v Brown (1847) 2 Legge 312 ............................................................... 2.25 Attorney-General (NT) v Chaffey (2007) 231 CLR 651 ................................................................ 1.55 Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1; [1997] Q ConvR 54-585 ............. 14.165, 14.170, 14.190 Austerberry v Corporation of Oldham (1885) 29 Ch D 750 ............. 18.175, 18.180, 18.190 Australian Conservation Foundation Inc v Commonwealth (1986) 146 CLR 493 ......................... 1.45 Australian Guarantee Corporation Ltd v de Jager [1984] VR 483 .................................... 5.185, 5.210 Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 ............................................. 17.65 Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd [1991] 2 VR 417 .................. 14.135 Avco Financial Services Limited v White [1977] VR 56 ................................................................. 6.90 Avco Financial Services Ltd v Fishman [1993] 1 VR 90 ............................................. 6.90, 6.95, 6.155 Avco Financial Services Ltd v White [1977] VR 561 ..................................................................... 6.50 Azkanaad Pty Ltd v Galanos Bros Pty Ltd (No 2) [2008] NSWSC 476 ........................................ 14.50

B Bacon v O’Dea (1989) 25 FCR 495 ............................................................................................. 6.50 Bahr v Nicolay (1987) 163 CLR 490 ......................................................................................... 10.85 Bahr v Nicolay (No 2) (1988) 164 CLR 604 ............. 5.160, 5.165, 5.185, 5.215, 5.220, 5.225, 10.80 Baigent v The Random House Group Ltd [2006] EWHC 719 .......................................... 4.100, 4.165 Baillie, Faithful v Sydney Industrial Blind Institution, Re (1907) 7 SR (NSW) 265 ......................... 2.65 Ballarat Corp v Waller [1924] VLR 115 .................................................................................... 14.180 Ballard’s Conveyance, Re [1937] Ch 473 .................................................................................. 18.45 Baloglow v Konstantinidis (2001) 11 BPR 20,721 ........................................................................ 9.25 Bamford v Loy (1982) NSW ConvR 55-043 ............................................................................... 6.155 Banco de Portugal v Waterlow and Sons Ltd [1932] AC 452 ....................................... 4.170 Banjima People v State of Western Australia [2015] FCAFC 84 .................................................... 7.75 Banjo v London Borough of Brent [2005] All ER (D) 282 (Mar); [2005] EWCA Civ 292; [2005] 1 WLR 2520 ............................................................................................................. 14.05 Bank of England v Cutler [1908] 2 KB 208 .............................................................................. 17.130 Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 ..... 5.190, 5.100, 5.185, 5.215 Bank of Victoria v Forbes (1877) 13 VLR 760 ............................................................................. 3.110 Bannister v Bannister [1948] 2 All ER 133 ...................................................................... 10.65 Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2002] V ConvR 54-654; [2001] FCA 1672 ...................................................................................... 14.235, 18.15, 18.90 Barber, Re (1937) 37 SR (NSW) 470 ......................................................................................... 11.20 Barbour, Re [1967] Qd R 10 ..................................................................................................... 12.25 Barclay’s Bank plc v O’Brien [1994] 1 AC 180 ........................................................................... 5.255 Barlin Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671 .................................................................................................................... 6.210, 6.215 Barnes v Addy (1874) LR 9 Ch App 244 ...................................................................................... 2.85 Barnes v James (1902) 27 VLR 749 ........................................................................................... 6.155 x

Table of Cases

Barnhart v Greenshields (1853) 9 Moo 18; 14 ER 204 .............................................................. 2.110 Barrett v Lounova (1982) Ltd [1989] 1 All ER 351; [1989] 2 WLR 137 ..................................... 14.135 Barrowcliff, Re [1927] SASR 147 ............................................................................................. 12.195 Barry v Heider (1914) 19 CLR 197 ................................................ 2.120, 6.20, 6.25, 6.30, 6.50 Bartlett v Tottenham [1932] 1 Ch 114 .................................................................................... 17.105 Barwick’s Case (1597) 77 ER 199; 5 Co Rep 93b ....................................................................... 11.10 Basham, Re [1987] 1 All ER 405 ................................................................................................ 9.165 Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 157 ALR 414; 72 ALJR 1470; [1998] HCA 59 ................................................................................. 7.15 Baumgartner v Baumgartner (1987) 164 CLR 137 .................................. 6.190, 10.70, 12.40 Baxendale v Instow Parish Council [1981] 2 All ER 620; [1981] 2 WLR 1055 ........................... 16.100 Baxter v Four Oaks Properties Ltd [1965] 1 Ch 816 .................................................................. 18.75 Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 ................................................ 8.105 Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709 .................................................... 3.110 Bazley v Wesley Monash IVF Pty Ltd [2010] QSC 118 .................................................................. 1.15 Beak Fast Investments Pty Ltd v PCH Melboune Pty Ltd (2007) 20 VR 311 ................................ 16.60 Beamer Pty v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 .................... 14.280 Beames v Leader [2000] 1 Qd R 347 ........................................................................................ 5.370 Beattie v Fine [1925] VLR 363 ................................................................................................... 14.70 Beatty v ANZ Banking Group Ltd [1995] 2 VR 292 .................................................................... 5.100 Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 ........................ 6.65 Beconwood Securities Pty Ltd v ANZ Banking Group Ltd [2008] FCA 594 ................................... 8.15 Bell v Graham [2000] VSC 142 ................................................................................................... 6.50 Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR 364 ......................... 17.130 Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 .......... 2.65 Belyea v McBride [1942] 3 DLR 785 ......................................................................................... 11.85 Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464; 74 LGRA 406 ........................... 16.60 Berdal v Burns [1990] WAR 140 .............................................................................................. 12.185 Berger Bros Trading Co Pty Ltd v Bursill Enterprises Pty Ltd [1970] 1 NSWR 137; (1969) 91 WN (NSW) 521 ................................................................................................................... 16.40 Bernstein of Leigh (Baron) v Skyviews and General Ltd [1978] 1 QB 479 ...... 16.50, 16.60 Beswick v Beswick [1968] AC 58 ........................................................................ 18.155, 18.160 Bettison v Langton [2000] Ch 54 ............................................................................................ 17.190 Bevilacqua v Merakovsky [2005] VSC 235 ............................................................................... 18.105 Bewick, Re [1911] 1 Ch 116 ..................................................................................................... 11.85 Big Rock Pty Ltd v Esanda Finance Corporation Ltd (1992) 10 WAR 259 ..................................... 4.40 Billiet v Commonwealth Bank of Australasia Ltd [1906] SALR 193 ........................................... 17.105 Billing v Pill [1954] 1 QB 70; [1953] 2 All ER 1061; [1953] 3 WLR 758 ...................................... 16.22 Bird v Trustees Executors and Agency Co Ltd [1957] VR 619 ................................................... 18.160 Birmingham, Dudley and District Banking Co v Ross (1888) 38 Ch D 295 .............................. 17.120 Birstar v Ocean Breaze [1996] QCA 110 .................................................................................... 13.35 Bishop v Taylor (1968) 118 CLR 518; 42 ALJR 277 .................................................................... 14.50 Black v Apps [2005] NSWSC 943 ............................................................................................ 16.125 Black v Garnock (2007) 230 CLR 438; 81 ALJR 1338 .......................................... 6.140, 6.145 Black v Poole (1895) 16 ALT 155 ............................................................................................. 14.110 Blackler v Felpure Pty Ltd (2000) NSW ConvR 55-921 .............................................................. 14.35 Blacks Ltd v Rix [1962] SASR 161 .............................................................................................. 18.90 Blathwayt v Baron Cawley [1976] AC 307 .................................................................................. 2.65 Bligh v Martin [1968] 1 WLR 804 ............................................................................................. 3.110 Bloch v Bloch (1981) 37 ALR 55 ................................................................................................. 9.15 Blockbuster Entertainment Ltd v Leakcliff Properties Ltd [1997] 1 EGLR 28 ............................. 14.215 Boardman v Phipps [1967] 2 AC 46 ............................................................................................ 2.85 Bob Jane T-Marts v The Baptist Union of Victoria [1999] VSC 346 ............................................... 6.50 Bocardo SA v Star Energy UK Onshore Ltd [2011] 1 AC 380 ..................................................... 16.65 Boddington v Robinson (1875) LR 10 Ex 273 ........................................................................... 11.10 Bogdanovic v Koteff (1988) 12 NSWLR 472 ............................................................................. 5.275 Bolton v Bolton (1879) 11 Ch D 968 ........................................................................................ 17.85 Bondi Beach Astra Retirement Village Pty Ltd v Gora (2010) 14 BPR 27,743 ................................ 4.10 Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 82 NSWLR 665 ............................... 2.65 Bondi Beach Astra Retirement Village Pty Ltd v Hohman [2010] NSWCA 38 ......... 15.150 xi

Australian Property Law: Cases and Materials

Bookville Pty Ltd v O’Loghlen [2007] VSC 67 .................................................. 17.175, 17.180 Boreham v Bignall (1850) 68 ER 302; 8 Hare 131 ..................................................................... 11.90 Borman v Griffith [1930] 1 Ch 493 ............................................................................ 17.105, 17.120 Borthwick-Norton v Romney Warwick Estates Ltd [1950] 1 All ER 798 ..................................... 14.280 Bosca Land Pty Ltd’s Caveat, Re [1976] Qd R 119 ....................................................................... 6.50 Boss v Hamilton Island Enterprises Ltd [2009] QCA 229 .......................................................... 14.215 Bouel v Cooktown Municipal Corporation (1885) 2 QLJ 93 ...................................................... 11.20 Bourke, In the Marriage of (1993) 16 Fam LR 779 .................................................................. 12.185 Box v Attfield (1886) 12 VLR 574 .............................................................................................. 14.70 Boyd v Mayor of Wellington [1924] NZLR 1174 ........................................................................ 5.240 Brand v Chris Building Co Pty Ltd [1957] VR 625 ............................... 9.170, 16.115, 16.120 Brandon v Robinson (1811) 34 ER 379; 18 Ves Jun 429 ............................................................. 11.10 Bray v Bray (1926) 38 CLR 542 ............................................................................................... 12.205 Breams Property Investment Co Ltd v Stroulger [1948] 2 KB 1 ............................................... 14.235 Bree v Scott (1903) 29 VLR 692 ................................................................................................ 3.110 Breen v Williams (1996) 186 CLR 71 ................................................................................ 4.155 Breheney (dec’d), Re [1915] VLR 242 ..................................................................................... 11.100 Bremner v Bleakley (1923) 54 OLR 233 ............................................................................. 3.35 Brennan v Duncan (No 2) [2006] NSWSC 851 ......................................................................... 12.70 Breskvar v Wall (1971) 126 CLR 376 ...................... 5.70, 5.95, 5.100, 6.90, 6.95, 6.110, 6.190 Breskvar v White [1978] Qd R 187 ............................................................................................ 5.360 Brickwood v Young (1905) 2 CLR 387 ................................................................. 12.85, 12.115 Bridgewater v Leahy (1998) 194 CLR 457 ..................................................................... 10.105 Brierfield’s Application, Re (1978) 35 P & CR .......................................................................... 18.105 Brikom Investments Ltd v Carr [1979] QB 467 ........................................................................ 14.250 Brisbane City Council v Attorney-General (Qld) [1978] 3 WLR 299 ............................................. 1.45 British Bakeries (Midlands) Ltd v Michael Testler & Co Ltd (1986) 277 EG 1245; [1986] 1 EGLR 64 ............................................................................................................................. 14.215 Broadcast Australia Pty Ltd v Minister assisting the Minister for Natural Resources (Lands) (2004) 221 CLR 178 ............................................................................................................ 5.290 Bromley Park Garden Estates Ltd v Moss [1982] 2 All ER 890; [1982] 1 WLR 1019 .................. 14.215 Bromor Properties Ltd’s Application, Re (1995) 70 P & CR 569 ................................................. 18.75 Brooker’s Colours Ltd v Sproules (1910) 10 SR (NSW) 839 ..................................................... 14.280 Brown v Commonwealth Bank of Australia [1993] SASC 4232 ....... 15.120, 15.125, 15.145 Brown v Commonwealth Bank of Australia (1994) 63 SASR 188 ............................................. 15.125 Brown v Independent Baptist Church of Woburn 325 Mass 645; 91 NE 2d 922 (1950) .......... 11.150 Brown & Austrust Ltd v Commonwealth Bank of Australia (1993) 173 LSJS 145 ........................ 5.290 Brownfield v Earle (1914) 17 CLR 615 ...................................................................................... 11.75 Brownsea v National Trustees Executors & Agency Co of Australasia Ltd [1959] VR 243; [1959] ALR 650 .................................................................................................................... 14.50 Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 ............................................................ 9.140 Brunner v Greenslade [1971] Ch 993 .......................................................................... 18.75, 18.120 Brunswick Developments Pty Ltd v Shock Records Pty Ltd (1996) V ConvR 54-604 .................. 14.50 Bruton v London & Quadrant Housing Trust [2000] 1 AC 406 .................................................... 2.50 Buchan v Nash [1983] 2 NSWLR 575 ....................................................................................... 12.50 Buchholz v Kempsey Shire Council [2005] NSWSC 235 ............................................................ 17.40 Buckinghamshire County Council v Moran [1990] Ch 623 ....................................................... 3.110 Bull v Bull [1955] 1 QB 234 ...................................................................................................... 12.40 Bulli Coal Mining Co v Osborne [1899] AC 351 ........................................................................ 16.65 Bundy v Alberts [2007] VSC 90 ......................................................................................... 15.95 Bunney v South Australia (2000) 77 SASR 319; [2000] SASC 141 ........................................... 16.125 Bunney v State of South Australia (2001) 112 LGERA 213; [2001] SASC 18 ............................. 16.125 Bunning Building Supplies Pty Ltd v Sgro (1995) V ConvR 54-535 .............................................. 6.50 Burgess v Rawnsley [1975] Ch 429 ......................................................................................... 12.185 Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382 ............................................................... 18.10, 18.90 Burman v AGC (Advances) Ltd [1994] 1 Qd R 123 ..................................................................... 6.80 Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; [1971] ALR 551 .......................................................................................... 5.140, 5.145, 16.40 Burton v Camden London Borough Council [2000] 2 AC 399 .................................................. 12.10 Butler v Fairclough (1917) 23 CLR 78 ................................................................... 6.90, 6.130, 6.155 xii

Table of Cases

Byrnes v Jokona Pty Ltd [2002] FCA 41 ................................................................................... 14.295 Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123 ........................ 14.280

C CPT Custodian Pty Ltd v Commissioner for State Revenue (2005) 221 ALR 196 .......................... 6.50 Cable v Bryant [1908] 1 Ch 259 ................................................................................ 14.170, 14.190 Caboche v Ramsay (1993) 119 ALR 215 ..................................................................................... 2.65 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2006] FCA 363 ...... 4.100, 4.165 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) [2006] FCA 446 ..... 4.100, 4.165 Cadell v Palmer (1833) 6 ER 956; 1 Cl & Fin 372 ...................................................................... 11.65 Cadia Holdings Pty Ltd v New South Wales (2010) 242 CLR 195 .............................................. 16.75 Cain v NSW Land and Housing Corporation [2014] NSWCA 28 ................................... 15.74 Caldwell v Rural Bank of NSW (1951) 53 SR (NSW) 415 ............................................................. 5.85 Callow v Rupchev [2009] NSWCA 148 .............................................................................. 12.75 Calverley v Green (1984) 155 CLR 242 ............................................................................. 10.50 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 235 .................... 10.15 Campbell v Hedley (1917) 39 OLR 528 ...................................................................................... 3.20 Campbell v Holyland (1878) 7 Ch D 166 ............................................................................ 8.30 Cancer Care Institute of Australia Pty Ltd, Re (2013) 16 BPR 31,529; [2013] NSWSC 37 .............................................................................................................. 16.20, 16.30 Capital Finance Australia Ltd v Karabassis (2003) 11 BPR 21,123 ................................................ 6.50 Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 225 ............................. 4.90, 4.95 Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272 ...................................................................... 14.150 Carisfield Estate Pty Ltd v Douglas [1998] SASC 7003 ................................................ 15.130 Carlin v Mladenovic (2002) 84 SASR 155 ............................................................................... 16.125 Carnovale v Pollack [1995] NSWSC 133 ..................................................................................... 8.50 Carnovale v State Bank of New South Wales (unreported, NSWSC, Rolfe J, 3 November 1992) .................................................................................................................................... 8.50 Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2004] NSWCA 150 ....................... 14.170, 14.190 Carrathool Hotel Pty Ltd v Scutti [2005] NSWSC 401 ............................................................. 14.150 Case of Mines, The (1567) 75 ER 472; 1 Plow 310 ................................................................... 16.75 Casey v Aldous (1994) 63 SASR 347 ......................................................................................... 15.40 Cashmore’s Application, Re [1967] Tas SR 217 ............................................................ 18.90, 18.190 Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2 ........................................ 5.203 Castagna v Great Wall Resources Pty Ltd [2005] NSWSC 942 ................................................. 18.105 Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11 ..................................... 17.65 Catanzariti v Whitehouse (1981) 55 FLR 426 ............................................................... 12.145 Caunce v Caunce [1969] 1 WLR 286 ........................................................................................ 2.110 Ceda Drycleaners Ltd v Doonan [1998] 1 NZLR 224 ................................................................ 18.10 Celsteel Ltd v Alton House Holdings Ltd (No 2) [1987] 2 All ER 240; [1987] 1 WLR 291 .......... 14.165 Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 3 All ER 610; [1972] 1 WLR 1048 ...... 14.260 Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 ......................................................................................................................... 8.70 Centrovincial Estates PLC v Bulk Storage Ltd (1983) 46 P & CR 393 ....................................... 14.220 Cervi v Letcher (2011) 33 VR 320 ............................................................................................. 3.110 Chairman, National Crime Authority v Flack (1998) 86 FCR 16 ..................................... 3.45 Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) NSW ConvR 55-367 ...................................... 14.25 Chan v Cresdon Pty Ltd (1989) 89 ALR 522 ...................................................................... 9.45 Chang v Registrar of Titles (1925) 137 CLR 177 .......................................................................... 9.50 Chapman’s Settlement Trusts, Re [1978] 1 All ER 1122; [1977] 1 WLR 1163 ........................... 11.100 Charalambous v Ktori [1972] 1 WLR 951 ................................................................................ 14.125 Chardon, Re [1928] Ch 464 ..................................................................................................... 11.55 Charles Frodsham & Co Ltd v Morris (1972) 229 EG 961 ....................................................... 14.235 Chasfild v Taranto Pty Ltd [1991] 1 VR 225 ............................................................................... 5.100 Chester v Buckingham Travel Ltd [1981] 1 All ER 386; [1981] 1 WLR 96 ................................. 14.125 Cheyne v Moses [1919] S R Qd 74 ......................................................................................... 14.235 Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 ......... 2.75, 2.85 xiii

Australian Property Law: Cases and Materials

Chiodo v Murphy (1995) V ConvR 54-531 ................................................................................. 6.50 Chipperfield v Carter (1895) 72 LT 487 .................................................................................... 14.50 Chirnside v Registrar of Titles [1921] VLR 406; 27 ALR 268 .............................. 16.80, 16.85 Chittick v Galea [2007] NSWSC 38 ......................................................................................... 14.280 Christie v Dalco Holdings Pty Ltd [1964] Tas SR 34 ................................................................... 18.75 Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 ............................................. 14.50 Chudleigh’s Case (1595) 76 ER 261; 1 Co Rep 113b ................................................................ 11.35 Church of England Collegiate School of St Peter, The v Chesser House Pty Ltd (1993) ANZ ConvR 110 ............................................................................................................................. 8.50 Churcher v Danis Hotels Pty Ltd (1980) 8 BPR 15,863 .............................................................. 12.50 Circuit Finance Australia Ltd v Registrar of Titles [2006] 1 Qd R 204 ............................................ 6.80 Cirino v Registrar-General (1993) 6 BPR 13 260 ........................................................................ 5.345 Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 .................................................. 14.110 Civil Service Cooperative Society Ltd v McGrigor’s Trustee [1923] 2 Ch 347 ........................... 14.260 Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 .......................... 14.05, 14.70 Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790 .............................................. 6.90, 6.155 Clarke v Burnie City Council [2008] TASSC 75 .............................................................. 18.110 Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54-506 ......................... 6.50 Clayton v Ramsden [1943] AC 320 ............................................................................................. 2.65 Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227 ............................. 18.10, 18.50, 18.60 Clement v Jones (1909) 8 CLR 133 ........................................................................................... 3.110 Clements v Ellis (1934) 51 CLR 217 ................................................................................... 5.70, 5.85 Clifford’s Settlement Trusts, Re [1981] Ch 63 .......................................................................... 11.100 Clos Farming Estates v Easton [2002] NSWCA 389 ........................................................ 17.05 Clubley v Bochrinis [2005] WASC 24 ...................................................................................... 18.105 Clyne v Lowe (1968) 69 SR (NSW) 433 .................................................................................. 14.120 Cobb v Lane [1952] 1 All ER 1199 ............................................................................................ 14.25 Cobbold v Abraham [1933] VLR 385 ........................................................................................ 18.75 Cole, Re [1964] Ch 175 ....................................................................................................... 9.105 Coleman v Bone (1996) 9 BPR 16,235 ........................................................................................ 6.50 Coleman v London County & Westminster Bank Ltd [1916] 2 Ch 353 ...................................... 2.140 Collins v Hopkins [1923] 2 KB 617 ......................................................................................... 14.150 Collins v Winter [1924] NZLR 449 .......................................................................................... 14.150 Colman v Golder [1957] VR 196 ............................................................................................... 14.50 Colvin v Bowen (1958) 75 WN (NSW) 262 ............................................................................. 14.215 Commercial Bank of Australasia Ltd v Schierholter [1981] VR 292 ............................................... 6.65 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ................................... 1.115, 10.20 Commonwealth v Registrar of Titles (Vic) (1918) 24 CLR 348; [1918] VLR 228; 24 ALR 106 ............................................................................................................ 17.25, 17.30 Commonwealth v Yarmirr (1999) 101 FCR 171 ........................................................................ 7.100 Commonwealth v Yarmirr (2001) 208 CLR 1; 184 ALR 113 ....................................................... 7.100 Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 ................................................... 6.50 Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 .......... 14.05 Composite Buyers Ltd v Soong [1995] 38 NSWLR 286 ............................................................... 6.50 Concept Projects Ltd v McKay [1984] 1 NZLR 560 .............................................. 16.25, 16.30 Concrete Constructions Pty Ltd v Government Insurance Office of New South Wales [1966] 2 NSWR 609 ...................................................................................................................... 18.160 Conlan v Registrar of Titles (2001) 24 WAR 299 ...................................... 5.165, 5.210, 5.270 Connolly v Noone [1912] St R Qd 70 ....................................................................................... 6.155 Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 ...................... 5.130, 11.40, 14.260 Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 ................................... 2.85 Contract between Fawcett and Holmes, Re (1889) 42 Ch D 150 .............................................. 18.35 Cooke v Dunn (1998) 9 BPR 16,489 ......................................................................................... 3.110 Coomber v Curry (1993) V ConvR 54-464 ..................................................................... 5.100, 5.240 Cooper v Stuart (1884) 14 AC 286 ............................................................................................. 7.30 Cooper v Stuart (1889) LR 14 App Cas 286 .............................................................................. 11.40 Cooper’s Lease, Re (1968) 19 P & CR 541 .............................................................................. 14.215 Copeland v Greenhalf [1952] 1 Ch 488 .................................................................................... 18.20 Cordingley, Re (1948) 48 SR (NSW) 248 ................................................................................ 12.215 Corin v Patton (1990) 169 CLR 540; 92 ALR 1 .......................... 5.275, 9.135, 12.170, 12.185 xiv

Table of Cases

Corinne Court (Owners of) 290 Stirling Street Perth Strata Plan 12821 v Shean Pty Ltd (2000) 23 WAR 1 ................................................................................................................. 5.100 Corozo Pty Ltd v Total Australia Pty Ltd [1988] 2 Qd R 366 ...................................................... 5.130 Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18 NSWLR 577 ........................... 17.200 Corry v Corry (1983) FLC 91-343 ........................................................................................... 12.185 Cory v Davies [1923] 2 Ch 95 .................................................................................................. 17.95 Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90 ........................................................... 6.50 Costin v Costin (1995) NSW ConvR 55-717 ........................................................................... 12.185 Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1999) 8 BPR 15,611 ........................................ 16.30 Couche v Adams (2002) 11 BPR 20,101; [2002] NSWSC 27 ................................................... 17.180 Cousin v Grant (1991) 103 FLR 236 ......................................................................................... 18.75 Cowell v Rosehill Racecourse Co Ltd (1936) 56 CLR 605 .............................................. 1.120 Cox v Glue (1848) 136 ER 987; 5 CB 533 ................................................................................. 16.65 Crabb v Arun District Council [1976] 1 Ch 179 ........................................................................ 9.155 Cram Foundation v Corbett-Jones [2006] NSWSC 495 ............................................................... 2.65 Crampton v French (1995) V ConvR 54-529 ............................................................................... 6.50 Crawley Borough Council v Ure [1995] 3 WLR 95 ................................................................... 12.155 Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 .............................. 13.10 Crompton, Re [2000] QSC 386 ................................................................................................ 5.370 Crook v Consumer, Trader & Tenancy Tribunal of New South Wales (2003) 59 NSWLR 300 ...................................................................................................................... 15.70 Crouch v Credit Foncier of England Ltd (1873) LR 8 QB 374 .................................................... 4.190 Crow v Wood [1971] 1 QB 77 ............................................................................. 17.115, 17.120 Crowther v Brisbane City Council [2010] QCA 348 ..................................................................... 1.45 Cruse v Mount [1933] Ch 278 ................................................................................................ 14.150 Cruz v Osborne [1999] WASC 8 .................................................................................................. 6.65 Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 .................................................... 8.165

D D’Arcy v Burelli Investments Pty Ltd (1987) 8 NSWLR 317 ........................................................ 16.30 DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [1980] 1 NSWLR 510 ..... 2.75, 2.80, 2.85 Da Costa, Re [1912] 1 Ch 337 .................................................................................................. 11.55 Daar Pty Ltd v Feza Foundation Ltd (2001) 10 BPR 19,099; [2001] NSWSC 949 ..................... 17.105 Dabbs v Seaman (1925) 36 CLR 538; 31 ALR 402 ........................................... 17.125, 17.130 Dairy Industry Marketing Authority v Southern Farmers Co-operative Ltd (1982) 61 FLR 174 .... 4.100, 4.165 Daniell v Paradiso (1991) 55 SASR 395 ....................................................................................... 6.50 Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406 ................................ 14.215 Davidson v Registrar of Titles [2002] WASC 168 .......................................................................... 8.75 Davies v Laughton (1996) 3 NZ ConvC 192,356; (1997) 3 NZLR 705 ...................................... 5.120 Davies v Littlejohn (1923) 34 CLR 174; [1923] HCA 64 ................................................... 7.05 Davies v Ryan [1951] VLR 283 .................................................................................................... 5.85 Davis v Commonwealth (1988) 166 CLR 79 ...................................................................... 1.10 Davis v Williams (2003) 11 BPR 21,313; [2003] NSWCA 371 ................. 5.170, 5.185, 5.210 Dayani v Bromley London Borough Council [1999] EGLR 144 ................................................ 14.135 De Campo Holdings Pty Ltd v Cianciullo [1977] WAR 56 ........................................................ 12.205 De Landgrafft v Brown (1993) 9 SR (WA) 236 ......................................................................... 14.295 De Rose v South Australia (2003) 133 FCR 325 .............................................................. 7.105 Deane (dec’d), Re [1913] VLR 272 .......................................................................................... 11.100 Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd (2000) 77 SASR 261 ................... 14.220 Delehunt v Carmody (1986) 161 CLR 464 ............................................................ 12.55, 12.60 Denham Bros Ltd v W Freestone Leasing Pty Ltd [2004] 1 Qd R 500; [2003] ANZ ConvR 522; [2003] QCA 376 ........................................................................................................ 11.160 Dennerstein, Re [1963] VR 688 .............................................................................. 18.80, 18.90 Dennis v Dennis (1971) 124 CLR 317; [1971] HCA 50 ................................................... 12.15 Destri Enterprises Pty Ltd v Maxwell [2012] NSWSC 295 ........................................... 17.170 Di Napoli v New Beach Apartments Pty Ltd (2004) 11 BPR 21,493 ........................................... 16.75 Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572 .................. 5.340, 5.345 xv

Australian Property Law: Cases and Materials

Dikstein v Kanevsky [1947] VLR 216 ....................................................................................... 14.135 Dillon v Nash [1950] VLR 293 ................................................................................................. 14.135 Dimond v Bostock (1875) LR 10 Ch App 358 ........................................................................... 11.90 Director of Public Prosecutions v Murdoch [1993] 1 VR 406 ..................................................... 4.150 Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402 ................................... 17.60, 17.65 Dobbs v Seaman (1925) 36 CLR 538; 31 ALR 402 .................................................................. 17.130 Doe d Carter v Barnard (1849) 13 QB 945; 116 ER 1524 ............................................................ 3.80 Doe d Lloyd v Powell (1826) 5 B & C 308; 108 ER 115 ........................................................... 14.260 Doe d Seebkristo v East India Co (1856) 10 Moo PC 140; 6 Moo Ind App 267; 14 ER 445 ..... 16.100 Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380 ........................................... 14.185 Dolphin’s Conveyance, Re [1970] Ch 654 ................................................................................ 18.75 Dominion Lifestyle Tower Apartment Ltd v Global Capital Corporation Pty Ltd (2005) V ConvR 54-696 ....................................................................................................................... 6.50 Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 ............... 6.95, 6.190 Downie v Lockwood [1965] VR 257 ....................................................... 2.110, 14.105, 14.125 Dowse v Wynyard Holdings Ltd [1962] NSWR 252 ................................................................. 14.165 Doyle v Phillips [1997] NSW ConvR 56,427 ................................................................. 18.45, 18.160 Drummond’s Settlement, Re [1988] 1 WLR 234 ................................................ 11.95, 11.105 Duggan v Kelly (1848) 10 Ir Eq Rep 473 ..................................................................................... 2.65 Duke of Norfolk’s Case (1682) 22 ER 931; 3 Ch Cas 1 .............................................................. 11.10 Duke of Westminster v Guild [1984] 3 All ER 144; [1984] 3 WLR 630 ...................................... 14.135 Duncan v McDonald [1997] 3 NZLR 669 ................................................................................. 5.120 Dungannon v Smith (1845) 8 ER 1523 ..................................................................................... 11.40 Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd [2000] NSWCA 28 .......................................... 18.105

E ER Ives Investment Ltd v High [1967] 2 QB 379 ................................................ 9.180, 18.190 Eade v Vogiazopoulos (No 2) (1993) V ConvR 54-458; [1999] 3 VR 889 ................................... 5.100 Eade v Vogiazopoulos (No 2) (1994) V ConvR 54-497 ................................................... 5.120, 5.130 Eagling v Gardner [1970] 2 All ER 838 ...................................................................................... 18.75 Earl Bathurst v Fine [1974] 1 WLR 905 .................................................................................... 14.280 Earl of Stafford v Buckley (1750) 28 ER 111; 2 Ves Sen 170 ....................................................... 11.10 Eastdoro Pty Ltd (No 2), Re [1990] 1 Qd R 424 ............................................................. 5.130, 14.85 Eastern Distributors Ltd v Goldring [1957] 3 WLR 237 ................................................................ 4.40 Ebers v MacEachern [1932] 3 DLR 415 ....................................................................................... 3.20 Ecclesiastical Commissioners for England v Kino (1880) 14 Ch D 213 ..................................... 17.180 Eckford v Stanbroke Pastoral Co Pty Ltd [2012] 2 Qd R 324 ...................................................... 3.110 Eddadock Pty Ltd v Denning Properties Pty Ltd [2002] NSWSC 208 ....................................... 14.215 Edwards v Sims 24 SW 2d 619 (1929) ...................................................................................... 16.65 Elitestone Ltd v Morris [1998] ANZ ConvR 478; [1997] 2 All ER 513; [1997] 1 WLR 687 ........... 16.22 Ell t/as GNP Printing v Cisera [2001] NSWSC 242 ..................................................................... 14.70 Ellenborough Park, Re [1956] Ch 131 ............................................................................ 17.20, 17.30 Ellison v Vukicevic (1986) 7 NSWLR 104 .......................................................... 17.195, 17.200 Elliston v Reacher [1908] 2 Ch 374 ........................................................................................... 18.75 Elmant Pty Ltd v Dickson (2001) V ConvR 54-647 ...................................................................... 6.50 Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394 ............................ 10.135 Elton v Cavill (No 2) (1994) 34 NSWLR 289 .................................................................. 2.65, 12.140 Emerald Quarry Industry Pty Ltd v Commissioner of Highways (1976) 14 SASR 486 ............... 17.200 Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd (1981) 28 SASR 214 ............... 8.175 Endeavour Lodge Motel Ltd v Langford [1998] 2 NZLR 121 ................................................... 14.260 Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841; 22 ATR 601 ......... 16.22 Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd [1997] SASC 6391 ............................ 9.40, 14.50 Equitiloan Securities Pty Ltd v Registrar of Titles [1997] 2 Qd R 597 ............................... 5.370, 5.380 Equus Corp Pty Ltd v Antonopoulos [2008] VSCA 179 .............................................................. 14.50 Errington v Errington and Woods [1952] 1 KB 290 ................................................................... 14.25 Estate of Bristow, Re [2005] NSWSC 1252 .............................................................................. 18.160 Estate of Soukup (1997) 97 A Cr R 103 ................................................................................... 12.195 Euston Centre Properties Ltd v H&J Wilson Ltd (1982) 262 EG 1079 ......................................... 14.50 Evanel Pty Ltd v Nelson (1995) 39 NSWLR 209; 7 BPR 14,388 .................................................. 17.20 xvi

Table of Cases

Executive Seminars Pty Ltd v Peck [2001] WASC 229 .............................................................. 16.125

F FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 .................... 6.65 Facchetti v Facchetti [2004] NSWSC 898 ................................................................................ 12.185 Facchini v Bryson [1952] 1 TLR 1386 ........................................................................................ 14.25 Fair Trading, Commissioner for v Voulan [2005] WASC 229 ...................................................... 15.15 Fairbairn v Varvaressos (2010) NSWLR 577 ............................................................................... 11.05 Fairwather v St Marylebone Property Co Ltd [1963] AC 510 ..................................................... 3.110 Faloon and Piesse v District Land Registrar [1997] 3 NZLR 498 ................................................. 17.20 Fantl v The Owners of Strata Plan 60492 (unreported, Consumer Trader & Tenancy Tribunal, 2002) .................................................................................................................... 13.80 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ................... 2.85, 5.250 Farley v Hawkins [1997] 2 Qd R 361; [1996] Q ConvR 59,381 ................................................. 16.22 Farmer v Residential Tenancies Tribunal [2002] NSWSC 199 ....................................... 15.85 Farquharson Bros & Co v C King & Co [1902] AC 325 ..................................................... 4.35 Fawaz (dec’d), Re [1958] VR 426; [1957] ALR 999 .............................................. 11.70, 11.75 Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 ............... 14.25, 14.280 Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371; [1980] 1 WLR 594 ...................................................................................... 18.40, 18.45, 18.170, 18.180 Fejo v Commonwealth (1999) 195 CLR 96 ........................................................................ 7.55 Felnex Central Properties Ltd v Montague Burton Properties Ltd (1981) 260 EG 705 ................ 14.70 Ferella v Otvosi [2005] NSWSC 962 ............................................................................ 18.75, 18.105 Ferguson v Miller [1978] 1 NZLR 819 ............................................................................. 12.120 Fernance v Simpson [2003] NSWSC 121 ........................................................................ 17.140 Ferrari v Beccaris [1979] 2 NSWLR 181 ................................................................................... 12.240 Ferrishurst Ltd v Wallcite Ltd [1999] Ch 355 ............................................................................. 2.110 Festing v Allen (1843) 152 ER 1204; 12 M & W 279 ................................................................. 11.35 Findlay v Nut Farms of Australia Pty Ltd [1989] ANZ ConvR 40 ............................................... 14.295 Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 [2004] QCA 214 ............................................................................................................................ 13.75 Fisher v Aboriginal Hostels Ltd [1998] VSCA 130 ........................................................ 15.100 Fitt v Luxury Developments Pty Ltd [2000] VSC 258 ................................................................. 18.10 Fiver Trading Pty Ltd v Spajak Pty Ltd [2005] NSWSC 532 ........................................................ 14.50 Forbes v Git [1922] 1 AC 256 ................................................................................................... 12.25 Forbes v New South Wales Trotting Club Ltd (1979) 25 ALR 1 .................................... 1.135 Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486 ....................................................................... 6.50 Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 .... 18.05, 18.170 Forgeard v Shanahan (1994) 35 NSWLR 206 ............................................................... 12.70, 12.100 Forrest Trust, Re [1953] VLR 246 ........................................................................................ 8.45 Forslind v Bechely-Crundall ([1922] SC (HL) 173 .................................................................... 14.295 Forsyth v Blundell (1973) 129 CLR 477 ........................................................................... 8.170 Four Oaks Enterprises Pty Ltd v Clark [2002] ANZ ConvR 440; [2002] TASSC 39 ....... 6.65, 6.70, 6.75 409 Lonsdale Pty Ltd v Carra [1974] VR 887 ........................................................................... 14.195 Fowley Marine (Emsworth) Ltd v Gafford [1967] 2 All ER 472; [1967] 2 WLR 1461 ................. 16.100 Francis v Francis [2009] SASC 363 .................................................................................. 12.200 Frater v Finlay (1968) 91 WN (NSW) 730 ............................................................................... 18.190 Frazer v Walker [1967] 1 AC 569 ................... 5.15, 5.70, 5.75, 5.85, 5.90, 5.100, 5.215, 5.370 Freeman d Vernon v West (1763) 95 ER 745; 2 Wils KB 165 ...................................................... 11.10 Fremantle Trades Hall Industrial Assn of Workers v Victor Motor Co Pty Ltd [1963] WAR 201 .... 14.260 French v Queensland Premier Mines [2004] VSC 294 .................................................... 5.120, 5.130 Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 ........................................................... 5.165 Frieze v Unger [1960] VR 230 ................................................................................................. 12.155 Frost, Re (1889) 43 Ch D 246 ................................................................................................... 11.75 Fuller’s Theatre & Vaudeville Co Ltd v Rofe [1923] AC 435 ...................................................... 14.195 Fyfe v Smith [1975] 2 NSWLR 408 .................................................................................... 8.115 xvii

Australian Property Law: Cases and Materials

G GIO v Reed [1988] VR 829 ....................................................................................................... 9.185 Gadsdon v Gadsdon [2003] WASC 48 ........................................................................................ 6.50 Gaite’s Will Trusts, Re [1949] 1 All ER 459; 65 TLR 194 .............................................................. 11.75 Galati v Deep Point Holdings (1999) ANZ ConvR 573 ............................................................ 12.205 Gallagher v Rainbow (1994) 179 CLR 624; 121 ALR 129; 68 ALJR 512 ....................... 17.45 Gallo v St Cyr (1983) 144 DLR (3d) 146 ................................................................................. 14.135 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 ................... 1.115, 5.265, 10.110 Gardiner v Chief Commissioner of State Revenue (2004) 59 NSWLR 549 ............................... 12.185 Garofano v Reliance Finance Corporation Pty Ltd (1992) NSW ConvR 55-640 ................. 5.85, 5.240 Gas & Fuel Corp (Vic) v Barba [1976] VR 755; (1977) 51 ALJR 219 ........................................... 17.20 Gaskin v Balls (1879) 13 Ch D 324 ......................................................................................... 18.125 George v Biztole Corporation Pty Ltd (1995) V ConvR 54-519 ........................................... 6.50, 6.65 Georges v Davies [2007] NSWSC 1284 ..................................................................................... 1.155 Ghilarducci v Ghilarducci [1993] ANZ ConvR 331 .................................................................... 3.110 Gibbs v Messer [1891] AC 248 ................................................................ 5.75, 5.80, 5.85, 5.100 Gifford v Lord Yarborough (1828) 130 ER 1023; 5 Bing 163 ................................................... 16.100 Gill v Lewis [1956] 2 QB 1 ...................................................................................................... 14.280 Ginelle Finance Pty Ltd v Diakakis (2004) NSW ConvR 56-064 ....................................... 5.130, 5.240 Giumelli v Giumelli (1999) 196 CLR 101 ....................................................................... 9.165, 6.190 Given v Pryor (1979) 24 ALR 442 .............................................................................................. 10.15 Gladwell v Steen (2000) 77 SASR 310; [2000] SASC 143 ........................................................ 16.125 Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456 ............. 14.165, 14.170, 14.190 Gleeson v Richey [1959] VR 258 .................................................................................. 14.60, 14.250 Glensaugh Pty Ltd v Registrar-General (2001) 10 BPR 19,311 ................................................... 5.365 Global College Pty Ltd v Sooncorp Holdings Pty Ltd [2008] NSWSC 750 ................................ 14.250 Global Finance Group Pty Ltd (in liq), Re; Ex parte Read [1999] WASC 46 ................................ 5.210 Global Minerals Australia Pty Ltd v Valerica Pty Ltd (2000) 10 BPR 18,463 .................................. 6.50 Glynn, Re; Ex parte Royle [2003] WASCA 122 ................................................................. 15.10 Golby v Golby (1997) NSW ConvR 55-802 ............................................................................. 12.215 Goldberg v Edwards [1950] Ch 247 .......................................................................... 17.105, 17.120 Golding v Tanner (1991) 56 SASR 482; [1992] ANZ ConvR 233 ............................................... 17.75 Goldmile Properties Ltd v Lechouritis [2003] 2 P & CR 1 ........................................................ 14.165 Goldstraw v Goldstraw [2002] VSC 491 ...................................................................................... 6.50 Goodtitle on the demise of Dodwell v Gibbs (1826) 108 ER 264; 5 B & C 709 ......................... 11.10 Goodwin v Baylis (1875) 13 SCR (NSW) Eq 27 ......................................................................... 11.20 Gordon v Body Corporate Strata Plan 3023 [2004] VSC 359 .................................................. 17.105 Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 ................................... 14.170, 14.190 Gotobed v Pridmore (1970) 115 Sol J 78 ................................................................................ 17.180 Gower v Postmaster-General (1887) 57 LT 527 ....................................................................... 14.235 Goyal v Chandra [2006] NSWSC 239 ..................................................................................... 12.185 Graham v KD Morris & Sons Pty Ltd [1974] Qd R 1 .................................................................. 16.60 Gration v C Gillen Investments Pty Ltd [2005] QCA 184 ........................................................... 15.40 Green v Ashco Horticulturist Ltd [1966] 2 All ER 232 ............................................................... 17.120 Green’s Case (1582) Cro Eliz 3; 78 ER 269 .............................................................................. 14.260 Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 ............... 5.120, 5.185, 5.210, 5.235 Griffies v Griffies (1863) 8 LT 758 ............................................................................................ 12.125 Groongal Pastoral v Falkiner Co Ltd (1924) 35 CLR 157 .............................................. 8.125 Guggenheimer v Registrar of Titles (2002) V ConvR 54-658 ...................................................... 3.110 Gumana v Northern Territory (2007) 158 FCR 349 ................................................................. 16.100 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; [2008] HCA 10 .................... 14.230, 14.235, 14.260, 14.290 Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 ................................................................ 8.10 Guthrie v Australian and New Zealand Banking Group Ltd (1991) 23 NSWLR 672 .................................................................................................................................. 12.180 Gyarfas v Bray (1989) 4 BPR 9736 .......................................................................................... 18.120 xviii

Table of Cases

H HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368 ................................................................... 5.255 Haggerty v City of Oakland 161 Cal App 2d 407; 326 P 2d 957; 66 ALR 2d 718 (1958) ........... 11.85 Haidar v Blendale Pty Ltd [1993] 2 VR 524 ............................................................................. 14.220 Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412 ............................................................... 14.50 Hall v Busst (1960) 104 CLR 206 ................................................................................................ 4.10 Hall v Hall [1956] QWN 28 ....................................................................................................... 8.150 Halsall v Brizell [1957] Ch 169 ................................................................................................ 18.190 Hamble Parish Council v Haggard [1992] 1 WLR 122 ............................................................... 17.20 Hamersley Iron Pty Ltd v Roberts (1996) 10 WAR 52 ................................................................. 15.15 Hamilton v Joyce [1984] 3 NSWLR 279 .................................................................................. 17.145 Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478 ...................... 12.155 Hampshire v Wickens (1878) LR 7 Ch D 555 .......................................................................... 14.125 Handberg v MIG Property Services Pty Ltd [2010] VSC 388 .............................. 6.135, 6.140 Harada v Registrar of Titles [1981] VR 743 .......................................................... 17.20, 17.40, 18.20 Hardebol v Perpetual Trustee Co Ltd [1975] 1 NSWLR 221 ....................................................... 11.65 Hardie v Cuthbert (1988) 65 LGRA 5 ...................................................................................... 16.125 Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200 ............................. 14.170, 14.190, 17.105 Harrem Pty Ltd v Toyo Tyre Rubber Australia Ltd [2008] NSWSC 776 ........................ 14.135, 14.150 Harrington-Smith on behalf of the Wongatha People v Western Australia (No 8) .[2004] FCA 338 ........................................................................................................................................ 7.50 Harris v The King (1936) 56 CLR 177; [1937] ALR 78 ................................................................ 11.75 Harrison v Lia [1951] VLR 470 ............................................................................................. 9.90 Hart v Windsor (1843) 12 M & W 67; 152 ER 1114 ........................................ 14.145, 14.150 Harvey v Pratt [1965] 2 All ER 786 (CA); [1965] 1 WLR 1025 .................................................... 14.50 Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 .............................................. 14.165 Hayes v Northern Territory (1999) 97 FCR 32; [1999] FCA 1248 ............................................... 5.100 Hayes v O’Sullivan (2001) 24 WAR 40 ......................................................................................... 6.50 Hayward v Chaloner [1968] 1 QB 107 ...................................................................................... 3.110 Hayward v Skinner [1981] NSWLR 590 ................................................................................... 12.215 Haywood v Brunswick Benefit Building Society (1881) 8 QBD 403 ........................................... 18.10 Heasman v Pearse (1871) LR 7 Ch App 275 .............................................................................. 11.55 Hedley v Roberts [1977] VR 282 .......................................................... 12.150, 12.155, 12.175 Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312 ....................... 5.165 Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 ........................................................ 5.345 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 ............ 6.85, 6.90, 6.95, 6.100, 6.130 Heidke v Sydney City Council (1952) 52 SR (NSW) 143 ................................................ 1.130 Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343 .......................................... 5.145 Henderson v Squire (1868) LR 4 QB 170 ................................................................................ 14.135 Henderson’s Caveat, Re [1998] 1 Qd R 632 ....................................................................... 6.50, 6.65 Henningsen v Nolan (2004) 88 SASR 214 ............................................................................... 14.195 Henry, Ex parte; Re Commissioner of Stamp Duties (1963) 63 SR (NSW) 298; [1962] 80 WN (NSW) 435 ........................................................................................................................ 17.200 Henville v Walker (2001) 206 CLR 459 ............................................................................ 10.10 Hickey v Powershift Tractors Pty Ltd (1998) NSW ConvR 55-889 ................................... 5.185, 5.210 Hill vTupper (1863) 2 H & C 121; 159 ER 51; 9 Jur NS 725; [1865] All ER Rep 696 ................... 17.20 Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472 ................................................. 5.290 Hindson v Ashby [1896] 2 Ch 1 .............................................................................................. 16.110 Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 ......... 12.45, 12.50 His Grace Metropolitan Petar v Macedonian United Society of Western Australia Inc [2003] WASC 15 ............................................................................................................................... 6.65 Hobson v Gorringe [1897] 1 Ch 182; [1896] All ER Rep 1231 ................................................... 16.22 Hobson’s Will, Re [1907] VLR 724; 13 ALR 703 ......................................................................... 11.75 Hodgson v Marks [1971] Ch 892 .............................................................................................. 2.110 Homebase Ltd v Allied Dunbar Assurance PLC [2002] EWCA Civ 666 ...................................... 14.215 Homebush Abattoir Corp v Bermria Pty Ltd (1991) 22 NSWLR 605 ........................................ 14.135 Honey v Australian Airlines Ltd (1989) 14 IPR 264 ........................................................ 4.125 xix

Australian Property Law: Cases and Materials

Hong v Choo [2004] HKCFI 24 ............................................................................................... 12.155 Hooper v ANZ Banking Group Ltd (1996) 5 Tas R 398 ................................................................ 6.65 Hooper, Re [1932] 1 Ch 38 ...................................................................................................... 11.55 Hordern v Permanent Trustee Co (1894) 10 WN (NSW) 190 ....................................... 11.15 Horsfall v Braye (1908) 7 CLR 629 .......................................................................................... 17.105 Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 ................................................... 5.100 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 ......................................... 13.60 House v Caffyn [1922] VLR 67 ............................................................................... 10.20, 10.35 Howard v B Miles Womens Foundation Inc [2012] NSWSC 1173 ................................. 15.72 Howie v NSW Lawn-Tennis Grounds Ltd (1956) 95 CLR 132 .................................................... 18.10 Hughes v Cork [1994] EGCS 25 ................................................................................................ 3.110 Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 (1994) 179 CLR 597 ............................................................................................. 13.30, 13.35 Hunt v Luck [1902] 1 Ch 428 ................................................................................................... 2.110 Hunter’s Lease, Re [1942] Ch 124 .......................................................................................... 14.235 Hutchinson v Lemon [1983] 1 Qd R 369 .................................................................................. 5.145 Hutton v Watling [1948] Ch 26 ................................................................................................ 11.55 Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541 ............................ 8.95 Hynes v Vaughan (1985) 50 P & CR 444 ................................................................................... 16.22

I I and L Securities Ltd Pty v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 ....................... 10.15 IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 ...... 6.90, 6.95, 6.160, 6.165, 6.205, 6.215 ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140 ................................................. 1.55 IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 ........................ 2.110, 6.130, 6.180 IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458 ........................................... 1.15 Iggulden v May (1806) 7 East 237; 103 ER 91 ........................................................................ 14.125 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; 112 ALR 609 .................................................................................................................. 16.40 Imray v Oakshette [1897] 2 QB 218 ....................................................................................... 14.280 India v Chelikani Rama Rao (1916) LR 43 Ind App 192; 85 LJPC 222 ...................................... 16.100 Indian Taj Pty Ltd v Gilany [2004] NSWSC 1193 ..................................................................... 14.250 Inglis v Clarence Holdings Ltd [1997] 1 NZLR 268 .................................................................... 14.50 Inner City Businessmen’s Club Ltd v James Kirkpatrick Ltd [1975] 2 NZLR 636 ....................... 14.260 Insearch Ltd v Kin Hing Pty Ltd [2004] ANZ ConvR 111; [2003] NSWSC 875 ........................... 14.50 International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561 ...................................... 4.85 International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513 ............................................................................................................... 14.210, 14.215 International Tea Stores Co v Hobbs [1903] 2 Ch 165 ............................................................ 17.120 Ioppolo v Ioppolo (1978) 4 Fam LR 124 ..................................................................................... 6.50

J J & C Reid Pty Ltd v Abau Holdings Pty Ltd [1989] ANZ ConvR 44 .......................................... 14.295 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 .......... 6.50, 6.90, 6.95, 6.150, 6.155 JA McBeath Nominees Pty Ltd v Jenkins Development Corp Pty Ltd [1992] 2 Qd R 121 .......... 14.215 JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 ........................................................................ 3.110 JA Pye (Oxford) Ltd v United Kingdom [2008] 46 EHRR 45 ....................................................... 3.110 Jabbour v Sherwood [2003] FCA 529 ....................................................................................... 6.190 Jackson v Crosby (No 2) (1979) 21 SASR 280 ........................................................................... 9.165 Jackson, Re (1883) 25 Ch D 162 ............................................................................................... 11.90 Jackson, Re (1887) 34 Ch D 732 ............................................................................................... 12.40 Jacobs v Platt Nominees Pty Ltd [1990] VR 146 .......... 2.110, 6.90, 6.95, 6.125, 6.130, 6.140 Jacobs v Seward (1872) LR 5 HL 464 ...................................................................................... 12.125 Jaggard v Sawyer [1995] 1 WLR 269 ................................................................................ 1.150 Jalnarne Ltd v Ridewood (1989) 61 P & CR 143 ..................................................................... 17.120 xx

Table of Cases

Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584 ...................... 14.275, 14.280 James v Registrar-General (1967) 69 SR (NSW) 361 ....................................................... 5.370, 5.380 Jared v Clements [1903] 1 Ch 428 ............................................................................................ 2.110 Javins v First National Realty Corp 428 F2d 1071 (1970) ........................................................ 14.150 Jee v Audley (1787) 29 ER 1186; 1 Cox 324 .............................................................................. 11.75 Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 ...... 6.50 Jesson v Wright (1820) 4 ER 230; 2 Bli 1 ................................................................................... 11.20 Jigrose Pty Ltd, Re [1994] 1 Qd R 382 ................................................................................ 3.60 Jobson v Nankervis (1943) 44 SR (NSW) 277 .......................................................................... 17.130 John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334 ......................... 2.65 Johnson, Re [1973] 2 Qd R 502 ................................................................................................ 3.110 Johnstone, Re [1973] Qd R 347 .............................................................................................. 12.185 Jolevski v Jolevska [2010] NSWSC 416 ........................................................................... 12.210 Jones v Daniel (2005) 212 ALR 588 ......................................................................................... 12.185 Jones v Jones [1977] 1 WLR 438 ............................................................................................. 12.100 Jones v Lavington [1903] 1 KB 253 ......................................................................................... 14.165 Jones v Lock (1865) 1 Ch App 21 ...................................................................................... 9.125 Jones v Morgan (1783) 28 ER 1086; 1 Bro CC 206 ................................................................... 11.20 Jones (dec’d), Re (1950) 66 TLR (Pt 2) 51 ................................................................................. 11.85 Jonns v Tan (1999) NSW ConvR 55-906 ..................................................................................... 6.50 Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) (Pt 1) 68 ...................... 6.215 Joyce v Barker Bros (Builders) Ltd (1980) 40 P & CR 512 .......................................................... 12.25 Julian-Armitage v The Proprietors Astor Centre [1998] QCA 111 ............................. 13.120 Julong Pty Ltd v Fenn (2003) Q ConvR 54-586 .............................................................. 5.120, 5.130

K KY Enterprises Pty Ltd v Darby [2013] VSC 484 ......................................................................... 3.110 Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235 ................... 5.100, 5.130 Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 ................................................... 14.135, 17.95 Kaufman v Michael (1892) 18 VLR 375 ..................................................................................... 14.50 Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 ...... 16.22 Kazas & Assocs Pty Ltd v Multiplex Pty Ltd (2002) 11 BPR 20,353; [2002] NSWSC 840 .......... 14.135 Keane v Carter (1994) 12 WAR 20 .............................................................................................. 3.65 Kearry v Pattinson [1939] 1 KB 471 ............................................................................................ 3.20 Keddell v Regarose Pty Ltd [1995] 1 Qd R 172 ......................................................................... 5.365 Keech v Sandford (1726) 2 Eq Cas Ab 741; 22 ER 629 ................................................................ 2.85 Keitley, Re [1992] 1 VR 583 .................................................................................................... 12.195 Kellow-Falkiners Motors Pty Ltd v Nimorakiotakis [2000] VSCA 1 ............................................ 14.280 Kelly, Re [1932] IR 255 ............................................................................................................. 11.65 Kelsen v Imperial Tobacco Co (of Great Britain and Ireland) Ltd [1957] 2 QB 334; [1957] 2 All ER 343; [1957] 2 WLR 1007 ............................................................ 16.45 Kenny v Preen [1963] 1 QB 499 ............................................................................................. 14.165 Kent v Johnson (1973) 21 FLR 177 ...................................................................................... 1.30 Kenworthy v Ward (1853) 11 Hare 196; 68 ER 1245 ................................................................. 12.10 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 ................................................ 6.60, 6.65 Kerridge v Foley (1964) 82 WN (Pt 1) (NSW) 293 .................................................................... 18.10 Ketby-Fletcher’s Will Trusts, Re [1969] 1 Ch 339; [1968] 2 WLR 34 ......................................... 11.100 Kettlewell v Refuge Assurance Co [1908] 1 KB 545 ................................................................... 5.210 Kilgour v Gaddes [1904] 1 KB 457 ......................................................................................... 17.145 King v AGC (Advances) Ltd [1983] 1 VR 682 ................................................................... 6.50, 6.165 King v Smail [1958] VR 273 ...................................................................................................... 5.275 King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 .................................................................................................................... 8.135 Kingdon v Hutt River Board (1905) 25 NZLR 145 ................................................................... 16.110 Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783 ....................................................................... 2.110 Kirby v Cowderoy [1912] AC 599 ............................................................................................. 3.110 Kirk v Sutherland [1949] VLR 33 ............................................................................................... 3.120 Knight v Williams [1901] 1 Ch 256 ......................................................................................... 14.250 Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 ................................................. 8.90 xxi

Australian Property Law: Cases and Materials

Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd [2008] NSWCA 6 ....................................................................................................... 5.285 Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd [1998] 3 VR 16 ................................. 5.255 Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6 ....................................................... 9.25 Kort Pty Ltd v Shaw [1983] WAR 113 ...................................................................................... 18.105 Kranz v National Australia Bank Ltd (2003) 8 VR 310; [2003] VSCA 92 ......................... 5.265, 10.115 Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 .................................... 8.85 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 ......................................................... 6.50 Kuru v New South Wales (2008) 236 CLR 1 .............................................................................. 1.105

L LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490; 74 LGRA 282 ................................................................................................ 16.55, 16.60 Lace v Chantler [1944] KB 368; [1944] 1 All ER 305 ................................................................. 14.35 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 ....................................... 1.15 Laffer v Gillen (1927) 40 CLR 86 ............................................................................................. 14.280 Lake v Craddock (1732) 3 P Wms 158; 24 ER 1011 .................................................................. 12.40 Lam Lee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247 ......................................................... 14.205 Lambeth London Borough Council v Blackburn (2001) 82 P & CR 494 ..................................... 3.110 Lamos Pty Ltd v Hutchison (1984) 3 BPR 9350; NSW ConvR 55-183 ...................................... 17.130 Lancaster v Lloyd (1927) 27 SR (NSW) 379 ............................................................................ 17.105 Landale v Menzies (1909) 9 CLR 89 .......................................................................................... 14.60 Lane Cove Municipal Council v H & W Hurdis Pty Ltd (1955) 72 WN (NSW) 284 ..................... 18.45 Lang v Asemo Pty Ltd [1989] VR 773 ...................................................................................... 14.235 Langdale Pty Ltd v Sollas [1959] VR 637 ................................................................................... 18.75 Langmead v Thyer Rubber [1947] SASR 29 ............................................................................... 4.100 Lansen v Olney (1999) 100 FCR 1 ............................................................................................ 5.275 Lanyon Pty Ltd v Canberra Washed Sands Pty Ltd (1966) 115 CLR 342; [1967] ALR 283 ............................................................................................................. 16.105, 16.110 Lapin v Abigail (1930) 44 CLR 166 ....................................................................... 6.90, 6.100, 6.155 Lardil Peoples v Queensland [2004] FCA 298 ............................................................................ 7.100 Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62 ............................................. 14.50 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 .... 2.140, 6.90, 6.185, 6.190 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 .................... 14.295 Lawrence v Griffiths (1987) 47 SASR 455 ................................................................................ 17.160 Lawrence v South County Freeholds Ltd [1939] Ch 656 ........................................................... 18.75 Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd [2000] NSWSC 459 ................................ 14.280 Leaver, Re [1997] 1 Qd R 55 ..................................................................................................... 12.25 Legal Services Commissioner v Dempsey [2008] 2 Qd R 272 ...................................................... 2.75 Legione v Hateley (1983) 152 CLR 406 .................................................................................. 14.280 Lehrer and the Real Property Act, Re [1960] NSWR 570; (1960) 61 SR (NSW) 365 .................................................................................................................................... 16.35 Leigh v Jack (1879) 5 Ex D 264 ................................................................................................. 3.110 Leigh v Taylor [1902] AC 157 ................................................................................................... 16.22 Lemon v Lardeur [1946] 1 KB 613 ............................................................................................ 14.60 Lend Lease Development Pty Ltd v Zemlicka [1985] 3 NSWLR 207 ............... 14.165, 14.170, 14.190 Lensworth Finance Pty Ltd v Whittenbury (unreported, VSC, 1 September 1970) ..................... 6.155 Leonard v Ielasi (1987) 46 SASR 495 ....................................................................... 4.60, 4.100 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 ................................................................... 5.100 Leverhulme (No 2), Re [1943] 2 All ER 274 ............................................................................... 11.65 Lewenberg and Pryles v Direct Acceptance Corp Ltd [1981] VR 344 ........................................... 6.65 Lewis v Averay [1992] 1 QB 525 ................................................................................................. 4.95 Lewis v Bell (1985) 1 NSWLR 731 ............................................................................................. 14.25 Lickbarrow v Mason (1787) 2 TR 63; 100 ER 35 ................................................................ 4.30, 4.40 Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 ............. 14.05, 14.50 Linden v Staybond Pty Ltd [1986] NSW ConvR 55-308 .......................................................... 14.135 Liristis v Wallville [2001] NSWSC 428 ...................................................................................... 14.220 xxii

Table of Cases

Liu v Adamson (2004) NSW ConvR 56–074 .............................................................................. 5.265 Liverpool City Council v Irwin [1977] AC 239; [1976] 2 All ER 39; [1976] 2 WLR 562 ............................................................................................. 14.130, 14.135, 14.150, 17.95 Lloyds & Scottish Finance Ltd v Williamson [1965] 1 WLR 404 ..................................... 4.45 Lloyds Bank Plc v Rosset [1989] Ch 350 .................................................................................... 2.110 Lloyds Bank Plc v Rosset [1991] 1 AC 107 ................................................................................. 2.110 Lockett v Norman-Wright [1925] Ch 56 ................................................................................... 14.50 Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 ............................ 5.155, 5.165 Lolakis v Konistas [2002] NSWSC 889 ..................................................................................... 18.105 London & Blenheim Estates v Ladbroke Retail Parks Ltd [1993] 4 All ER 157; [1994] 1 WLR 31 ........................................................................................................................................ 17.40 London County Council v Allen [1914] 3 KB 642 ...................................................................... 18.10 Long v Gowlett [1923] 2 Ch 177 ............................................................................................ 17.120 Long v Michie [2003] NSWSC 233 ............................................................................ 17.180, 18.105 Long v Piper [2002] ANZ ConvR 43; (2002) NSW ConvR 56-000; [2001] NSWCA 342 ............. 14.50 Lonsdale v Gilbert [2006] NSWLEC 30 .................................................................................... 16.125 Lord Stratheden & Campbell, Re [1894] 3 Ch 265 ................................................................... 11.85 Lord’s Settlement, Re [1947] 2 All ER 685 ............................................................................... 11.100 Louis Vuitton New Zealand Ltd v Prices Wharf Property Fund Ltd [2005] ANZ ConvR 245 ...... 14.215 Louis and the Conveyancing Act, Re [1971] 1 NSWLR 164 ..................... 18.60, 18.85, 18.90 Lukacs v Wood (1978) 19 SASR 520 ......................................................................................... 5.255 Lund v MacArthur 462 P2d 482 (1969) .................................................................................. 14.150 Lynch v O’Keefe [1930] St R Qd 74 .......................................................................................... 6.155 Lyons v Lyons [1967] VR 169 ..................................................................................... 12.155, 12.185 Lysaght v Edwards (1876) 2 Ch D 499 ............................................................................. 9.70, 14.50

M Mabey v Ramsey [1963] NSWR 599 ......................................................................................... 11.20 Mabo v Queensland (No 1) (1988) 166 CLR 186 ....................................................................... 7.30 Mabo v Queensland (No 2) (1992) 175 CLR 1; 107 ALR 1 ......... 1.05, 2.05, 2.15, 2.35, 3.95, 7.25, 7.30, 7.35, 7.90, 16.75 Macfarlane v Nairn [1903] Tas LR 136; 2 N & S 136 ............................................................... 17.180 Mack and the Conveyancing Act, Re [1975] 2 NSWLR 623 ................................ 18.70, 18.75 Mackay, Re; Associated Securities (SA) Ltd v Official Receiver (1972) 20 FLR 147 ..... 4.07 Macleay, Re (1875) LR 20 Eq 186 ............................................................................................... 2.65 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 ............. 5.185, 5.200, 5.215, 5.245 Maddison v Alderson (1883) 8 App Cas 467 .................................................................. 9.165, 14.50 Magill v Magill (1993) NSW ConvR 59,793 (aff (1997) NSW ConvR 56,241) .......................... 12.185 Magnussen v Flanagen [1981] 2 NSWLR 926 ............................................................................. 4.85 Maguire v Makaronis (1997) 188 CLR 449 .................................................................... 10.125 Maiden Civil (P & E) Pty Ltd, Re [2013] NSWSC 852 ........................................................ 8.76 Main Roads, Commissioner for v North Shore Gas Co Ltd (1967) 120 CLR 118 ........................ 17.20 Mair v Rio Grande Rubber Estates Ltd [1913] AC 583 ............................................................... 5.210 Malayan Credit Ltd v Jack Chia Mph Ltd [1986] 1 AC 549 ................................ 12.35, 12.40 Malsons Pty Ltd, Re [1991] 2 Qd R 61 ........................................................................... 5.130, 14.85 Malter v Procopets (2000) V ConvR 54-624 .............................................................................. 3.110 Malzy v Eichholz [1916] 2 KB 308 .......................................................................................... 14.165 Mancetter Developments Ltd v Garmanson Ltd [1986] QB 1212; [1986] 1 All ER 449 .............. 16.30 Manjang v Drammeh (1990) 61 P & CR 194 ............................................................................ 17.85 Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 ........................................................... 9.05 Maori Trustee v Kahuroa [1956] NZLR 713 ............................................................................. 14.280 Marcroft Wagons Ltd v Smith [1951] 2 KB 496 ......................................................................... 14.25 Marengo Cave Co v Ross 7 NE (2d) 59 (1937) ......................................................................... 3.110 Maridakis v Kouvaris (1975) 5 ALR 197 ................................................................................... 14.250 Marist Brothers Community Inc v Shire of Harvey [1994] 14 WAR 69 .......................................... 9.25 Markin, Re [1966] VR 494 ...................................................................................................... 18.105 Marriott v Franklin (1993) 60 SASR 457 .................................................................................. 12.125 Marsden v Heyes Ltd [1927] 2 KB 1 ........................................................................................ 14.135 xxiii

Australian Property Law: Cases and Materials

Martin-Smith v Woodhead [1990] WAR 62 ............................................................................. 12.205 Martyn, Re (1965) 65 SR (NSW) 387 ........................................................................................ 18.90 Mason v Clarke [1955] AC 778 ............................................................................................... 17.200 Massart v Blight (1951) 82 CLR 423 ....................................................................................... 14.250 Masters v Cameron (1954) 91 CLR 353; 28 ALJR 438 ............................................................... 14.50 Maughan, Re (1885) 14 QBD 956 ............................................................................................ 14.50 Maurice Toltz Pty Ltd v Macy’s Emporium Pty Ltd [1970] 1 NSWR 474 ..................................... 17.20 Maxted v LC Smith & Co Pty Ltd [2008] QSC 165 ................................... 9.160, 15.60, 15.65 McDonald v Reicht (1984) 36 SASR 295 ............................................................... 15.05, 15.15 McDonald Trust No 1, Re [2010] VSC 324 ................................................................................ 11.65 McEacharn v Colton [1902] AC 104 ........................................................................................... 6.50 McEwin v Valuer-General (1993) 80 LGERA 12 .......................................................................... 16.40 McGrath v Campbell [2006] NSWCA 180 ......................................................................... 17.70 McGregor v McGregor (1859) 1 De GF & J 63 ......................................................................... 12.10 McIntyre v Porter [1983] 2 VR 439 ......................................................................................... 17.180 McKean’s Caveat, Re [1988] 1 Qd R 524 .................................................................................... 6.50 McKee v McKee (1986) 10 Fam LR 754 .................................................................................. 12.185 McKenzie v McAllum [1956] VLR 208 ..................................................................................... 14.215 McKinnon v Portelli (1959) 60 SR (NSW) 343 ......................................................................... 14.260 McLernon v Connor (1907) 9 WALR 141 .................................................................................. 17.85 McMahon v Ambrose [1987] VR 817 ........................................................................................ 14.50 McMillan v Dunoon [2006] ANZ ConvR 87; [2005] VSC 440 ...................................................... 6.50 McPhail v Persons, Names Unknown [1973] Ch 447 .............................................................. 14.270 McPherson v Minister for Natural Resources (1990) 22 NSWLR 671 ....................................... 14.280 McVey v Dennis (1984) FLC 91-521 ....................................................................................... 12.185 McWilliam v McWilliams Wines Pty Ltd (1963) 114 CLR 656 ....................................................... 9.50 Medforth v Blake [2000] Ch 86 ................................................................................................ 8.165 Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606 ........... 5.130, 5.255, 5.275, 5.370 Melacare International v Daley Investments [1999] NSWSC 496 ............................................. 14.280 Melksham v Archerfield Airport Corp [2004] QSC 164 .................................. 14.200, 14.205 Members of the Yorta and Yorta Aboriginal Community v Victoria (2002) 214 CLR 222; [2002] HCA 58 ................................................................................................. 7.115 Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 ......... 5.120, 5.125, 5.130, 14.80 Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 ....................... 1.115, 5.240 Merhi v New Quay Stage 2 Pty Ltd [2003] VSC 190 ............................................................... 14.280 Meriton Apartments Pty Ltd v McLaurin & Tait Developments Pty Ltd (1976) 133 CLR 671 ...... 6.215 Mervin, Re [1891] 3 Ch 197 ..................................................................................................... 11.55 Metal Manufacturers Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375 ..................... 16.22 Metropolitan Trade Finance Co Pty Ltd v Coumbis (1973) 131 CLR 396 ................................. 14.195 Meye v Electric Transmission Ltd [1942] Ch 290 ....................................................................... 14.05 Micklethwait v Newlay Bridge Co (1886) 33 Ch D 133 ........................................................... 16.110 Middle Harbour Investments Ltd, Re [1977] 2 NSWLR 652 ......................................................... 2.35 Midland Brick Co Pty Ltd v Welsh [2006] WASC 122 ................................................................... 6.65 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 ......................................................................... 7.30 Miller v Cannon Hill Estates Ltd [1931] 2 KB 113 .................................................................... 14.150 Miller v Emcer Products Ltd [1956] Ch 304 ............................................................................ 14.165 Miller v Evans [2010] WASC 127 ..................................................................................... 18.135 Miller v Minister of Mines [1963] AC 484 ........................................................................ 5.280, 6.50 Mills v Brooker [1919] 1 KB 555 ................................................................................................. 3.40 Mills v Renwick (1901) 1 SR ...................................................................................................... 2.110 Milroy v Lord (1862) 4 De G F & J 264; 45 ER 1185 ................................................................. 9.130 Mimi v Millenium Developments Pty Ltd (2004) V ConvR 54–687 ................................. 6.130, 6.155 Minter v Minter (2000) 10 BPR 18,133 ..................................................................................... 12.50 Mischel v Mischel Holdings Pty Ltd (in liq) [2012] VSC 292 .................................................... 12.185 Mitcham City Council v Clothier (1994) 62 SASR 394; 83 LGERA 431 ...................................... 17.20 Mitchell v Arblaster [1964-1965] NSWR 119 ............................................................................. 12.60 Moffett v Dillon [1999] 2 VR 480 ...................................................... 2.110, 6.90, 6.170, 6.180 Monash City Council v Melville (2000) V ConvR 54-261 ........................................................... 3.110 Monk v Custom Credit Corporation Ltd (1982) 104 LSJS 310 ..................................................... 4.75 xxiv

Table of Cases

Monte Carlo Caravan Park Pty Ltd v Curyer & Curyer [2006] QCA 363 ...... 15.110, 15.115 Moody v Steggles (1879) 12 Ch D 261 .................................................................................... 18.20 Moore v Dimond (1929) 43 CLR 105 ..................................................................... 14.65, 14.70 Moore v Ullcoats Mining Co Ltd [1908] 1 Ch 575 ........................................... 14.255, 14.260 Moore, Re [1901] 1 Ch 936 ...................................................................................................... 11.65 Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700 ...................................... 3.65 Morley v Bird (1798) 3 Ves 628; 30 ER 1192 ............................................................................. 12.40 Morley v Rennoldson (1843) 2 Hare 570; 67 ER 235 .................................................................. 2.65 Morton v Black (1986) 4 BPR 9164 ........................................................................................... 5.100 Mount Eden Land Ltd v Straudley Investments Ltd (1996) 74 P & CR 306 .............................. 14.215 Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 ....................... 3.80, 3.110, 3.115, 3.120 Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd (2001) 10 BPR 19,253 ........ 6.50 Murphy v Harris [1924] St R Qd 187 ...................................................................................... 14.245 Murphy v Michel (1867) 4 WW & A’B (L)13 ............................................................................. 3.120 Murphy v Overton Investments (2004) 216 CLR 388 .............................................................. 15.125 Murphy v Wright (1992) NSW ConvR 55-652 ............................................................................ 6.50 Murray-Oates v Jjadd Pty Ltd (1999) 76 SASR 38 .................................................................... 14.295 Muschinski v Dodds (1985) 160 CLR 583 ................................................................................. 6.190

N N Jobson and the Real Property Act 1990, Re (1951) 68 WN (NSW) 23 .................................... 5.380 NGL Properties Pty Ltd v Harlington Pty Ltd [1979] VR 92 ...................................................... 14.260 NRMA Insurance Ltd v Martin (1988) 84 ACTR 1 ........................................................................ 6.80 NSW Land and Housing Corporation v Stannard [2000] 50 NSWLR 89 ..................... 15.25 Naish and the Conveyancing Act, Re (1960) 77 WN (NSW) 892 ............................................... 18.75 Nangus Pty Ltd v Charles Donovan Pty Ltd [1989] VR 184 ..................................................... 14.295 Nathan Securities Ltd v Stavefield Holding (No 29) Ltd (1993) 6 BCB 227 ................................ 8.165 National Australia Bank Ltd v Blacker (2000) 104 FCR 288; 179 ALR 97; [2000] FCA 1458 ............................................................................................................... 16.10, 16.22 National Australia Bank Ltd v Maher [1995] 1 VR 318 ............................................................... 5.100 National Australia Bank Ltd v New South Wales (2009) 182 FCR 52; 260 ALR 115 ...................... 2.35 National Bank of Australia v Dyer (1996) V ConvR 54-533 .......................................................... 6.50 National Banking Corporation of Australia Ltd v Hedley (1984) NSW ConvR 55-211 ................. 5.185 National Commercial Banking Corp. of Australia Ltd v Hedley (1984) NSW ConvR 55-211 ....... 5.210 National Executors and Trustees Co of Tasmania Ltd v Edwards [1957] Tas SR 182 .................................................................................................................................. 17.205 National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732 ..................................... 14.25 National Trustees, Executors & Agency Co of Australasia Ltd v Boyd (1926) 39 CLR 72 ........... 14.110 National Trustees Executors and Agency Co of Australasia Ltd v Long [1939] VLR 33; [1939] ALR 46 .................................................................................................................. 17.105, 17.120 Naziridis v Rimis (1985) 9 BPR 16,201 .................................................................................... 12.240 Neilson v Letch (No 2) [2006] NSWCA 254 .............................................................................. 12.60 Nelson v Nelson (1995) 184 CLR 538 ....................................................................................... 10.55 Netherby Properties Pty Ltd v Tower Trust Ltd (1999) 76 SASR 9; [1999] SASC 247 ......................................................................................................................... 18.25, 18.90 Neubacher v Good (2003) 11 BPR 20,877 .............................................................................. 12.195 New South Wales v Koumdjiev (2005) 63 NSWLR 353 ........................................................... 12.155 New South Wales Sports Club Ltd v Solomon (1914) 14 SR (NSW) 340 .................................. 14.125 New South Wales in Williams v State Transit Authority of NSW [2004] NSWCA 179 .................. 17.75 Newcastle-under-Lyme v Wolstanton Ltd [1947] 1 Ch 92 ......................................................... 17.20 Newton Abbot Cooperative Society Ltd v Williamson and Treadgold Ltd [1952] Ch 286 .......... 18.60 Newtons of Wembley Ltd v Williams [1965] 1 QB 560 .............................................................. 4.100 Newtons of Wembly Ltd v Williams [1965] 1 QB 560 .................................................................. 4.95 Nguyen v Huy On (2004) NSW ConvR 56-065 ........................................................................... 6.50 Ninubon v Gag Pty Ltd (1998) 9 BPR 16,479 ......................................................................... 14.250 Norden v Blueport Enterprises Ltd [1996] 3 NZLR 450 ........................................................... 14.165 North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971] 2 NSWLR 150 ........................................................................................................... 17.80, 17.85 Northern Building Contractors Pty Ltd v Bourseguin (1992) ANZ ConvR 598 ........................... 5.165 xxv

Australian Property Law: Cases and Materials

Northern Countries Fire Insurance Co v Whipp (1884) 26 Ch D 482 ............... 2.115, 2.120 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 ........................... 15.35, 15.40 Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24 .......................... 16.100 Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 ...................... 2.65

O O’Byrne v Gillett (Real Property) [2006] VCAT 1053 ................................................................ 12.115 O’Neil v Hart [1905] VLR 107 ................................................................................................... 3.110 Oak Property Co Ltd v Chapman [1947] KB 886 .................................................................... 14.260 Obadia v Morris (1974) 232 EG 333 ....................................................................................... 17.180 Oceanic Village Ltd v Shirayama Shokusan Co Ltd [2001] All ER (D) 62 (Feb); [2001] L & TR 35 ......................................................................................................................... 14.170, 14.190 Official Receiver v Klau; Ex parte Stephenson Nominees Pty Ltd (1987) 74 ALR 67 .................... 5.275 Official Trustee in Bankruptcy v Mateo (2003) 202 ALR 571 ........................................... 6.50, 12.185 Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 ............. 14.215, 14.220, 14.280 Oleander Nominees Pty Ltd v Owners of Lakeside Villas Strata Plan 14025 [2002] WASC 255 .... 18.105 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193 .......................................................... 14.220 Oppenheimer v Attenborough [1908] 1 KB 221 ......................................................................... 4.75 Osmanoski v Rose [1974] VR 523 ............................................................................................. 6.155 Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [2003] VSC 495 ................................................................................................................... 2.110 Owen v Gadd [1956] 2 QB 99 ................................................................................................ 14.165 Owners - Strata Plan 5709, The v Andrews [2009] NSWCA 189 .................................. 13.40 Owners Strata Plan 50276 v Chee Min Thoo [2013] NSWCA 270 .............................. 13.115 Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [2000] WASC 293 ........................................................................................................................... 13.35 Oxford v Moss (1979) 68 Cr App R 182 ....................................................... 1.65, 4.145, 4.150

P P&A Swift Investments v Combined English Stores Group Plc [1989] AC 632 ....... 14.225, 14.235 PT Ltd v Maradona Pty Ltd (1991) 25 NSWLR 643 ............................................. 5.100, 5.120, 5.130 Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finances) Ltd [1965] AC 867 ................... 4.100 Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 452 ......................................................... 5.240 Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; 215 ALR 253; 79 ALJR 1121; [2005] HCA 28 ............................................................................................... 4.15, 8.05 Palmer v Board of Land and Works (1875) 1 VLR (E) 80 ............................................................ 17.30 Palumberi v Palumberi (1986) 4 BPR 9106 .......................................................... 16.15, 16.22 Pampris v Thanos [1968] 1 NSWR 56 ..................................................................................... 14.150 Pan Australian Credits (SA) Pty Ltd v Kolim Pty Ltd (1981) 27 SASR 353 ................................... 16.22 Pancontinental Mining Ltd v Commissioner of Stamp Duties [1989] 1 Qd R 310 ...................... 4.150 Panizutti v Trask (1987) 10 NSWLR 531 .................................................................................. 12.215 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ............................ 4.120 Parker v Mortgage Advance Securities Pty Ltd [2003] QCA 275 ...................... 5.260, 5.265 Parker v Registrar-General [1977] 1 NSWLR 22 ............................ 5.345, 5.350, 5.360, 5.365 Paroz v Paroz [2010] QSC 203 ........................................................................................ 12.130 Parry v Sullivan (1979) 9 RFL (2d) 349 .................................................................................... 12.185 Parsons v McBain (2002) 109 FCR 120; 192 ALR 772 ............................................................... 6.190 Parsons v Queen (1999) 195 CLR 619 ..................................................................... 1.60, 4.190 Patmore v Upton (2004) 13 Tas R 95 ............................................................................... 6.50, 6.190 Paul v Nurse (1828) 8 B & C 486; 108 ER 1123 ...................................................................... 14.245 Paulet v Stewart [2009] VSC 60 ........................................................................................ 10.90 Payne v Inwood (1996) 74 P & CR 42 .................................................................................... 17.120 Pearson v Rose & Young Ltd [1950] 2 All ER 1027; [1951] 1 KB 275 ........................................... 4.75 Peck v Peck [1965] SASR 293 ................................................................................................. 12.205 Peck, Re [1893] 2 Ch 315 ....................................................................................................... 17.120 xxvi

Table of Cases

Peckham v Ellison (1999) 77 P & CR 172 .................................................................................. 17.95 Peddie v Stein (1998) NSW ConvR 55-379 ............................................................................... 5.210 Pedulla v Panetta [2011] NSWSC 1386 ..................................................................................... 5.345 Pekel v Humich (1999) 21 WAR 24 ......................................................................................... 17.145 Peldan v Anderson (2006) 229 ALR 432 .................................................................................. 12.185 Pemberton v Dimitrijevic [2001] NSWSC 54 ............................................................................. 14.50 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 ............................ 8.165 Penn v Gatenex Co Ltd [1958] 2 QB 210 ............................................................................... 14.150 Penny Nominees Pty Ltd v Fountain (No 3) (1991) NSW ConvR 55-561 ................................. 12.185 People of the State of New York ex rel, The Nonhuman Rights Project Inc, on behalf of Tommy v Lavery (2014) WL 6802767 (NYAD 3 Dept) ............................................................ 1.15 Perman v Maloney [1939] VLR 376 ........................................................................................ 12.205 Permanent Trustee Australia Ltd v Esanda Corp Ltd (1991) 6 BPR 13,420; [1991] ANZ ConvR 565 .......................................................................................................................... 16.22 Permanent Trustee Ltd v Shand (1992) 27 NSWLR 426 .......................................................... 17.200 Perpetual Ltd v Barghachoun [2010] NSWSC 108 .................................................................... 5.100 Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209 ......................................................... 11.55 Perpetual Trustee Co Ltd v Gilmour [1979] 2 NSWLR 716 .......................................................... 2.65 Perpetual Trustee Company Ltd v Smith [2010] V ConvR 54-779 .......... 2.110, 6.90, 6.175, 6.180 Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328 ......................................................... 5.110 Perpetual Trustees Victoria Ltd v English [2010] ANZ ConvR 10-015; [2010] NSW ConvR 56-260 ................................................................................................................................ 5.110 Perpetual Trustees Victoria Ltd v Suncorp-Metway Ltd [2009] NSWLEC 1326 ......................... 16.125 Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281 ........................................... 5.120, 5.130 Perpetual Trustees Victoria Ltd v Xiao Hui Ying [2015] VSC 21 .................................................. 5.120 Perrin v Blake (1770) 98 ER 355; 4 Burr 2579 ........................................................................... 11.20 Perry v Clissold [1907] AC 73 ............................................................................. 3.80, 3.85, 3.90 Perry v Rolfe [1948] VLR 297 ............................................................................................. 8.40, 8.50 Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 ............ 6.120, 6.155 Perth Construction Pty Ltd v Mount Lawley Pty Ltd (1955) 57 WALR 41 ................................. 18.105 Pertsoulis v Pertsoulis (1980) FLC 90,823 ............................................................................... 12.185 Peters v Lithgow Forge Pty Ltd [2010] NSWSC 283 .................................................................... 6.50 Phillips v Marrickville Municipal Council (2002) 11 BPR 20,135 ................................................ 3.120 Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35; [1964] 2 WLR 996 ........................ 17.20, 17.120 Picwoods Pty Ltd v Panagopoulos (2005) NSW ConvR 56-120; [2004] NSWSC 978 ................. 14.50 Pigot’s Case (1614) 11 Co Rep 26b .......................................................................................... 5.100 Pilcher v Rawlins (1872) 7 Ch App 259 ................................................................... 2.95, 2.100 Pile’s Caveats, Re [1981] Qd R 81 ............................................................................................... 6.50 Pimms Ltd v Tallow Chandlers Co Ltd [1964] 2 QB 547 .......................................................... 14.215 Pines v Perssion 111 NW 2d 409 (1961) ................................................................................. 14.150 Pinewood Estate, Farnborough, Re [1958] Ch 280 ................................................................... 18.60 Pirie v Registrar-General (1962) 109 CLR 619 ........................................................................... 18.60 Pitt v Baxter (2006) 159 A Crim R 293; [2006] WASC 4 ........................................................... 12.155 Pivotal Pty Ltd, Re [2000] VSC 264 ......................................................................................... 18.105 Platt v Ciriello [1998] 2 Qd R 417 .................................................................................. 13.100 Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 ............................... 2.110, 6.90, 6.95 Plenty v Dillon (1991) 171 CLR 635 .................................................................................... 1.95 Polden v Bastard (1865) LR 1 QB 156 ..................................................................................... 17.105 Ponderosa International Development Inc v Pengap Securities (Bristol) Ltd (1986) 277 EG 1252 .................................................................................................................................. 14.215 Port v Griffith [1938] 1 All ER 295 ........................................................................................... 14.170 Porter v Williams (1914) 14 SR (NSW) 83 ................................................................................. 14.35 Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598 .......................................... 18.105, 18.120 Postle v Sengstock [1994] 2 Qd R 290 ........................................................................................ 8.15 Pozzi, Re [1982] Qd R 499 ...................................................................................................... 12.185 PricewaterhouseCoopers Legal v Perpetual Trustees Victoria Ltd (2007) 14 BPR 26,835 ............ 16.22 Prior v Lansdowne Press Pty Ltd [1977] VR 65 .......................................................................... 12.14 Prior’s Case (1368) YB 42 Ed III ............................................................................................... 18.170 xxvii

Australian Property Law: Cases and Materials

Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 ............................................... 14.295 Property Unit Nominees (No 2) Pty Ltd, Ex parte [1981] Qd R 178 .......................................... 5.145 Proprietors Strata Plan No 30234 v Margiz Pty Ltd (1993) 32 NSWLR 294 .............. 13.50 Proprietors Strata Plan No 9,968 v Proprietors Strata Plan No 11,173 [1979] 2 NSWLR 605 .... 17.180 Proprietors of Strata Plan 6522 v Furney [1976] 1 NSWLR 412 ............................................... 13.110 Proprietors of the Centre Building Units Plan No 343, The v Bourne [1984] 1 Qd R 613 ......... 12.125 Prospect County Council v Cross (1991) 21 NSWLR 601 ........................................................ 17.105 Provident Capital Ltd v Zone Developments Pty Ltd [2002] NSW ConvR 56-003; [2001] NSWSC 843 ....................................................................................................................... 14.215 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 ................................... 14.35 Public Trustee v Evans (1985) 2 NSWLR 188 ........................................................................... 12.195 Public Trustee v Fraser (1987) 9 NSWLR 433 .......................................................................... 12.195 Public Trustee v Gittoes (aka Caldar) [2005] NSWSC 373 ......................................................... 12.50 Public Trustee v Grivas [1974] 2 NSWLR 316 .......................................................................... 12.185 Public Trustee v Hall [2003] ACTCA 27 ................................................................................... 12.185 Public Trustee v Paradiso (1995) 64 SASR 387 ............................................................... 5.240, 5.305 Public Trustee v Pfeiffle [1991] 1 VR 19 ................................................................................... 12.185 Pugh v Savage [1970] 2 QB 373; [1970] 2 All ER 353 ............................................................. 17.145 Pulleyn v Hall Aggregates (Thames Valley) Ltd (1992) 65 P & CR 276 ....................................... 3.110 Purchase v Lichfield Brewery Co [1915] 1 KB 184 ................................................................... 14.245 Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380 ............................................... 11.25, 11.35 Pwllbach Colliery Co Ltd v Woodman [1915] AC 634; [1915] All ER Rep 124 ................. 17.30, 17.95 Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 .......... 5.100, 5.120, 5.130, 5.175, 5.185

Q Quach v Marrickville Municipal Council (No 2) (1990) 22 NSWLR 55 ....................................... 3.110 Quarmby v Keating [2008] TASSC 71 ......................................................................................... 2.75 Queensland v Beames (2002) 120 LGERA 309; Q ConvR 54-571; [2002] QCA 209 ................. 16.100 Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81 .............................................. 5.120 Queensway Marketing Ltd v Associated Restaurants Ltd (1984) 271 EG 1108 ......................... 14.165

R R v Cattell [2010] SASCFC 18 ................................................................................................... 1.105 R v Commissioners of Sewers for Pagham (Sussex) (1828) 108 ER 1075; 8 B & C 355 ............ 16.100 R v Credit Tribunal (SA); ex parte GMAC (1977) 137 CLR 545 .................................................. 15.20 R v Delphin (2001) 79 SASR 429 .............................................................................................. 1.105 R v McKay [1957] VR 560 ........................................................................................................... 1.55 R v Recorder of Titles; Ex parte Horlock [1991] Tas R (NC) N4; [1992] ANZ ConvR 172 ............ 5.145 R v Stewart (1988) 50 DLR (4th) 1 ............................................................................................ 4.150 R v The Registrar of Titles; Ex parte Waddington [1917] VLR 603; 23 ALR 315 ...... 17.15, 17.20 R v Turner [1962] VR 30 ........................................................................................................... 1.105 R K Roseblade and V M Roseblade and the Conveyancing Act, Re [1964-5] NSWR 2044 ........ 18.105 R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100 ........................................................ 5.165 RJ Finlayson Ltd v Elder, Smith & Co Ltd [1936] SASR 209 ........................................................ 17.20 Radaich v Smith (1959) 101 CLR 209; [1959] HCA 45 ........................................ 14.20, 14.25 Rains v Buxton (1880) 14 Ch D 537 ......................................................................................... 3.110 Rands Development Pty Ltd v Davis (1975) 133 CLR 26 ............................................................. 9.50 Ransome, Re [1957] Ch 348; [1957] 1 All ER 690 ................................................................... 11.100 Raphael, Re; Permanent Trustee Co of New South Wales Ltd v Lee (1903) 3 SR (NSW) 196 ...... 11.55 Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70 ......................................................... 9.70 Rasmanis v Jurewitsch [1968] 2 NSWR 166 .................................................................. 12.190 Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407 .......................................................... 12.190 Rasmussen v Rasmussen [1995] 1 VR 613 ...................................................................... 5.100, 5.275 Ratcliffe v Watters [1969] 2 NSWR 146; (1969) 89 WN (Pt 1) ................................................... 5.210 Ratto v Trifid Pty Ltd [1987] WAR 237; (1985) 56 LGRA 22; [1985] ANZ ConvR 202 ................. 14.50 xxviii

Table of Cases

Ray v Hazeldine [1904] 2 Ch 17 ............................................................................................... 17.85 Raymond Pemberton v Milivoj Dimitrijevic [2001] NSWSC 54 .................................... 14.30 Redden v Wilks [1979] WAR 161 ................................................................................................. 9.25 Redglove Projects v Ngunnawal Local Aboriginal Council (2004) 12 BPR 22–319 ....................... 6.50 Regent v Millett (1976) 133 CLR 679; 10 ALR 496 ................................................ 9.30, 14.50 Regis Property Co Ltd v Dudley [1959] AC 370 ....................................................................... 14.135 Regis Towers Real Estate Pty Ltd v CSS Holdings Pty Ltd [2001] NSWSC 139 ............................ 13.35 Registrar-General v Behn [1980] 1 NSWLR 589 .............................................................. 5.345, 5.365 Registrar-General v Cleaver (1996) 4 NSWLR 713 ..................................................................... 5.145 Registrar-General v Fairless [1997] 1 VR 404 ............................................................................. 5.360 Registrar-General (NSW) v Jea Holdings (Aust) Pty Ltd [2015] NSWCA 74 .... 17.35, 17.65 Registrar General of New South Wales v Van Den Heuvel [2010] NSW ConvR 56-266; [2010] ANZ ConvR 10-040 ............................................................................... 5.105 Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 ............................................................. 5.345 Renshaw v Maher [1907] VLR 520 .......................................................................................... 14.245 Renwarl Pty Ltd v Birky (1998) V ConvR 54-578 ......................................................................... 6.50 Reste Realty Corp v Cooper (1968) 53 NJ 444; 251 A 2d 268 (1968) ...................................... 14.295 Reuthlinger v MacDonald [1976] 1 NSWLR 88 ........................................................................... 2.65 Rhone v Stephens [1994] 2 AC 310 ........................................................................... 18.180, 18.190 Rice v Rice (1853) 2 Drew 73; 61 ER 646 .................................................................................... 6.90 Richardson v Landecker (1949) 66 WN (NSW) 236 ................................................................ 14.195 Ridley v Taylor [1965] 2 All ER 51 ............................................................................................ 18.105 Riley v Penttila [1974] VR 547; 30 LGRA 79 ................................. 3.110, 17.10, 17.20, 17.180 Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327 ............................... 2.50 Roads and Traffic Authority v Swain (1997) 41 NSWLR 452 ........................................ 15.80 Roake v Chadha [1984] 1 WLR 40 ............................................................................................ 18.45 Robertson v Butler [1915] VLR 31 ............................................................................................. 3.120 Robertson v Fraser (1871) 6 Ch A 696 ............................................................................. 12.20 Robinson v Hardcastle (1788) 2 Term Rep 241; 100 ER 131 ...................................................... 11.55 Robinson v Kilvert (1889) LR 41 Ch D 88 ................................................................... 14.170, 14.190 Robinson v Kingsmill (1954) 71 WN (NSW) 127 ..................................................................... 14.250 Robinson, Re [1972] VR 278 ............................................................................... 18.100, 18.105 Robson-Paul v Farrugia (1969) 20 P & CR 820 ........................................................................ 12.155 Roche and Murdoch’s Contract, Re [1921] VLR 296 ............................................................... 17.120 Roche and the Conveyancing Act, Re (1960) 77 WN (NSW) 431 .............................................. 18.45 Rochford v Hackman (1852) 68 ER 597; 9 Hare 475 ................................................................. 11.10 Rock v Todeschino [1983] Qd R 356 ......................................................................................... 5.100 Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485 .............................................................. 6.65 Roddy v Fitzgerald (1858) 10 ER 1518; 6 HL Cas 823 ............................................................... 11.20 Rodwell v GR Evans & Co Pty Ltd [1978] 1 NSWLR 448; [1979] ANZ ConvR 8 ....................... 17.145 Rogers v Hosegood [1900] 2 Ch 388 ........................................................................... 18.45, 18.170 Rogers v Mutch (1878) 10 Ch D 25 .......................................................................................... 11.90 Rogers v Resi-Statewide Corporation Ltd (1991) 101 ALR 377 .................................................. 5.295 Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97 .............................................. 14.260 Rosher, Re (1884) 26 Ch D 801 .................................................................................................. 2.65 Routledge v Dorril (1794) 30 ER 671; 2 Ves Jun 357 ................................................................. 11.55 Roy v Lagona [2010] VSC 250 ................................................................................................ 16.120 Royal Bank of Scotland v Etridge (No 2) [2002] AC 773 ............................................................ 5.255 Royal Brunei Airlines v Tan [1995] 3 WLR 64 ............................................................................... 2.85 Royal College of Surgeons of England v National Provincial Bank Ltd [1952] AC 631; [1952] 1 All ER 984; [1952] 1 TLR 978 ............................................................................................. 11.55 Royal Melbourne Hospital v Equity Trustees Ltd (2007) 18 VR 469; [2007] VSCA 162 ......................................................................................................................... 13.20, 13.25 Royal Victoria Pavilion (Ramsgate), Re [1961] Ch 581 ............................................................... 18.35 Rufa Pty Ltd v Cross [1981] Qd R 365 .......................... 9.185, 17.155, 17.160, 18.185, 18.190 Rule v Mallon (2000) 10 BPR 18,005 ........................................................................................ 12.50 Rural View Developments Pty Ltd v Fastfort Pty Ltd [2009] QSC 244 ...................... 17.155 Russo v Bendigo Bank Ltd [1999] 3 VR 376 .............................................. 5.180, 5.185, 5.210 Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 ............................................................................. 6.190 Ryan v Dries (2002) 10 BPR 19,497 ....................................................................... 12.65, 12.70 xxix

Australian Property Law: Cases and Materials

Ryan v King [1932] QWN 1 .................................................................................................... 12.240 Ryan v O’Sullivan [1956] VLR 99 ......................................................................................... 8.60 Ryan v Starr [2005] NSWSC 170 ............................................................................................... 5.165 Rye v Rye [1962] AC 496 ........................................................................................................ 17.120

S Sabri, Re (1996) 137 FLR 165; (1997) FLC 92-732 ........................................................... 6.50, 6.190 Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 ................ 18.160 Sahade v BP Australia Pty Ltd (2005) NSW ConvR 56–113 .......................................................... 6.50 Saint v Jenner [1973] Ch 275 ................................................................................................. 18.150 Sames v The District Council of Mount Barker [2004] SASC 374 .............................. 18.145 Sampi on behalf of the Bardi and Jawi People v Western Australia (2010) 266 ALR 537 ............. 7.110 Sanderson v Mayor of Berwick-on-Tweed (1884) LR 13 QBD 547 ........................................... 14.165 Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329 ........ 14.110 Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (in liq) (1998) 45 NSWLR 556 ..... 2.35 Sansom Nominees Pty Ltd v Meade [2005] WASC 9 ............................................................... 14.150 Santucci v Barnes (1992) V ConvR 54-434 ................................................................................ 3.110 Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 9514; (1989) NSW ConvR 55-437 ................................................................................................. 16.22 Sarson v Roberts [1895] 2 QB 395 .......................................................................................... 14.150 Sawyer v Starr [1985] 2 NZLR 540 ............................................................................................ 18.90 Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd (2009) 14 BPR 27 ........................ 11.65 Sayers v Collyer (1884) 28 Ch D 103 ...................................................................................... 18.125 Schmidt v 28 Myola Street Pty Ltd [2006] VSC 343 ........................................................... 6.50, 6.80 Schnytzer v Wielunski [1978] VR 418 ...................................................................................... 12.205 Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576 .................................. 5.205, 5.210 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793 ............................................ 2.35 Secure Parking (WA) Pty Ltd v Wilson [2005] WASC 264 ......................................................... 14.195 Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268 .......................................... 14.170, 14.190 Sefton v Tophams Ltd [1967] 1 AC 50 .................................................................................... 18.180 Segal v Barel [2013] NSWCA 92 ............................................................................................. 12.215 Segal Securities Ltd v Thoseby [1963] 1 QB 887 ..................................................................... 14.260 Seidler v Schallhofer [1982] 2 NSWLR 80 .................................................................................... 2.65 Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 ................................. 13.85 Selous, Re [1901] 1 Ch 921 ...................................................................................................... 12.50 Selwyn v Garfit (1888) LR 38 Ch D 273 .................................................................................. 14.260 Seven Network (Operations) Ltd v TCN Channel 9 Pty Ltd (2005) 222 ALR 569 ....................... 12.14 Shadbolt v Wise (2006) 1 Qd R 553; [2005] QCA 443 ............................................................ 16.125 Shaw v Garbutt (1996) 7 BPR 14,816 ............................................................................ 3.110, 3.120 Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444 ............................. 6.50 Sheahan v Cooper [1999] FCA 190 ......................................................................................... 12.205 Shean Pty Ltd v Corinne Court (Owners of) 290 Stirling Street Perth Strata Plan 12821 (2001) 25 WAR 65 ............................................................................................................... 5.100 Shell Co Ltd v Kenpark Pty Ltd (1985) 38 SASR 297 ................................................................. 15.15 Shelley’s Case (1581) 76 ER 206; 1 Co Rep 93b .................................................. 11.10, 11.20, 11.25 Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315 ............................................................ 3.120, 17.180 Shepherd v Ingram (1764) 27 ER 296; Amb 448 .................................................................... 11.100 Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267 .................................................. 18.10 Sheppard v Gibbons (1742) 26 ER 666; 2 Atk 441 .................................................................... 11.20 Sherrard v Registrar of Titles [2004] 1 Qd R 558 ....................................................................... 3.100 Shiloh Spinners Ltd v Harding [1973] AC 691 ......................................................................... 18.190 Shropshire Union Rlys & Canal Co v The Queen (1875) LR 7 HL 496 ........................................ 2.140 Sidebotham v Holland [1895] 1 QB 378 ...................................................................... 14.60, 14.250 Siemenski v Brooks Nominees [1990] Tas R 236 ............................................................ 5.145, 18.30 Silvan Properties Ltd v Royal Bank of Scotland PLC [2004] 1 WLR 1410 .................................... 8.165 Simmons v Body Corporate of Strata Plan 5181 [1980] VR 103 .............................................. 13.110 Simmons v Dobson [1991] 4 All ER 25; [1991] 1 WLR 720 ..................................................... 17.145 Simpson v Weber (1925) 133 LT 46 .......................................................................................... 17.95 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 .......................................................... 6.50 xxx

Table of Cases

Site Developments (Ferndown) Ltd v Cuthbury Ltd [2011] Ch 226 ........................................... 3.120 Sixty-Fourth Throne Pty Ltd v Macquarie Bank (1996) V ConvR 54-546 .................................... 5.100 Smith v Jones [1954] 1 WLR 1089 .......................................................................... 2.105, 2.110 Smith v Lloyd (1854) 9 Exch 562; 156 ER 240 .......................................................................... 3.110 Smith v Marrable (1843) 11 M & W 6; 152 ER 693 ......................................... 14.140, 14.150 Smith (dec’d), Re [1967] VR 341; (1966) 18 LGRA 403 ............................................................. 11.55 Smith Kline and French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 .................................................................................. 4.150 Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500 ..................................................................................................................... 18.165, 18.170 Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 ..................................................................... 5.165 Sodhi v Stanes [2007] NSWSC 177 ................................................................................. 17.150 Somma v Hazelhurst [1978] 2 All ER 1011; [1978] 1 WLR 1014 ................................................ 14.25 South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603 ....... 5.280, 5.290 Southern Centre of Theosophy Inc v South Australia [1982] AC 706 ......................... 16.95 Southlink Holdings Pty Ltd v Morerand Pty Ltd [2010] VSC 214 ................................................. 2.65 Southwark London Borough Council v Mills [2001] 1 AC 1; [1999] 4 All ER 449; [1999] 3 WLR 939 ......................................................................................................... 14.160 Sovmots Investments Ltd v Secretary of State for the Environment [1979] AC 144; [1977] 2 All ER 385; [1977] 2 WLR 951 ............................................................................... 17.105, 17.120 Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087 ............................................................................................................................. 3.80, 3.90 Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54 ................................... 14.280 Spathis v Havane Investment Co Pty Ltd [2002] NSWSC 304 .................................... 14.165, 14.260 Spence v Federal Commissioner of Taxation (1967) 121 CLR 273 ............................................. 12.40 Spencer’s Case (1583) 5 Co Rep 16a; 77 ER 72 ................................................ 14.240, 14.245 Sprott v Harper (2000) Q ConvR 54-545 ................................................................................ 12.185 Spunter Pty Ltd v Hall [2006] WASC 6 ........................................................................................ 6.50 Spyer v Phillipson [1931] 2 Ch 183 ............................................................................... 16.22, 16.30 Squire v Rogers (1979) 39 FLR 106 ........................................................................................... 12.90 Staight v Burn (1869) LR 5 Ch App163 ................................................................................... 17.180 Stanhill Pty Ltd v Jackson [2005] VSC 169 .............................................................................. 18.105 Stansfield, Re (1880) 15 Ch D 84 ............................................................................................. 11.90 State v Shaw (1902) 67 Ohio St 157 .......................................................................................... 3.20 State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398 .......................................................................... 5.255, 5.275, 5.370, 5.375, 5.380 State Bank of New South Wales v Yee (1994) 33 NSWLR 618 .................................................... 5.210 State Electricity Commission of Victoria & Joshua’s Contract, Re [1940] VLR 121; [1940] ALR 105 ............................................................................................ 17.90, 17.95 State Transit Authority of NSW v Australian Jockey Club (2003) 11 BPR 21,107; [2003] NSWSC 726 ....................................................................................................................... 17.145 State for the Army, Minister of v Dalziel (1944) 68 CLR 261 .................................................... 14.295 State of Queensland v Congee [2015] HCA 17 ........................................................................... 7.75 Steadman v Steadman [1976] AC 536 ............................................................................. 9.40, 14.50 Stephen v Bell (1934) 37 WALR 52 ........................................................................................... 16.22 Stern (dec’d), Re [1962] Ch 732 ............................................................................................... 11.65 Steve Christenson & Co Ltd v Furs and Fashions (NZ) Ltd [1971] NZLR 129 ........................... 14.250 Stevens and Evans v Allan and Armanasco (1955) 58 WALR 1 ................................................. 17.105 Stillman v Youmans 266 SW 2d 913 (1954) ............................................................................ 14.295 Stilwell v Blackman [1968] Ch 508 ........................................................................................... 18.60 Stockdale v City of Charles Sturt (2000) 76 SASR 225 ................................................ 15.135 Stone v Owen [2001] 1 Qd R 419 ......................................................................... 12.95, 12.100 Stoneham, Re [1919] 1 Ch 149 ......................................................................................... 9.100 Stow v Mineral Holdings (Australia) Pty Ltd (1977) 180 CLR 295; 14 ALR 397 ......... 1.40, 7.20 Street v Mountford [1985] AC 809 .............................................................................. 14.25, 14.205 Strugwell v Walker (1993) DFC 95-134 ..................................................................................... 10.45 Stuy v BC Ronalds Pty Ltd [1984] 2 Qd R 578 ........................................................................... 17.65 Subiaco, City of v Heytesbury Properties Pty Ltd (2001) 24 WAR 146; [2001] WASCA 140 ...... 14.295 xxxi

Australian Property Law: Cases and Materials

Sullivan v McMahon [1999] WASC 84 ........................................................................................ 6.65 Sunlea Investments Pty Ltd v New South Wales (1998) 9 BPR 16,707; [2000] ANZ ConvR 274 .................................................................................................................................... 16.100 Sunny Corporation Pty Ltd v Elkayess Nominees Pty Ltd [2006] VSC 314 .................................. 3.110 Supply & Development, Minister for v Servicemen’s Co-operative Joinery Manufacturers Ltd [1951] HCA 15; (1951) 82 CLR 621 .............................................. 9.80 Swan v Sinclair [1925] AC 227 ................................................................................................ 17.180 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 ........... 2.110, 6.45, 6.50, 6.190 Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121 ................................. 14.50, 14.295 Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 .................................... 14.125 Symbion Pathology Pty Ltd v Healthscope Ltd [2006] ANZ ConvR 347; [2006] VSC 191 .......... 5.225

T Taddeo v Catalano (1975) 11 SASR 492 ................................................................................... 6.155 Tallon v Proprietors of Metropolitan Towers Building Units Plan No 5157 [1997] 1 Qd R 102 .... 16.125 Tannous v Cipolla [2001] NSWSC 236 .................................................................................... 14.280 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 .............. 6.50, 9.65, 9.70, 10.130 Tanzone Pty Ltd v Westpac Banking Corp (1999) NSW ConvR 55-908 ...................................... 5.255 Tapling v Jones (1865) 12 CB (NS) 826; 142 ER 1367 ............................................................. 17.180 Targetts Pty Ltd v Target Australia Pty Ltd (1993) 26 IPR 51 ...................................... 4.135 Taxation, Commissioner of v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 ................. 2.75 Taxation, Commissioner of v Metal Manufacturers Ltd (2001) 108 FCR 150; 182 ALR 98; 2001 ATC 4152; 46 ATR 497; [2001] FCA 365 ...................................................................... 16.22 Taylor v Browning (1885) 11 VLR 158 .................................................................................... 17.105 Teague v Trustees, Executors and Agency Co Ltd (1923) 32 CLR 252 ........................................ 11.75 Tennant v Adamczyk [2006] 1 P & CR 28 ................................................................................. 3.110 Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR 625 ............................. 5.130, 14.85 Teparyl Pty Ltd v Willis [2009] VSC 259 .................................................................................. 14.245 Terry v O’Connell [2010] NSWSC 255 ........................................................................................ 6.50 Tessari v Bais Pty Ltd (1992) 60 SASR 59 ........................................................................ 5.130, 14.85 Texaco Antilles Ltd v Kernochan [1973] AC 609 ...................................................................... 18.120 Thamesmead Town Ltd v Allotey (1998) 30 HLR 1052 ............................................................ 18.190 The Land Transfer Act 1908, Re; Ex parte Matheson (1914) 33 NZLR 838 ................................. 11.05 Thearle v Kelley (1958) 76 WN (NSW) 48 ............................................................................... 14.295 Thellusson v Woodford (1805) 32 ER 1030; 11 Ves Jun 112 ....................................................... 11.65 Theodore v Mistford Pty Ltd (2005) 221 CLR 612; [2005] HCA 45 ............ 6.155, 8.20, 8.65 Thomas v Hayward (1869) LR 4 Ex 311 .................................................................................. 14.235 Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 ........................................................................................................................ 4.65 Thomas W Ward v Alexander Bruce (Grays) Ltd [1959] 2 Lloyd’s Rep 472 ................................. 17.40 Thompson v Whittard (1925) 25 SR (NSW) 430 ..................................................................... 17.210 Thwaites v Brahe (1895) 21 VLR 192 ...................................................................................... 17.145 Tidex v Trustees Executes & Agency Co Ltd [1971] 2 NSWLR 453 ........................................... 11.100 Tillack v Tillack [1941] VLR 151 ............................................................................................... 12.240 Tiller v Hawes [2005] NSWSC 1232 .......................................................................................... 17.40 Tiltwood, Sussex, Re [1978] 1 Ch 269 .................................................................................... 18.120 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29 ................................. 14.260, 14.295 Titchmarsh v Royston Water Co Ltd (1899) 81 LT 673) ............................................................. 17.85 Tito v Waddell (No 2) [1977] Ch 106 ...................................................................................... 18.190 Toohey v Gunther (1928) 41 CLR 181 ....................................................................... 8.80, 8.85 Tooth & Co Ltd v Barker (1960) 77 WN (NSW) 231 ................................................................... 6.50 Torrisi v Magame Pty Ltd [1984] 1 NSWLR 14; (1984) NSW ConvR 55-168 .............................. 17.85 Town and Country Marketing Ltd v McCallum (1998) 3 NZ ConvC 192,698 ........................... 5.145 Townsend v BBC Hardware Ltd [2003] QCA 572 ............................................................ 14.10 Transphere Pty Ltd, Re (1986) 5 NSWLR 309 .............................................................................. 2.85 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 ....................................... 5.130, 5.290, 14.85 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 .................. 14.295 xxxii

Table of Cases

Tredegar v Harwood [1929] AC 72 ......................................................................................... 14.215 Treloar v Nute [1976] 1 WLR 1295 ........................................................................................... 3.110 Trident General Insurance v McNiece (1988) 165 CLR 107 ....................................................... 5.225 Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98 ........................................ 5.345, 5.355 Trifid Pty Ltd v Ratto [1985] WAR 19 ........................................................................................... 9.25 Troja v Troja (1994) 33 NSWLR 269 ........................................................................................ 12.195 Troncone v Aliperti (1994) 6 BPR 13,291; (1994) NSW ConvR 55-703 ........................................ 6.50 Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280 ...... 12.40, 12.60 Trusts of the Will of Foss, Re (1868) 7 SCR (NSW) Eq 68 ......................................................... 17.210 Tsirikolias v Oakes (1993) 169 LSJS 249 .................................................................................... 5.305 Tubantia, The [1924] P 78 .................................................................................................... 3.25 Tujilo v Watts [2005] NSWSC 209 ............................................................................................. 17.20 Tulk v Moxhay (1848) 1 H and Tw 105; 47 ER 1345 ................................................................. 18.65 Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 ................................................................. 18.10, 18.30 Turner v York Motors Pty Ltd (1951) 85 CLR 55 .................................... 14.35, 14.55, 14.250 Tutt v Doyle (1997) 42 NSWLR 10 ............................................................................................ 5.255 Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 ............................................ 14.280 Tyler, Re [1891] 3 Ch 252 ......................................................................................................... 11.55

U Unic v Quartermain Holdings Pty Ltd [2002] 2 Qd R 660 ......................................................... 5.195 Unimin Pty Ltd v Commonwealth (1974) 2 ACTR 71 .............................................................. 17.200 Union Lighterage Co v London Graving Dock Co [1902] 2 Ch 557 ............................... 17.85, 17.95 Union of London and Smith’s Bank Ltd’s Conveyance, Re [1933] 1 Ch 611 .............. 18.55 United Starr-Bowkett Cooperative Building Society v Clyne [1968] 1 NSWR 134 .... 14.115 Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) 24 NSWLR 510 ......................................................................................................................... 16.40 Universal Guarantee Pty Ltd v Metters Ltd [1966] WAR 74 ........................................... 4.55 Universal Guarantee Pty Ltd v National Bank of Australasia Ltd [1964-1965] NSWR 977 ........... 4.190 Upton v Baron (2000) 9 Tas R 178 ............................................................................................ 5.100 Upton v Tasmanian Perpetual Trustees Ltd [2007] FCAFC 57 ...................................... 8.155

V Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295 ............................................................... 5.165 Valerica v Global Minerals Australia Pty Ltd (2001) NSW ConvR 55-963 ...................................... 6.50 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 ............................................................................. 5.275 Van Grutten v Foxwell [1897] AC 658 ....................................................................................... 11.20 Van Schaik Organic Soils & Bark Supplies Pty Ltd v Woakwine Industries Pty Ltd (2001) 215 LSJS 278; [2001] SASC 297 .................................................................................................. 14.50 Vassos v State Bank of South Australia [1993] 2 VR 316 ............ 5.100, 5.120, 5.130, 5.230, 5.240 Vedejs v Public Trustee [1985] VR 569 ........................................................................... 12.40, 12.60 Vella v Wah Lai Investment (Aust) Pty Ltd [2004] NSWSC 748 .................................................. 14.50 Vercorp Pty Ltd v Lin [2007] 2 Qd R 180 .................................................................................... 2.65 Vernon v Smith (1821) 5 B & Ald 1; 106 ER 1094 ................................................................... 14.235 Victoria Park Racing and Recreation Grounds Company Ltd v Taylor (1937) 58 CLR 479 ............................................................................................................................... 1.20 Villar, Re [1929] 1 Ch 243 ....................................................................................... 11.60, 11.65 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 ............. 16.30

W Wade v NSW Rutile Mining Co Pty Ltd (1969) 121 CLR 177; [1969] ALR 577 ........................... 16.65 Waimiha Sawmilling Co (in liq) v Waione Timber Co Ltd [1923] NZLR 1137 ............................. 5.185 Walker v Linom [1907] 2 Ch 104 ........................................................................... 2.125, 2.140 Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd [1975] QB 94 ........................... 3.110 Walmsley, In the Will of (1922) 18 Tas LR 32 ........................................................................... 17.210 xxxiii

Australian Property Law: Cases and Materials

Walsh v Lonsdale (1882) LR 21 Ch D 9 ................................................................. 14.45, 14.50 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 ............. 9.150, 14.50, 14.280 Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238 ....................... 5.100 Ward v Kirkland [1967] Ch 194; [1966] 1 All ER 609; [1966] 1 WLR 601 ................................. 17.105 Ward v Stephens (1886) 12 VLR 378 ........................................................................................ 4.100 Ward v Van der Loeff [1924] AC 653 ......................................................................................... 11.75 Warnford Investments Ltd v Duckworth [1979] Ch 127 .......................................................... 14.220 Warren v Keen [1954] 1 QB 15 .......................................................................... 14.135, 14.175 Washington Construction v Ashcroft [1982] Qd R 776 .............................................................. 5.275 Water Wine and Juice Pty Ltd v Konstantopoulos [2010] NSWSC 312 ..................................... 14.280 Waterhouse v Waugh [2003] NSWCA 139 .............................................................................. 14.245 Watt v Lord (2005) 62 NSWLR 495 ......................................................................................... 12.185 Watt v State Bank of NSW [2003] ACTCA 7 ............................................................................... 5.265 Waverley Borough Council v Fletcher [1996] QB 334 ...................................................... 3.50 We are Here Pty Ltd v Zandata Pty Ltd [2010] NSWSC 262 ...................................................... 5.100 Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 ................................... 8.145 Webster v Strong [1926] VLR 509; 32 ALR 323b ..................................................................... 17.180 Weeks v Bond [1999] 1 Qd R 134 ..................................................................................... 15.45 Weeks’ Caveat, Re [1971] QWN 4 .............................................................................................. 6.50 Weg Motors Ltd v Hales [1961] Ch 176 .................................................................................. 14.235 Weller v Williams [2010] NSWSC 716 ....................................................................................... 6.215 Wellsmore v Ratford (1973) 23 FLR 295 .................................................................................... 16.22 Wenczel v Commonwealth Bank of Australia [2006] VSC 324 ................................................. 10.115 Wernher’s Settlement Trusts, Re [1961] 1 All ER 184; [1961] 1 WLR 136 ................................. 11.100 West v Weston (1998) 44 NSWLR 657 ...................................................................................... 12.60 Western v Lawrence Weaver Ltd [1961] 1 QB 402 .................................................................. 18.150 Western Australia v Commonwealth (1995) 128 ALR 1 ............................................................... 7.30 Western Australia v Ward (2000) 170 ALR 159 ................................................................ 2.40 Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1; [2002] HCA 28 ............ 7.30, 7.65, 7.70, 7.75, 7.90, 16.75 Western Electric Ltd v Welsh Department Agency [1983] 2 All ER 629 ..................................... 14.135 Western Metals Resources Ltd v Murrin Murrin East Pty Ltd [1999] WASC 257 ............................ 2.65 Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521 ..................................... 5.165, 5.255 Westpac Banking Corporation v Dimopoulos [2006] VSC 10 ...................................................... 6.50 Westpac Banking Corporation v Rabaiov [1991] ANZ ConvR 560 ............................................. 16.22 Westpoint Corp Pty Ltd v Registrar of Titles [2004] WASC 189 ............................ 6.50, 18.10, 18.180 Wheaton v Maple & Co [1893] 3 Ch 48 ................................................................................. 17.145 Wheeldon v Burrows (1879) 12 Ch D 31 .......................................................... 17.100, 17.105 Wheeler v JJ Saunders [1996] Ch 19; [1995] 2 All ER 697; [1995] 3 WLR 466 .......................... 17.105 Whelan, Ex parte [1986] 1 Qd R 500 ...................................................................................... 14.260 White v Betalli (2007) 71 NSWLR 381; [2007] NSWCA 243 ......................................... 13.95 White v Cariste [2004] NSWCA 460 ......................................................................................... 14.70 White v Kenny [1920] VLR 290 .................................................................................. 14.195, 14.235 White v Summers [1908] 2 Ch 256 ................................................................................... 11.30 White v Tomasel [2004] 2 Qd R 438 ......................................................................................... 5.255 Whittlesea City Council v Abbatangelo (2009) 259 ALR 56 .............................. 3.105, 3.110 Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247 ............................................ 5.295 Wik Peoples v Queensland (1996) 187 CLR 1 ...................... 1.55, 2.05, 2.30, 7.10, 7.60, 7.65 Wilcox v Richardson (1997) 34 NSWLR 4 ................................................................................ 17.105 Wilkes v Spooner [1911] 2 KB 473 ............................................................................................ 2.100 Wilkinson v Duncan (1861) 54 ER 831; 30 Beav 111 ................................................................. 11.90 Williams v Hensman (1861) 1 J & H 546; 70 ER 862 ....................................... 12.160, 12.185 Williams v Lewis [1915] 3 KB 493 ........................................................................................... 14.180 Williams v Usherwood (1981) 45 P & CR 235 ........................................................................... 3.110 Williams Bros Direct Supply Ltd v Raftery [1958] 1 QB 159 ....................................................... 3.110 Williams and Glyn’s Bank Ltd v Boland [1981] AC 487 .............................................................. 2.110 Williamson v Wootton (1855) 61 ER 883; 3 Drew 210 .............................................................. 16.65 Willshire v Dalton (1948) 65 WN (NSW) 54 .............................................................................. 14.60 Wilmer’s Trusts, Re [1903] 2 Ch 411 ......................................................................................... 11.65 Wilson v Anderson (2002) 213 CLR 401; 76 ALJR 1306 .......................................... 2.65, 7.80 xxxiv

Table of Cases

Wilson v Finch Hatton (1877) LR 2 Ex D 336 .......................................................................... 14.150 Wilson v Graham (1997) 10 BPR 19,051 ..................................................................................... 6.50 Wilson v Meudon Pty Ltd [2004] NSWSC 1183 .................................................... 13.65, 13.70 Wincant Pty Ltd v South Australia (1997) 69 SASR 126 ............................................................. 16.30 Windella (NSW) Pty Ltd v Hughes (1999) NSW ConvR 55-926 ................................................... 6.65 Wirth v Wirth (1956) 98 CLR 228 ..................................................................................... 10.40 Wolfe v Freijahs Holdings Pty Ltd [1988] VR 1017 ................................................................... 17.180 Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 ............................ 2.65 Wolveridge v Steward (1833) 1 Cr & M 644; 149 ER 557 ....................................................... 14.245 Wong v Beaumont Property Trust Ltd [1965] 1 QB 173 ............................................................ 17.85 Wood, Re [1894] 3 Ch 381 ...................................................................................... 11.80, 11.85 Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 .................................................. 14.295 Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 .......................... 12.215 Woodward v Wesley Hazell Pty Ltd (1994) 3 Tas R (NC) N4 ...................................................... 3.110 Woollerton & Wilson Ltd v Richard Costain Ltd [1970] 1 WLR 411 ............................................ 16.60 Woolley v Attorney-General (Vic) (1877) LR 2 App Cas 163 ........................................ 16.70 Woolley, Re [1903] 2 Ch 206 .................................................................................................... 12.30 World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1993) ANZ ConvR 121 ..................... 8.55 Worrall v Commissioner for Housing for the Australian Capital Territory [2002] FCAFC 127 ........................................................................................................................ 15.50 Wratten v Hunter [1978] 2 NSWLR 367 ............................................................................. 9.20 Wright v Gibbons (1949) 78 CLR 313 ....... 5.203, 9.135, 12.05, 12.10, 12.45, 12.145, 12.165, 12.180 Wright v Macadam [1949] 2 KB 744 ...................................................................................... 17.120 Wrightson v McArthur [1921] 2 KB 807 .......................................................................... 9.115 Wurridial v Commonwealth (2009) 237 CLR 309 ....................................................................... 1.55 Wycombe Health Authority v Barnett (1984) 47 P & CR 394 .................................................. 14.180 Wykes v Samilk Pty Ltd (No 2) [1998] NSW ConvR 56,821 ....................................................... 14.70

X Xenou v Katsaras (2002) 7 VR 335 ................................................................................. 12.40, 12.60

Y Yanner v Eaton (1999) 201 CLR 351 .............................................. 1.50, 2.35, 3.20, 4.10, 7.85 Yerkey v Jones (1939) 63 CLR 649 ................................................................................ 1.115, 10.115 Young v Hichens (1844) 6 QB 606; 115 ER 228 ............................................... 3.15, 3.20, 3.30 Young v Hoger [2001] Q ConvR 54-557 ................................................................................... 5.185 Youssef v Victoria University of Technology [2005] VSC 223 ...................................................... 6.190

Z Zapletal v Wright [1957] Tas SR 211 ......................................................................... 2.60, 2.65

xxxv

TABLE OF STATUTES COMMONWEALTH

Corporations Act 2001: 2.35

Atomic Energy Act 1953 s 35: 16.65

Currency Act 1965 s 14(1): 4.175

Australian Consumer Law: 10.25, 15.20 s 1: 15.20 s 18: 4.120, 10.05, 10.15, 15.125 s 20: 10.25 s 21: 10.25 s 21(2): 10.25 s 22: 10.25 s 23: 10.25 s 24: 10.25 s 25: 10.25 s 30: 10.15 ss 30 to 50: 10.05 s 31: 10.15 s 52: 10.05 s 61: 15.20 s 82: 10.15 s 218: 10.15 s 219: 10.15 s 224: 10.15 s 232: 10.15 s 236: 10.15 s 243: 10.15 Pt V: 10.05 Pt IV: 10.05

Designs Act 2003: 4.165

Bankruptcy Act 1966: 2.35, 9.110 ss 115 to 116: 5.275 s 120: 9.110 ss 120 to 123: 5.275 s 121(1): 12.185

Native Title Act 1993: 7.35, 7.65 s 14: 7.45 s 15: 7.45 s 223: 7.40, 7.90 Pt II: 7.65

Cheques Act 1986: 4.180 s 39: 4.190 s 54: 4.190 s 55: 4.190

Northern Territory (Self Government) Act 1978 s 69(4): 16.65

Circuit Layouts Act 1989: 4.165 Commonwealth of Australia Constitution Act 1901 s 51(xxxi): 1.55, 4.150 s 96: 1.55 s 122: 1.55 Competition and Consumer Act 2010: 8.85, 15.20 s 4(1): 4.10 s 45B: 8.85 Sch 2: 10.05 Copyright Act 1968: 4.165 s 100AE: 12.240

Family Law Act 1975: 12.40 s 4AA: 2.65 s 4AA(5): 2.65 s 79: 6.50, 12.185 s 90SL: 2.65 s 90SM: 2.65 Land Title Act 1994 s 9A: 5.185 s 189(1)(ab): 5.185, 5.360 National Consumer Credit Act 2009 s 35: 8.05 National Consumer Credit Code: 14.05 National Consumer Credit Protection Act 2009: 4.10, 10.25 National Credit Code: 10.25 ss 14 to 17: 8.05 ss 70 to 73: 10.25 s 72: 8.05 s 76: 8.05 s 88: 8.05, 8.150

Patents Act 1990: 4.165 s 16: 12.240 s 17: 12.240 Personal Property Securities Act 2009: 4.10, 4.30, 4.100, 4.180, 4.190, 8.05, 8.78 ss 69 to 72: 4.190 Plant Breeders Rights Act 1994: 4.165 Racial Discrimination Act 1975: 7.30 Reserve Bank Act 1959 s 36(1): 4.175 Seas and Submerged Lands Act 1973: 7.100 Trade Marks Act 1995: 4.165 Trade Practices Act 1974: 10.05, 15.125 xxxvii

Australian Property Law: Cases and Materials

s 104A(1): 6.80 s 105(1): 6.80 s 106: 6.80 s 107: 6.80 s 107A(1)(b): 6.80 s 109: 18.45, 18.160 s 110: 18.160 s 113: 18.45 ss 119 to 120: 14.135 s 124: 6.40 s 124(3): 6.40 ss 143 to 155: 5.330 s 147(a): 5.360 s 147(b): 5.360 s 152: 5.65 s 154(1)(a): 5.345 s 154(2): 5.360 s 154(3): 5.345 s 155: 5.345 s 159: 5.65 s 160: 5.370 s 160(6): 5.370 ss 160 to 162: 5.370

Trade Practices Act 1974 — cont s 52: 4.120

AUSTRALIAN CAPITAL TERRITORY Civil Law (Property) Act 2006 s 201: 9.00, 17.55 s 201 to 203: 9.15 s 203: 14.40 s 204: 14.50 s 208: 12.185 ss 210 to 211: 12.50 s 211: 12.50 s 213(1): 12.10 s 213(2): 12.10 s 213(3): 12.10 s 224: 12.10 s 225: 11.05 ss 242 to 247: 12.205 s 400: 14.245 s 401: 14.245 s 426: 14.280 s 428: 14.195, 14.280 Civil Law (Sale of Residential Property) Act 2003 s 9: 9.190 s 10: 9.190 s 11: 9.190 s 12: 9.190 s 25: 9.190 s 28: 9.190 s 29: 9.190, 9.195 s 30: 9.190 Land Titles Act 1925: 3.100 s 14(1)(d): 5.370 s 33(2): 6.75 s 48(4): 6.15 s 48(5): 6.15 s 54(1): 12.50 s 54(2): 12.50 s 55: 12.10 s 57: 9.10 s 58: 5.135 s 58(1): 5.15, 5.150 s 58(1)(a): 5.310 s 58(1)(b): 17.55 s 58(1)(c): 5.310 s 58(1)(d): 14.90 s 58(1)(f): 5.320 s 59: 5.55 s 60(2): 5.55 s 79: 11.05 s 82: 14.75 s 83: 5.130 s 87: 14.280 s 103B: 17.55 s 103C: 17.30 s 103G: 17.200 s 104: 6.55 s 104(1): 6.40

Leases (Commercial and Retail) Act 2001: 14.05 Legislation Act 2001 s 2: 16.40, 16.85 Limitation Act 1985: 3.100 s 5: 3.65 s 5(a): 3.100 s 11(1): 3.65 s 18: 3.65 s 43: 3.65 Mercantile Law Act 1962: 4.30 Perpetuities and Accumulations Act 1985: 11.105 s 5: 11.110 s 8(1): 11.110 s 8(3): 11.110 s 8(4): 11.110 s 9: 11.125 s 10(1): 11.140 s 10(3): 11.140 s 15(1): 11.150 s 15(3): 11.160 s 16: 11.160 Real Property Act 1925 s 109(1): 18.170 Residential Tenancies Act 1997: 14.05 ss 5 to 6: 15.15 s 9: 15.20 Retirement Villages Act 2012: 15.125 ss 184 to 190: 15.125 Sale of Goods Act 1954 s 23: 9.85 xxxviii

Table of Statutes

s 88(3)(a): 18.30, 18.115 s 88(3)(c): 18.120 s 88B: 18.120 s 88E: 18.10 s 89: 18.105 s 89(1): 17.165, 17.180, 18.95 s 93: 8.95 s 96A: 12.40 s 99: 12.40 s 117: 14.245 s 118: 14.245 s 127(1): 14.60 s 128: 14.245 ss 128 to 131: 14.280 s 129: 14.280 s 130: 14.195, 14.280 s 132: 14.215 s 133B(1): 14.215 s 134: 18.190 s 164: 2.110 s 179: 17.145 s 184: 5.100 ss 184A to 184J: 2.145 Pt 4, Div 6: 12.215

Sale of Goods Ordinance 1954: 4.30 Unit Titles Act 2001: 16.40 s 14: 13.90 s 15: 13.90 s 17: 13.35 Unit Titles (Management) Act 2011 s 17: 13.35, 13.45 Wills Act 1968 s 7(2): 11.05

NEW SOUTH WALES Agricultural Tenancies Act 1990 s 5(3): 16.30 s 10: 16.30 s 14(3): 16.30 Civil Liability Act 2002 s 72(1): 16.60 Contracts Review Act 1980: 10.25 Conveyancing Act 1919: 18.170 s 7(1): 17.120 s 12: 18.170 s 16(1): 11.35 s 17: 11.20 s 19(1): 2.50 s 23B: 17.55 s 23B(1): 9.00, 9.70, s 23C: 9.15, 18.50 s 23D: 9.00, 9.15 s 23D(2): 14.40 s 23E: 9.15 s 24: 12.185 s 26: 12.50, 12.60 s 26(2): 12.50, 12.60 s 27: 12.50 s 35: 12.10 s 36A: 12.240 s 36C: 18.160 s 38(3): 14.40 s 44(1): 10.45 s 44(2): 12.10 s 44(2A): 12.10 s 47(1): 2.50 s 47(2): 2.50 s 47(3): 2.50 s 50(1): 11.05 s 50(2): 3.120 s 53(1): 2.110 s 53(3): 2.110 s 54A: 14.50 s 67: 17.110 s 70: 18.45 s 70A: 14.245, 18.35 ss 84 to 85: 14.135 s 88(1): 18.60, 18.90 s 88(1)(a): 18.45, 18.90

Conveyancing and Law of Property Act 1898 Pt IV: 13.25 Crown Lands Act 1989 s 172(7): 16.110 Damage by Aircraft Act 1952 s 2(1): 17.30 Encroachment of Buildings Act 1922: 16.125 Factors (Mercantile Agents) Act 1923: 4.30 Forfeiture Act 1995: 12.195 Imperial Acts Application Act 1969 s 8: 2.70, 11.35 s 18: 14.270 Interpretation Act 1987 s 21: 16.40 Landlord and Tenant Act 1899 ss 8 to 10: 14.280 Limitation Act 1969: 3.100 s 11(3): 3.120 s 14(1): 3.65 s 27(2): 3.110 s 28: 3.110 s 38: 3.110 s 38(2): 3.120 s 39: 3.120 ss 52 to 53: 3.120 s 54: 3.120 s 54(1): 3.120 s 54(4): 3.120 ss 55 to 56: 3.120 s 65: 3.65 xxxix

Australian Property Law: Cases and Materials

s 97: 12.185 s 100(1): 12.50 s 100(2): 11.05 s 101(1): 12.10 s 118: 5.65 s 120: 5.330 s 120(1): 5.345 s 120(2): 5.345 ss 128 to 135: 5.330 s 129(1): 5.345 s 129(2)(b)(i): 5.360 s 129(2)(e): 5.360 s 129(2)(f)(i): 5.360 s 129(2)(f)(ii): 5.360 s 136: 5.370 s 137: 5.370 Pt 6A: 3.100

Mining Act 1992 s 4: 16.65 Perpetuities Act 1984: 11.105 s 3(2): 11.110 s 7(1): 11.110 s 8: 11.125 s 9(1): 11.140 s 9(4): 11.140 s 14(2): 11.150 s 14(4): 11.160 s 15: 11.150, 11.155 Petroleum (Onshore) Act 1991: 16.65 Property, Stock and Business Agents Act 1941 s 49: 9.195 Public Works Act 1912: 17.105 Real Estate of Intestates Distribution Act 1862: 14.05

Real Property Amendment (Compensation) Act 2000: 5.330

Real Property Act 1900: 5.290 s 3(1)(a): 16.85 s 12(1)(d): 5.370 s 12(3)(b): 5.380 s 12(3)(b)(c): 5.370 s 36(4): 6.15 s 36(5): 6.15 s 41: 9.10 s 42: 5.135 s 42(1): 5.15, 5.150, 17.55 s 42(1)(a): 5.310, 17.55 s 42(1)(c): 5.310 s 42(1)(d): 14.60, 14.90, 14.120 s 43(1): 5.55 s 43A: 6.195, 6.200 s 45(1): 5.65 s 45(2): 5.65 s 46: 17.55 ss 46 to 47: 17.200 s 47: 17.55 s 47(6A): 17.165 s 49(2): 17.180 s 53(1): 14.75 s 53(3): 5.130 s 55: 14.280 s 67(5): 17.120 s 74F: 6.40 s 74F(2): 6.50 s 74F(5): 6.55, 6.65 s 74F(6): 6.80 s 74G: 6.80 s 74H: 6.80 s 74H(1)(a): 6.80 s 74H(1)(b): 6.80 s 74L: 6.65 s 74O: 6.80 s 74MA: 6.75 s 82(2): 6.40 s 82(3): 6.40

Real Property Regulations 2003 reg 6: 12.50 Residential (Land Lease) Communities Act 2013: 15.107 s 4: 15.115 Pt 5: 15.115 Pt 8: 15.115 Residential Parks Act 1998: 16.22 s 3: 15.115 s 6A: 15.115 Residential Tenancies Act 2010: 14.05 ss 5 to 6: 15.15 s 15: 15.20 s 35A: 15.55 s 44: 15.30 s 129: 3.65 Retail Leases Act 1994: 14.05 Retirement Villages Act 1999: 15.125 s 92: 15.140 s 93: 15.140 ss 133 to 136A: 15.125 Sale of Goods Act 1923: 4.30 s 5: 4.05 s 23: 9.85 Strata Schemes Development Act 2016 s 9: 13.35 ss 28A to 28QH: 13.35 Strata Schemes (Freehold Development) Act 1973: 16.40 Strata Schemes (Leasehold Development) Act 1986: 16.40 Strata Schemes Management Act 2015 s 5(2): 13.90 ss 28 to 40: 13.35 xl

Table of Statutes

s 145: 6.80 s 157: 6.15 s 177: 17.165 s 180: 6.15 s 183: 5.275 s 184: 9.10 s 185: 17.55 s 187: 12.185 s 188(1): 5.25, 5.135 ss 188(1) to (3): 5.150 s 188(2)(a): 5.55 s 188(2)(c): 5.65 s 188(3)(b): 5.65 s 189(1)(a): 5.215 s 189(1)(c): 17.55 s 189(1)(d): 5.310 s 189(1)(e): 5.310 s 189(1)(f): 5.310 s 192(2): 5.345 ss 192 to 196: 5.330 s 193: 5.345 s 195(1)(a): 5.360 s 195(1)(b): 5.360 s 195(1)(b)(d): 5.360 s 195(1)(d): 5.360 s 198: 3.100, 17.75

Strata Schemes Management Act 2015 — cont s 33: 13.35 Sch 2: 13.35, 13.45 Succession Act 2006 s 4: 11.05 Trustee Act 1925 s 87: 12.240 Wills, Probate and Administrative Act 1898: 14.05

NORTHERN TERRITORY Business Tenancies (Fair Dealings) Act: 14.05 Caravan Parks Act: 15.107 s 6: 15.107 Encroachment of Buildings Act: 16.125 ss 13 to 14: 16.120 Interpretation Act s 17: 16.40, 16.85 Land Title Act: 5.330, 5.345 s 4: 14.90 s 17(1)(a): 5.370 s 17(1)(b): 5.370 s 20: 5.370 s 26(a): 5.370 s 31: 5.320 s 31(2): 6.80 s 35: 5.320 s 38: 5.320 s 39: 5.25 s 56: 11.05 s 57(1): 12.50 s 57(2): 12.50 s 57(3): 12.50 s 57(4): 12.50 s 59: 12.185 s 65: 14.75 s 70: 14.280 s 81: 17.85 s 91: 17.55 s 112: 18.115 ss 116 to 124: 17.200 s 126(1): 6.40 s 126(2): 6.40 s 137: 6.55 s 138: 6.40 s 138(1)(c): 6.50 s 139: 6.80 s 140: 6.40 s 140(1): 6.80 s 140(3)(b): 6.80 s 142: 6.80 s 142(1): 6.80 s 142(3): 6.80 s 143(2): 6.75

Law of Property Act s 4: 17.120 s 6: 2.70, 11.35 s 9(1): 9.00, , 17.55 s 9 to 11: 9.15 s 10: 18.50 s 11(2): 14.40 s 13(3): 12.185 s 22: 2.50 s 26: 12.50 s 28: 11.20 s 29: 2.50 s 30(1): 11.35 s 31: 11.05 s 35(3): 12.50 ss 35 to 36: 12.50 s 36: 12.50 s 43: 12.240 s 45: 12.70 s 47(2): 14.40 s 56: 18.160 s 62: 14.50 s 103: 12.40 s 117: 14.135 s 130: 14.245 s 131: 14.245 s 134(1): 14.215 s 134(1)(b): 14.215 s 136(2): 14.245 ss 136 to 143: 14.280 ss 137 to 138: 14.280 s 139: 14.195, 14.280 s 144: 14.60 xli

Australian Property Law: Cases and Materials

Law of Property Act — cont s 170: 18.170 s 171: 14.245, 18.35, 18.45 s 177: 17.165 s 182: 18.170 s 187: 11.110 s 188: 11.125 s 189: 11.125 s 190: 11.125 s 191: 11.140 s 192: 11.140 s 196: 11.150 s 196(5): 11.160 s 197: 11.160 s 216(2)(d): 12.10 Pt 11: 11.105

QUEENSLAND Acts Interpretation Act 1954 s 36: 16.40 Body Corporate and Community Management Act 1997: 16.40 s 62: 13.35, 13.45 Factors Act 1892: 4.30 Land Act 1994 s 13(4): 16.110 s 13A: 16.110 Land Title Act 1994: 5.345, 14.90 s 4: 14.90 s 11A: 5.185, 5.360 s 11B: 5.185, 5.360 s 15(1)(a): 5.370 s 15(1)(b): 5.370, 5.380 s 19: 5.370 s 29(2): 6.80 s 36: 13.35 s 38: 5.15 s 55: 11.05 s 56(1): 12.50 s 56(2): 12.50 s 59: 12.185 s 64: 14.75 s 68: 14.280 s 82: 17.55 s 83: 17.55 ss 97E to 97J: 17.200 ss 98 to 108B: 3.100 s 110(1): 6.40 s 110(2): 6.40 s 110(3): 6.40 s 110(4): 6.40 s 114: 12.10 s 121: 6.55 s 122: 6.40 s 122(1)(c): 6.50 s 123: 6.80 s 124: 6.40 s 124(1): 6.80 s 124(2)(b): 6.80 s 126: 6.80 s 126(1): 6.80 s 126(1)(b): 6.80 s 126(2): 6.80 s 127(2): 6.75 s 150: 6.215 s 159: 6.15 s 170: 17.75 s 177: 6.15 s 180: 5.275 s 181: 9.10 s 183: 17.85 s 184(1): 5.15, 5.135 ss 184(1) to (3): 5.150 s 184(2)(a): 5.55

Limitation Act: 3.100 s 12(1): 3.65 s 19: 3.65 Minerals Acquisition Act s 2: 16.65 Petroleum Act: 16.65 Property Law Act Pt 5, Div 2: 12.215 Residential Tenancies Act s 5: 15.15 s 6: 15.15 s 19: 15.20 s 42: 15.30 s 74: 15.15 s 99A: 15.55 s 100: 15.55 Residential Tenancy Act: 14.05 Retirement Villages Act: 15.125 Sale of Goods Act 1923 s 23: 9.85 Sale of Goods Ordinance 1972: 4.30 Trustee Act s 69: 13.25 Unit Titles Act: 16.40 s 4(2): 13.90 Unit Titles Schemes Act s 18: 13.35 s 78: 13.35, 13.45 Water Act s 9: 16.110 s 13: 16.110 Wills Act s 3: 11.05 s 6: 11.05 xlii

Table of Statutes

s 36: 12.50 s 41(1): 12.240 s 43: 12.70 s 45(2): 14.40 s 53: 18.35, 18.45 s 53(1): 18.170 s 53(2A): 14.245 s 55: 18.160 s 59: 14.50 s 60: 9.195 s 93: 12.40 ss 105 to 107: 14.135 s 117: 14.245 s 118: 14.245 s 121: 14.215 s 121(1): 14.215 s 123(2): 14.245 ss 123 to 128: 14.280 s 124: 14.280 s 125: 14.195, 14.280 s 129(1): 14.60 s 155: 16.30 s 178: 17.145 s 181: 17.165, 18.95 ss 182 to 194: 16.125 ss 196 to 197: 16.120 s 199: 18.170 s 200: 18.170 s 209(1): 11.110 s 210: 11.125 s 210(4): 11.110 s 212: 11.125 s 213: 11.140 s 214: 11.125 s 217: 11.160 s 218: 11.160 s 219: 11.150 s 219(2): 11.160 s 237(1): 2.110 s 237(6): 2.110 s 239: 17.110 ss 241 to 249: 2.145 s 346: 2.110 Pt 5, Div 2: 12.215 Pt 14: 11.105

Land Title Act 1994 — cont s 184(2)(b): 5.65 s 184(3)(b): 5.65 s 185(1): 17.85 s 185(1)(a): 5.215 s 185(1)(b): 14.90 s 185(1)(c): 17.55 s 185(1)(d): 3.100 s 185(1)(e): 5.310 s 185(1)(f): 5.310 s 185(1)(g): 5.310 s 185(3): 17.105 s 188(2): 5.345 s 188A: 5.345 ss 188 to 190: 5.330 s 189(1)(a): 5.360 s 189(1)(b): 5.360 s 189(1)(b)(e): 5.360 s 189(1)(e): 5.360 s 189(1)(f): 5.360 s 189(1)(g): 5.360 s 203(a): 14.90 s 234: 17.120 Pt 7A: 6.215 Limitation of Actions Act 1974: 3.100 s 10(1): 3.65 s 12(2): 3.65 s 13: 3.110 s 19: 3.110 s 21: 3.120 s 29: 3.120 s 35(1)(a): 3.120 ss 35 to 37: 3.120 s 36(1): 3.120 s 38: 3.120 Manufactured Homes (Residential Parks) Act 2003: 15.107, 15.115 Mineral Resources Act 1989 s 6: 16.65 Petroleum Act 1923: 16.65 Property Law Act 1974 s 1: 18.50 s 3: 17.120 s 7: 2.70, 11.35 s 10: 17.55 s 10(1): 9.00, s 10(2): 14.40 s 11 to 12: 9.15 s 14(3): 12.185 s 22: 2.50 s 28: 11.20 s 29: 2.50 ss 29(1) to (2): 2.50 s 30(1): 11.35 s 31: 11.05 s 35(3): 12.50 ss 35 to 36: 12.50

Queensland Coast Islands Declaration Act 1985: 7.30 Real Property Act 1877 s 11: 14.90 Residential Tenancies and Rooming Accommodation Act 2008: 14.05, 15.107 s 15: 15.105 ss 29 to 41: 15.15 s 61: 15.115 s 92: 15.30 s 228: 15.115 ss 249 to 250: 15.105 ss 257 to 265: 15.105 xliii

Australian Property Law: Cases and Materials

s 28(1): 9.00, s 29: 18.50 s 29 to 31: 9.15 s 30(2): 14.40 s 34: 18.160 s 36: 17.110 s 40(3): 12.185 s 41(4): 14.245 ss 54 to 55: 12.40 s 59(2): 11.50 s 61(1): 11.40, 11.45 s 62: 11.50 s 62(1): 11.50 s 62(2): 11.50 s 69(2): 12.205 ss 69 to 74: 12.240 s 71: 12.205 s 117: 2.110 Pt 8: 12.205

Residential Tenancies and Rooming Accommodation Act 2008 — cont Ch 2: 15.115 Ch 4: 15.105 Residential Tenancies and Rooming House Agreements Act 2008 s 61: 15.20 Retail Shop Leases Act 1994: 14.05 Retirement Villages Act 1999: 15.125 s 90A: 15.140 s 90B: 15.140 s 190: 15.125 Sale of Goods Act 1896: 4.30 s 23: 9.85 Succession Act 1981 s 8(1): 11.05 s 65: 12.10

Limitation of Actions Act 1936: 3.100 s 4: 3.110 s 6: 3.110 s 18: 3.120 s 21: 3.120 s 21(b): 3.120 s 35: 3.65 s 45: 3.120 s 47: 3.120 s 48: 3.120

SOUTH AUSTRALIA Acts Interpretation Act 1915 s 4: 16.40 Community Titles Act 1996: 16.40 s 13: 13.35 s 19: 13.90 s 82: 13.35, 13.45 Consumer Credit Act 1972 s 46: 10.25

Mercantile Law 1936: 4.30 Mining Act 1971 s 6: 16.65

Criminal Law Consolidation Act 1935 s 15A: 1.105

Native Title (South Australia) Act 1994: 16.40

Development Act 1993 s 57(3B): 18.140

Petroleum and Geothermal Energy Act 2000: 16.65

Encroachments Act 1944: 16.125

Real Property Act 1886: 5.210 s 3: 16.85 s 56(1): 6.15 s 58: 6.15 ss 60 to 63: 5.370 s 64: 17.165 s 67: 9.10 s 69: 5.25, 5.30, 5.135 s 69(a): 5.150 s 69(b): 5.295 s 69(c): 5.310 s 69(d): 17.55 s 69(e): 5.310 s 69(f): 3.100 s 69(h): 14.90 s 69(i): 5.320 s 69II: 5.295 s 70: 5.25, 5.30 s 71: 5.325 s 71(d): 5.215 s 71(e): 5.215

Land and Business (Sale and Conveyancing) Act 1974 s 24N: 9.195 Landlord and Tenant Act 1936 s 4: 14.280 s 5: 14.280 s 7: 14.280 s 9: 14.280 s 10: 14.280 s 12: 14.280 s 12(4): 14.215 Law of Property Act 1936 s 7: 17.120 s 10: 11.05 s 15: 18.170 s 22: 17.145 s 25: 11.35 s 26: 14.50 s 28: 17.55 xliv

Table of Statutes

Retirement Villages Act 1987: 5.290, 15.125 s 9(4): 5.290 s 9(4A): 5.290 ss 19(3) to (6): 5.290 s 19(4): 5.290 s 31: 15.125

Real Property Act 1886 — cont s 74: 12.50 s 75: 11.05 ss 80A to 80I: 3.100 s 81: 17.55 s 84: 17.75 s 86: 5.55 s 96: 17.55 s 111: 11.05 s 116: 14.75 s 117: 5.130 ss 124 to 125: 14.135 s 126: 14.280 s 129: 6.80 s 149: 8.65 s 151: 14.245 s 152: 14.245 s 162: 6.40 s 187: 5.55 s 188: 12.10 s 191: 6.40 s 191(a): 6.55 s 191(b): 6.80 s 191(d): 6.75 s 191(e): 6.80 s 191(f): 6.80 s 191(k): 6.80 ss 201 to 219: 5.330 s 203: 5.345 s 205: 5.345 s 207: 5.65 s 208: 5.345 s 211: 5.360 s 212: 5.360 s 214: 5.360 s 220(f): 5.370 s 251: 3.100 Pt 13A: 6.215

Sale of Goods Act 1895: 4.30 s 18: 9.85 Settled Estates Act 1880: 13.25 Summary Offences (Gatecrashers at Parties) Amendment Act 2007: 1.105 Wills Act 1936 s 4(2): 11.05

TASMANIA Acts Interpretation Act 1931 s 46: 16.40 Conveyancing and Law of Property Act 1884: 18.160 s 2: 17.120 s 5: 2.110 s 6: 17.110 s 10: 14.245 s 11: 14.245 s 15: 14.280 s 15(3): 14.195, 14.280 s 30: 12.40 s 35(1): 2.110 s 35(5): 2.110 s 35A: 2.110 s 36(1): 14.50 s 60(1): 9.00, , 17.55 s 60(2): 18.50 s 60(2) to (5): 9.15 s 60(4): 14.40 s 61(2): 2.50 s 61(c): 18.160 s 62: 11.05 s 62(1): 12.185 s 62(2): 12.185 s 65: 2.50 s 71: 18.45, 18.170 s 71A: 18.35 s 71A(2): 14.245 s 80: 11.05 s 80(1): 11.05 s 80(2): 11.35 s 81: 11.35 s 83: 18.190 s 84C: 17.165, 18.95 s 84L(1): 12.240 s 86: 18.170

Registration of Deeds Act 1935: 2.145 Residential Parks Act 2007 s 5: 15.115 s 6(2): 15.115 s 50: 15.115 s 66: 15.115 Residential Tenancies Act 1995: 14.05 s 3: 15.105 s 5: 15.15 s 49: 15.20 s 56(1): 15.30 s 89A: 15.55 s 95: 15.55 ss 103 to 105A: 15.105 Residential Tenancies (Rooming House) Regulations 1999 Sch 2: 15.105

Crown Lands Act 1976 s 54: 16.65 Damage by Aircraft Act 1963

Retail and Commercial Leases Act 1995: 14.05 xlv

Australian Property Law: Cases and Materials

s 137(1): 6.80 ss 138T to 138ZA: 3.100 s 138U: 3.110 s 139(1): 5.370 s 139(2)(b): 5.370 s 149: 5.65 ss 150 to 159: 5.330 s 151(1)(a): 5.360 s 151(1)(b): 5.360 s 151(1)(d): 5.360 s 151(2): 5.360 s 152(2)(b): 5.345 s 152(7): 5.345 s 152(8): 5.345 s 153(1): 5.345 Fourth Schedule: 17.120

Damage by Aircraft Act 1963 — cont s 3: 16.60, 17.30 Environmental Management and Pollution Control Act 1994 s 74M: 5.280 Factors Act 1891: 4.30 Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998: 14.05 Land Titles Act 1980 s 3(1): 16.85 s 33(6): 11.05 s 33(8): 11.05 s 40: 5.135, 17.105 s 40(1): 5.35, 5.40 s 40(2): 5.35, 5.40, 5.150 s 40(3): 17.55 s 40(3)(a): 5.150 s 40(3)(b): 5.310 s 40(3)(d): 14.90 s 40(3)(e): 17.85 s 40(3)(f): 5.310 s 40(3)(g): 5.320 s 40(3)(h): 3.100 s 41(1): 5.55 s 41(2): 5.55 s 42: 5.65 s 44: 12.50 s 48: 6.15 s 48(2): 6.15 s 48(3): 6.15 s 49(1): 9.10 s 52: 6.215 s 63: 12.185 s 64(1): 14.75 ss 66 to 67: 14.135 s 68: 14.280 s 91: 17.120 s 100: 12.10 s 102(2)(a)(iv): 18.90 ss 102 to 104: 18.30 s 103(1): 18.120 s 103E: 17.165 s 104: 18.115 s 105: 17.55 s 106: 17.55 s 107: 17.200 s 107C: 6.80 s 108(1): 17.165 s 108(3): 17.180 ss 127 to 128: 5.330 s 132(1): 6.40 s 132(3): 6.40 s 133: 6.40 s 133(1): 6.55 s 133(1)(a): 6.80 s 133(2): 6.55 s 133(3)(b): 6.80 s 137: 6.80

Landlord and Tenant Act 1935 s 26: 16.30 Limitation Act 1974: 3.100 s 4(1): 3.65 s 6(2): 3.65 s 10(2): 3.110 s 11: 3.110 s 16: 3.110 s 19: 3.120 ss 26 to 28: 3.120 s 29: 3.120 ss 29 to 31: 3.120 s 30(1): 3.120 Mineral Resources Development Act 1995 s 3: 16.65 s 6(4): 16.65 Partition Act 1869: 12.205 Perpetuities and Accumulations Act 1992: 11.105 s 3(2)(c): 11.110 s 6(1): 11.110 s 7: 11.125 s 9: 11.125 s 10: 11.125 s 11(1): 11.140 s 11(2): 11.140 s 11(3): 11.140 s 11(4): 11.140 s 15: 11.160 s 16: 11.150 s 16(5): 11.160 s 20: 11.160 s 24: 11.140, 11.145 Presumption of Survivorship Act 1921 s 2: 12.10 Registration of Deeds Act 1935: 2.145 Residential Tenancy Act 1997: 14.05 s 3: 15.105 s 5: 15.105 xlvi

Table of Statutes

s 6(2): 3.65 s 8: 3.110 s 9(1): 3.110 s 14(1): 3.110 s 16: 3.120 s 23: 3.120 s 24(1)(a): 3.120 ss 24 to 26: 3.120 s 25: 3.120 s 25(1): 3.120 s 25(2): 3.120 s 27: 3.120

Residential Tenancy Act 1997 — cont s 6: 15.15 ss 13 to 14: 15.20 ss 48A to 48H: 15.105 ss 48B to 48F: 15.105 s 68: 15.30 Retirement Villages Act 2004: 15.125 Sale of Goods Act 1896: 4.30 s 18: 9.85 Settled Land Act 1884: 13.25 Strata Titles Act 1998: 16.40 s 9: 13.90 s 35: 13.35 s 46: 13.35 s 75: 13.35, 13.45 Supreme Court Civil Procedure Act 1932 s 11(14): 14.280 s 11(14A): 14.280 Transfer of Land Act 1980 s 163: 5.370 s 164: 5.370 Wills Act 2008 s 4: 11.05 s 6: 11.05

VICTORIA Fair Trading Act 1999: 10.25 ss 32U to 32ZD: 10.25 Goods Act 1938 Pt II: 4.30 Goods Act 1958: 4.30 s 23: 9.85 Imperial Acts Application Act 1980: 12.70 s 5: 2.70, 11.35 Instruments Act 1958 s 126: 14.50 Interpretation of Legislation Act 1984 s 38: 16.40 Land Act 1958 s 42(1)(b): 5.310 s 42(2)(f): 5.320 s 385: 16.110 s 386: 16.110 Land Legislation Amendment Act 2009 s 22: 6.40 Landlord and Tenant Act 1958 s 28(2): 16.30 Limitation of Actions Act 1958: 3.100 s 5(1): 3.65

Local Government Act 1989 s 187A: 17.20 s 509(1B): 17.30 Mineral Resources (Sustainable Development Act 1990 s 4: 16.65 Owners Corporation Act 2006 s 24: 13.90 s 69: 13.35, 13.45 Perpetuities and Accumulations Act 1968: 11.105 s 5(1): 11.110 s 6(1): 11.115, 11.120 s 6(4): 11.110 s 8: 11.125, 11.130 s 9: 11.140 s 10: 11.125, 11.130, 11.140 s 13: 11.160 s 15: 11.160 s 16: 11.150 s 16(2): 11.160 Petroleum Act 1998: 16.65 Planning and Environment Act 1987: 18.130 Property (Co-ownership) Act 2005: 12.105, 12.185, 12.240 s 233: 12.105 s 234: 12.105 Property Law Act 1958 s 18(1): 17.120 s 19: 11.05 s 19(1): 11.05 s 19A: 2.70 s 23B: 17.55 s 28A: 12.70 s 44(1): 2.110 s 44(6): 2.110 s 52(1): 9.00, s 53: 18.50 s 53(1)(a): 9.25 s 53 to 55: 9.15 s 54(2): 9.10, s 56(1): 18.160 s 60(6): 2.50 xlvii

Australian Property Law: Cases and Materials

Property Law Act 1958 — cont s 62: 17.110 s 72(3): 12.185 s 73A: 14.40 s 77(1)(c): 14.245 s 78: 18.45 s 78(1): 18.170 s 79: 14.245, 18.35 s 79A: 18.45 s 84(1): 18.95 ss 112 to 113: 12.40 s 130: 11.20 s 134: 18.170 s 136: 14.245 s 141: 14.245 s 142: 14.245 s 144(1): 14.215 s 146: 14.280 s 146(4): 14.195, 14.280 ss 146 to 147: 14.280 s 153: 18.190 s 154: 14.245 s 154A: 16.30 s 154A(1): 16.30 s 154A(2): 16.30 s 154A(3): 16.30 s 187: 12.240 s 187(1): 12.240 s 187(2): 12.240 s 191: 11.35 s 195: 17.145 s 196: 17.145 s 199: 2.110 s 199(1)(b): 2.110 ss 221 to 224: 12.230 s 225: 12.225 s 228(1): 12.220, 12.230 ss 228 to 231: 12.225 s 229: 12.230 s 230: 12.230 s 231: 12.230 s 232: 12.230 s 233: 12.110 s 233(2): 12.115 s 233(2)(a): 12.115 s 233(3): 12.115 s 233(4): 12.115 s 234: 12.110 s 249: 2.50 s 272: 16.90 s 273: 16.90 Pt I: 2.145 Pt IV: 12.105, 12.115, 12.220, 12.230, 12.240 Residential Tenancies Act 1997: 14.05 s 3: 15.105, 15.115 ss 6 to 14: 15.15 s 26: 15.20 ss 45 to 46: 15.30

ss 100 to 127: 15.105 ss 110 to 119: 15.105 ss 120 to 123: 15.105 ss 143 to 206A: 15.107 ss 146 to 148: 15.115 ss 185 to 187: 15.115 Retail Leases Act 2003: 14.05 Retail Tenancies Act 1986 s 21: 14.220 Pt 3: 14.220 Retirement Villages Act 1986: 15.125 s 16: 15.125 Sale of Land Act 1962 s 32: 2.110 s 38: 9.195 Settled Land Act 1958: 13.25 Subdivision Act 1988: 16.40, 18.130 s 37: 13.35 Summary Offences Act 1966 s 9(1)(g): 14.270 Supreme Court Act 1986 s 79: 14.280 s 80: 14.280 s 85: 14.280 Transfer of Land Act 1915 s 4: 16.85 Transfer of Land Act 1958 s 26R: 6.75 s 30(2): 12.50 s 33(4): 12.50 s 34: 6.10 s 34(1): 6.15 s 34(2): 6.15 s 34(3): 6.15 s 37: 6.40 s 37(2): 6.40 s 40(1): 9.10 s 41(1): 5.10 s 42: 5.70, 5.135 s 42(1): 5.05, 5.150 s 42(1)(a): 5.310 s 42(2)(b): 3.100 s 42(2)(d): 17.55, 17.85 s 42(2)(e): 14.90, 14.110 s 43: 5.45, 5.50, 5.70 s 44(1): 5.100, 5.150 s 44(2): 5.55, 5.60 s 44H(1): 5.380 s 50: 12.10 ss 60 to 62: 3.100 s 66(1): 14.75 s 67: 14.135 s 70: 14.280 s 72: 17.55 xlviii

Table of Statutes

Law Reform (Statute of Frauds) Act 1962: 14.50

Transfer of Land Act 1958 — cont s 73: 17.180 s 73(2): 17.165 s 73(3): 17.180 s 88: 18.30 s 88(1): 18.115 s 89(1): 6.40, 6.55 s 89(2): 6.80 s 89(3): 6.80 s 90(1): 6.80 s 90(1)(b): 6.80 s 90(2A): 6.65 s 91(1): 6.80 s 91(4): 6.80 s 91C to 91J: 6.215 s 96(2): 17.130 s 103(2)(a): 5.370 s 103(2)(b): 5.370 ss 108 to 111: 5.330 s 109(2)(a): 5.360 s 109(2)(b): 5.360 s 109(2)(c): 5.360 s 110(1): 5.345 s 110(2): 5.345 s 110(3)(a): 5.360 s 110(4): 5.365

Law of Property Act 1969 s 39: 10.45 Limitation Act 1935: 3.100 Limitation Act 2005: 3.100 s 19: 3.110 ss 30 to 54: 3.120 s 38(1): 3.65 ss 46 to 51: 3.120 s 47: 3.120 s 48: 3.120 s 65: 3.110 s 65(2): 3.120 s 66: 3.110 s 84(a): 3.120 Mining Act 1978 s 8(1): 16.65 Petroleum and Geothermal Energy Resources Act 1967: 16.65 Property Law Act 1969 s 7: 17.120 s 9(2)(4): 14.40 s 11: 18.160 s 20: 18.170 s 23(1): 2.50 s 26: 11.35 s 27: 11.20 s 33: 17.55 s 33(1): 9.00, 14.40 s 34: 18.50 s 35(2): 14.40 s 34 to 36: 9.15 s 37: 2.50 ss 37(1) to (4): 2.50 s 39: 12.10 s 41: 17.110 s 44: 12.185 s 47: 18.45, 18.170 s 48: 18.35 s 48(2): 14.245 s 49: 18.45 ss 67 to 68: 12.40 ss 71 to 72: 14.60 s 77: 14.245 s 78: 14.245 s 80(1): 14.215 s 81: 14.280 s 81(4): 14.195, 14.280 s 81(5): 14.245 s 101: 11.110 s 102: 11.125 s 103: 11.125 s 105: 11.140 s 106: 11.140 s 107: 11.140 s 108: 11.125

Transfer of Land (Electronic Transactions) Act 2004 s 6: 5.380 Transfer of Land (Single Register) Act 1998: 2.145 Trustee Act 1958 s 63(1): 13.25 Water Act 1989 s 136: 17.30 Wills Act 1997 s 4(2): 11.05 Wrongs Act 1958 s 30: 16.60, 17.30

WESTERN AUSTRALIA Commercial Tenancy (Retail Shops) Agreements Act 1985: 14.05 Damage by Aircraft Act 1964 s 4: 16.60 Family Court Act 1997 s 205ZA: 2.65 s 205ZB: 2.65 Interpretation Act 1984 s 5: 16.40 s 13A(3): 2.65 Land Administration Act 1997 s 195: 18.10 xlix

Australian Property Law: Cases and Materials

s 84: 11.05 s 91: 14.75 ss 92 to 93: 14.135 s 95: 14.245 s 96: 14.280 s 104: 14.280 s 129A: 18.30 s 129B(2): 18.115 s 129C: 17.165, 18.95 s 134: 5.55 s 136J(1): 17.165 s 137: 6.40 s 137(1): 6.55 s 138: 6.80 s 138(1): 6.80 s 138(2): 6.80 s 141(l): 6.80 s 188(ii): 5.370 s 196(1): 5.360 s 199: 5.65 s 201: 5.330, 5.345 s 202: 5.65 s 205: 5.345 ss 205 to 211: 5.330 ss 222 to 223A: 3.100 s 227: 12.10 s 229A: 17.180

Property Law Act 1969 — cont s 110: 11.160 s 111: 11.150 s 111(2): 11.160 s 120(d): 12.10 s 121: 17.145 s 122: 16.125 s 123: 16.120 s 129: 12.240 Pt XI: 11.105 Pt XIV: 12.205 Registration of Deeds Act 1856: 2.145 Residential Parks (Long-stay Tenants) Act 2006 s 10: 15.115 ss 21 to 54: 15.115 ss 59 to 61: 15.115 Residential Tenancies Act 1987: 14.05 s 5 to 6: 15.15 s 6: 15.15 s 27A: 15.20 s 32(1): 15.30 Retirement Villages Act 1992: 15.125 ss 58 to 64: 15.125 Rights in Water and Irrigation Act 1914 s 15(1): 16.110 s 16: 16.110

Wills Act 1970 s 4: 11.05 s 6: 11.05

Sale of Goods Act 1895: 4.30 s 18: 9.85 Sale of Land Act 1970 s 22: 2.110

IMPERIAL

Strata Titles Act 1985: 16.40 s 3(2)(a): 13.90 s 10: 13.35 s 18: 13.35 s 19: 13.35 s 49(1): 13.35, 13.45

Grantees of Reversions Act 1540: 14.245

1540 Statute: 14.245

Royal Mines Act 1688: 16.75 Statute of Forcible Entry 1381: 14.270

ENGLAND

Transfer of Land Act 1893 s 4(1): 16.85 s 31(2): 6.75 s 53(1): 6.15 s 55: 6.40 s 55(3): 6.40 s 58: 9.10 s 60: 12.50 s 63A: 17.55 s 64: 17.55 s 65: 17.55 s 67: 17.55 s 68: 5.135, 14.90, 17.85 s 68(1): 3.100, 5.150, 5.310, 5.320 ss 68(1) to (4): 5.15 s 68(2): 5.150 s 68(3)(c): 17.55 s 76: 5.370 s 77: 5.370

Factors Act 1823: 4.30 Factors Act 1825: 4.30 Factors Act 1842: 4.30 Factors Act 1847: 4.30 Statute of Anne 1705: 12.70 Statute of Frauds 1677 s 4: 14.50 Statute of Uses 1535: 2.70, 11.25, 11.35 Statute of Wills 1540: 11.35

NEW ZEALAND Land Transfer (Computer Register and Electronic Lodgment) Amendment Act 2002 l

Table of Statutes

s 70(1)(g): 2.110

Land Transfer (Computer Register and Electronic Lodgment) Amendment Act 2002 — cont s 80(1): 5.380 s 81(2): 5.380 s 81(3): 5.380

Land Registration Act 2002: 3.100 Sch 3, para 2: 2.110 Law of Property Act 1925 s 56(1): 18.160 s 62: 17.110, 17.120 s 78: 18.170, 18.180 s 78(1): 18.45, 18.170 s 79: 18.180

UNITED STATES Uniform Commercial Code: 10.25

UNITED KINGDOM

Perpetuities and Accumulations Act 1964: 11.105

Abolition of Feudal Tenures etc (Scotland) Act 2000: 2.35

Perpetuities and Accumulations Act 2009: 11.105

Age of Marriage Act 1929: 11.75

Real Property Limitation Act 1833: 3.110

Contingent Remainders Act 1877 s 1: 11.35

Statute of Frauds: 8.65 Statute of Quia Emptores 1290: 2.10

Contracts (Rights of Third Parties) Act 1999: 18.160

Statute of Tenures 1660: 2.10, 2.25 Statute of Wills 1540: 1.115

Land Registration Act 1925

li

CONTEXT OF PROPERTY LAW

PART1

CHAPTER 1 Concept of Property [1.05]

RECOGNITION BY THE COURTS OF PROPERTY ..................................................... 3 [1.10] [1.20] [1.30] [1.40] [1.50] [1.60]

[1.70]

WRITINGS ON THE MEANING OF PROPERTY ...................................................... 32 [1.70] [1.75] [1.85]

[1.95]

Women, Property and Family Relations ..................................... 60

BOUNDARY BETWEEN PROPERTY AND CONTRACT ............................................ 64 [1.120] [1.130] [1.135] [1.140]

[1.150]

Plenty v Dillon ........................................................................ 55

PROPERTY AND GENDER ISSUES ........................................................................... 60 [1.110]

[1.120]

Introduction: Some Theses on Property ..................................... 32 Property in Thin Air ................................................................. 37 Property and Sovereignty ......................................................... 47

PROTECTION FOR PROPERTY ................................................................................ 55 [1.95]

[1.110]

Davis v Commonwealth ............................................................ 4 Victoria Park Racing and Recreation Grounds Co Ltd v Taylor ....................................................................................... 9 Kent v Johnson ........................................................................ 16 Stow v Mineral Holdings (Australia) Pty Ltd .............................. 20 Yanner v Eaton ....................................................................... 23 Parsons v Queen ..................................................................... 28

Cowell v Rosehill Racecourse Co Ltd .......................................... 64 Heidke v Sydney City Council ................................................... 70 Forbes v New South Wales Trotting Club Ltd ............................. 72 Ashburn Anstald v Arnold ......................................................... 73

REMEDIES ................................................................................................................. 78 [1.150]

Jaggard v Sawyer .................................................................... 78

RECOGNITION BY THE COURTS OF PROPERTY [1.05] The creation of new proprietary interests is normally a matter for legislative bodies, primarily because they can act prospectively and can set out in one place all the characteristics of any interest. By contrast the courts describe the law that has been in existence and make binding decisions only with respect to the matters essential for the resolution of the dispute before them. However the possibility of new proprietary interests arises in the cases below as a result of the interpretation of statutes or the definition of tortious actions. The most significant recognition of new proprietary rights by Australian courts has been the recognition of land rights of indigenous people by the High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1. These rights were derived from another legal system; that of the native persons as at the date of the exercise of British sovereignty. The authors of this text contend that the courts were forced to act by the failure of the Commonwealth parliament to make laws in an area of obvious contention and where non-recognition would have produced a result discriminatory against indigenous people. The definition of native title on a case-by-case basis has produced inevitable uncertainty. [1.05]

3

Australian Property Law: Cases and Materials

Davis v Commonwealth [1.10] Davis v Commonwealth (1988) 166 CLR 79 High Court of Australia DEMURRER: Louis Edward Davis, Allan Santo and Ernie Creighton sued the Commonwealth and the Australian Bicentennial Authority in the High Court for a declaration that ss 6 to 18, 22, 23 and 25 of the Australian Bicentennial Authority Act 1980 (Cth) were beyond the legislative power of the Commonwealth Parliament, and a declaration that the appropriation of money for the purposes of the Authority or the celebration by the Commonwealth of the Bicentenary was not authorised by s 83 of the Constitution. The first plaintiff alleged that he designed and printed articles of clothing bearing the name of the Authority and certain symbols and expressions prescribed under s 22 of the Act. His request for the Authority’s consent to the use of the name, symbols and expressions had been refused. One of the devices or symbols for which the Authority declined consent had a central symbol, with the figures “1788” and “1988”, bearing a discernible similarity to the first and second official symbols of the Authority. The inner symbol was surrounded with a outer ring in which the words “200 YEARS OF SUPPRESSION AND DEPRESSION” appeared. The first plaintiff further alleged that he intended selling articles to which the name of the Authority and/or a prescribed symbol or a prescribed expression had been applied. The first plaintiff intended to sell the articles by wholesale to the second and third plaintiffs who intended to sell them by retail. The defendants demurred to the statement of claim on the ground that the Act was valid. The demurrer was heard by the Full Court. … MASON CJ, DEANE and GAUDRON JJ: The scope of the executive power of the Common-wealth has often been discussed but never defined. By s 61 of the Constitution it extends to the execution and maintenance of the Constitution. As Mason J observed in Barton v The Common-wealth (1975) 131 CLR 477 at 498, the power: extends to the execution and maintenance of the Constitution and of the laws of the Commonwealth. It enables the Crown to undertake all executive action which is appropriate to the position of the Commonwealth under the Constitution and to the spheres of responsibility vested in it by the Constitution. These responsibilities derived from the distribution of legislative powers effected by the Constitution itself and from the character and status of the Commonwealth as a national polity: Victoria v The Commonwealth and Hayden (the “Australian Assistance Plan Case”) (1975) 134 CLR 338 at 396-397. So it is that the legislative powers of the Commonwealth extend beyond the specific powers conferred upon the Parliament by the Constitution and include such powers as may be deduced from the establishment and nature of the Commonwealth as a polity: see the discussion by Dixon J in Australian Communist Party v The Commonwealth (the “Communist Party Case”) (1951) 83 CLR 1 at 187-188. Dixon J expressed a like view of Parliament’s power of appropriation when he said in Attorney- General (Vict) v The Common-wealth (the “Pharmaceutical Benefits Case”) (1945) 71 CLR 237, at 271-272: In deciding what appropriation laws may validly be enacted it would be necessary to remember what position a national government occupies and … to take no narrow view, but the basal consideration would be found in the distribution of powers and functions between the Commonwealth and the States. The Constitution distributes the plenitude of executive and legislative powers between the Commonwealth and the States: see Colonial Sugar Refining Co Ltd v Attorney-General for the Commonwealth (1912) 15 CLR 182 at 214-215, per Isaacs J; Smith v Oldham (1912) 15 CLR 355 at 365, per Isaacs J. On this footing, as Isaacs J pointed out in The Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd (the “Wooltops Case”) (1922) 31 CLR 421 at 437-439, s 61 confers on the Commonwealth all the prerogative powers of the Crown except those that are necessarily exercisable by the States under the allocation of responsibilities made by the Constitution and those denied by the Constitution itself. Thus the existence of Commonwealth executive power in areas beyond the express 4

[1.10]

Concept of Property

CHAPTER 1

Davis v Commonwealth cont. grants of legislative power will ordinarily be clearest where Commonwealth executive or legislative action involves no real competition with State executive or legislative competence. If we ask the question whether the commemoration of the Bicentenary is a matter falling within the peculiar province of the Commonwealth in its capacity as the national and federal government, the answer must be in the affirmative. That is not to say that the States have no interest or no part to play in the commemoration. Clearly they have such an interest and such a part to play, whether as part of an exercise in co-operative federalism or otherwise. But the interest of the States in the commemoration of the Bicentenary is of a more limited character. It cannot be allowed to obscure the plain fact that the commemoration of the Bicentenary is pre-eminently the business and the concern of the Commonwealth as the national government and as such falls fairly and squarely within the federal executive power. Implicit in what we have just said is a rejection of any notion that the character and status of the Commonwealth as the government of the nation is relevant only in the ascertainment of the scope of the executive power in the area of Australia’s external relations. In the legislative sphere the nature and status of the Commonwealth as a polity has sustained legislation against subversive or seditious conduct: Burns v Ransley (1949) 79 CLR 101 at 116; R v Sharkey (1949) 79 CLR 121 at 148-149; see the Communist Party Case, at 187-188. And there was no suggestion in the judgments in the Australian Assistance Plan Case (at 362, 375, 397 and 412-413) that the character and status of the Commonwealth as a national government was not relevant in ascer-taining the scope of the executive power in its application domestically. Indeed, the judgments in that case contradict the suggestion, the Australian Assistance Plan being a domestic scheme. From the conclusion that the commemoration of the Bicentenary falls squarely within Commonwealth executive power other consequences follow. The first is that the executive power extends to the incorporation of a company as a means for carrying out and implementing a plan or programme for the commemoration. There is no constitutional bar to the setting up of a corporate authority to achieve this object or purpose in preference to executive action through a Ministry of the Crown. Certainly there is no such bar to the incorporation of a company in the Australian Capital Territory, though we very much doubt that this procedure would enable the Commonwealth to circumvent limitations or restrictions which would otherwise attach to the federal executive power in so far as it extends to the commemoration of the Bicentenary: cf Johnson v Kent (1975) 132 CLR 164 at 169. Section 51(xxxix) of the Constitution enables the Parliament to legislate in aid of an exercise of the executive power. So, once it is accepted that the executive power extends to the incorporation of the Authority with the object set out in cl 3 of its memorandum of association, s 51(xxxix) authorises legislation regulating the administration and procedures of the Authority and conferring on it such powers and protection as may be appropriate to such an authority. It may be possible to support this conclusion without recourse to s 51(xxxix). The requisite legislative power may be deduced from the nature and status of the Commonwealth as a national polity in just the same way as Dixon J in the Communist Party Case thought that legislation prohibiting specific acts of sedition could be upheld. However it is unnecessary for us to pursue this question. … To return again to the incidental and implied powers. It is necessary, first, to refer to the four devices or symbols to the plaintiffs’ use of which the Authority refused to consent. The first device consists of the profile of a human head surrounded by the two words “AUSTRALIAN BICENTENARY” with the caption “DISCOVERED & DISCOLOURED”. The device is quite different from the official symbols of the Authority. And the words “AUSTRALIAN BICENTENARY”, though prescribed by reg 4 for the purposes of s 22(6)(d), are not used in the device in conjunction with “1788”, “1988” or “88”. Accordingly, the [1.10]

5

Australian Property Law: Cases and Materials

Davis v Commonwealth cont. plaintiffs’ proposed use of the expression does not fall within the concluding words of s 22(6)(d). The third and fourth devices to be used by the plaintiffs do not involve the use of a prescribed expression or an official symbol. However the plaintiffs’ second device stands in a different situation. It has a central symbol, bearing the figures “1788” and “1988”, that has a discernible similarity to the first and second official symbols of the Authority. The inner symbol is surrounded with an outer ring in which the words “200 YEARS OF SUPPRESSION AND DEPRESSION” appear. The device involves the use of a prescribed expression, the words “200 years”, in conjunction with “1788” and “1988”. Furthermore, the device incorporates a symbol that “so nearly resembles” the first and second official symbols “as to be capable of being mistaken for” those symbols. Accordingly, it is only the use of the second of the plaintiffs’ devices that would expose the plaintiffs to liability for the commission of offences against s 22(1)(a), (b) and (c), in the absence of the written consent of the Authority. Section 24 recognises that ss 22 and 23 are provisions “for the protection of (the) name, property or interests” of the Authority. The defendants submit that, when the two sections are so understood, the executive power, operating in conjunction with the incidental power (s 51(xxxix)) or the implied power, supports them as laws reasonably adapted to the purpose of facilitating and protecting the attainment of the objects of the commemoration of the Bicentenary and the objects of the Authority. This, the defendants argue, includes the protection of the integrity of the official symbols and the protection of the prescribed expressions. The broad proposition advanced by the defendants travels too widely in two respects. First, it suggests that the relevant exercise of executive and legislative power is directed not to the commemoration of the Bicentenary as such but to the attainment of objects lying beyond the commemoration itself. Secondly, the proposition suggests that the relevant exercise of power extends to the attainment of the objects of the Authority as though they are independent of the commemoration of the Bicentenary. In one respect this is so. The external affairs power supports the prescription in s 22(6)(d)(i) of the last four expressions mentioned in that paragraph. Australia is a party to the Convention Relating to International Exhibitions of 1928 as amended by subsequent Protocols. Expo 88 is an international exhibition to which the Convention applies. By Art 9(3) Australia is bound to: “use whatever means it considers most appropriate under its own legislation to act against the organisers of false exhibitions or exhibitions to which participants might be fraudulently attracted by false promises, notices or advertisements”. Apart from this aspect of s 22(6)(d)(i), the federal executive power authorises the commemoration of the Bicentenary and what is incidental to it. Likewise, in the manner already discussed, federal legislative power extends to the same extent. In exercising that power the Parliament may protect the name of the Authority, authorise the prescription of appropriate official symbols for use by the Authority and prohibit unauthorised use by others of the Authority’s name or of those symbols, or likenesses of them, for the purpose of protecting their integrity. The implied legislative power, as well as the incidental power (s 51(xxxix)), enables Parliament to enact coercive laws: see Burns v Ransley. Consequently, if the provisions of ss 22 and 23 relating to the use of the Authority’s name and prescribed symbols stood on their own we would uphold their validity. If we look to s 22(1)(a) as it applies to prescribed expressions, the first six expressions prescribed by s 22(6)(d)(i) are expressions which may be used in conjunction with “1788”, “1988” or “88”, in connection with a business, trade, profession or occupation, in a great variety of circumstances, without prejudicing in any way the commemoration of the Bicentenary or the attainment of the objects of the Authority. The expressions are commonly used by all sections of the community, particularly in this the Bicentennial year. There is every reason for thinking that a wide range of persons, companies and organizations have occasion to use them otherwise than for purposes of advertising and publicity, if only to record what they are doing in the Bicentennial year. And there is no 6

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Davis v Commonwealth cont. reason for thinking that the protection of the integrity of the commemoration of the Bicentenary and the attainment by the Authority of its objects require the prohibition of such a use of the six prescribed expressions in the circumstances mentioned in s 22(1), subject only to the written consent of the Authority. The difficulties do not stop at this point. Take the prescription of “Melbourne” and “Sydney” in par (d)(i). The use of “Family Law Conference Melbourne 1988”, without the prior written consent of the Authority, in connection with a conference of the legal profession in that city this year would infringe s 22(1)(a). Yet it is impossible to perceive how the prohibition of such a use contributes to the protection of the integrity of the commemoration of the Bicentenary or the attainment of the objects of the Authority. Many similar illustrations (for example, clothing or emblems displaying support for sporting teams) might be given of the use of a combination of “Melbourne” and “1988” or “Sydney” and “1988”. The illustrations given in the two preceding paragraphs indicate that the effect of the provisions is to give the Authority an extraordinary power to regulate the use of expressions in everyday use in this country, though the circumstances of that use in countless situations could not conceivably prejudice the commemoration of the Bicentenary or the attainment by the Authority of its objects. In arming the Authority with this extraordinary power the Act provides for a regime of protection which is grossly disproportionate to the need to protect the commemoration and the Authority. It is therefore no answer to say that the Authority’s power to refuse written consent is exercisable only for the purpose of ensuring such protection, assuming that to be a permissible construction of s 22(1). Here the framework of regulation created by s 22(1)(a) with s 22(6)(d)(i) and (ii) reaches far beyond the legitimate objects sought to be achieved and impinges on freedom of expression by enabling the Authority to regulate the use of common expressions and by making unauthorised use a criminal offence. Although the statutory regime may be related to a constitutionally legitimate end, the provisions in question reach too far. This extraordinary intrusion into freedom of expression is not reasonably and appropriately adapted to achieve the ends that lie within the limits of constitutional power. It follows that a reading down of the power to refuse or grant consent under s 22(1)(a) to the use of prescribed expressions would not avail to bring the provision within power. In any event it is not clear how one would read the provision down. The question is complicated by the contrast between the form of par (c)(ii) and pars (d)(i) and (ii). In the latter paragraphs no attempt is made to confine the concept of “prescribed expressions” to expressions the use of which would, in specified circumstances, convey some suggestion of connection or affiliation with the Authority or the commemoration which it is promoting and assisting. Moreover, the absence of any express limitation on the power of prescription contained in par (d)(ii) is consistent with an intention to confer on the Authority a wide-ranging power to regulate the use of expressions in common use, in the belief that there is a possibility that in some circum-stances the expressions could conceivably be used in a way that would be detrimental to the interests sought to be protected. Again, it is not easy to see how the power of prescription should be read down so as to bring it within the limits of constitutional power. [Wilson, Dawson and Brennan JJ agreed that the provisions of the Australian Bicentennial Authority Act 1980 were beyond the powers of the Commonwealth government.]

[1.15]

Notes and Questions

1. Although this case is expressed in terms relating to the legislative and executive powers of the Commonwealth government, the legislation under attack had purported to restrict the [1.15]

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use of expressions related to the bicentenary and thus in effect vest copyright in those words in the Bicentenary Authority. Copyright is an intangible form of property but as the following cases illustrate the essential nature of property is the preclusion of something from others. The High Court reacted to what was characterised as an attempt to take away from members of the Australian community the right to use common phrases of the English language. The general nature of protection for the products of intellectual endeavour is explored below in Chapter 4. 2. It is becoming common for governments to grant to promoters of special events exclusive rights for merchandising in association with that event. Thus the issue of the validity and nature of the rights conferred is likely to be an increasing matter of dispute. 3. The Australian Football League (and all similar bodies) claims copyright in its fixture of matches for the season. Does that prevent me from running a football tipping competition where I use the fixture as outlined by the AFL? If not, why not? (See IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458. Cf, on relevantly different facts, Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273.) 4. Controversies as to the existence of proprietary interests have centred on the extent to which ideas and aspects of relationships should be protected. The acceptance of private property in Australian society has meant that most tangible things, including land, can be owned. One thing of which ownership has generally been regarded as inappropriate has been the human body. Australian society has not allowed the sale of blood or, more recently, human tissue. Whether connected to this prohibition or not a shortage of material for transplants has been an irritant for medical practitioners. Even corpses have been excluded from the domain of commerce with apparent consequences as far ago as the Edinburgh murders by Burke and Haire at the beginning of the 19th century to supply bodies for medical education. Australian courts have been prepared to recognise property rights in a human body which has been specially treated after death. In Doodeward v Spence (1908) 6 CLR 406 at 414 Griffiths CJ stated: a human body, or a portion of a human body, is capable by law of becoming the subject of property … I entertain no doubt that, when a person has by the lawful exercise of work or skill so dealt with a human body or a part of a human body in his lawful possession that it has acquired some attributes differentiating it from a mere corpse awaiting burial, he acquires a right to retain possession of it.

In Bazley v Wesley Monash IVF Pty Ltd [2010] QSC 118, the court held that frozen semen samples, stored for a fee by an assisted reproductive technology clinic after the donor’s death, constituted property. The transaction was one of bailment for reward, and the personal representative of the deceased was entitled to the return of the sperm samples despite the fact that National Health and Medical Research Council Ethical Guidelines required the destruction of the samples in the relevant circumstances. For a detailed philosophical analysis of the issues surrounding property rights and the human body, see Davies and Naffine, Are Persons Property? Legal Debates about Property and Personality (Ashgate, Aldershot, 2001). 5. Property represents a power relationship between the owner of something and the object of that ownership. In today’s society all natural persons are capable of owning property but the absence of slavery is relatively recent. Today (non-human) animals suffer, in part, because they are regarded as property. Prevention of cruelty laws impact only on the grossest abuses and continue to permit the commercial and non-commercial exploitation 8

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of sentient beings with which humans share the planet. In recent times, however, the idea that animals should merely be regarded as the object of human property rights has become increasingly contested: see Sunstein and Nussbaum (eds), Animal Rights: Current Debates and New Directions (OUP, Oxford, 2006). For a philosophical and doctrinal analysis of the legal status of animals in Australasia, see Cao, Animal Law in Australia and New Zealand (Thomson Reuters, Sydney, 2010). Also see [4.10] Note 3. Also compare People of the State of New York ex rel, The Nonhuman Rights Project Inc, on behalf of Tommy v Lavery (2014) WL 6802767 (NYAD 3 Dept) (chimpanzee held to be property and not entitled to be released from a caged environment), with an Argentinian court which held that an orangutan was entitled to succeed in a writ of habeas corpus sought on his behalf by an animal protection organisation. Anon, “Conceden un Habeas Corpus a Una Orangutana”, December 21, 2014, WLNR 36132917; Anon, “Una Orangutana en Libertad” December 26, 2014, WLNR 36603997.

Victoria Park Racing and Recreation Grounds Co Ltd v Taylor [1.20] Victoria Park Racing and Recreation Grounds Company Ltd v Taylor (1937) 58 CLR 479 High Court of Australia LATHAM CJ: This is an appeal from a judgment for the defendants given by Nicholas J in an action by the Victoria Park Racing and Recreation Grounds Co Ltd against Taylor and others. The plaintiff company carries on the business of racing upon a racecourse known as Victoria Park. The defendant Taylor is the owner of land near the racecourse. He has placed an elevated platform on his land from which it is possible to see what takes place on the racecourse and to read the information which appears on notice boards on the course as to the starters, scratchings, etc, and the winners of the races. The defendant Angles stands on the platform and through a telephone comments upon and describes the races in a particularly vivid manner and announces the names of the winning horses. The defendant the Common-wealth Broadcasting Corporation holds a broadcasting licence under the regulations made under the Wireless Telegraphy Act 1905-1936 and carries on the business of broadcasting from station 2UW. This station broadcasts the commentaries and descriptions given by Angles. The plaintiff wants to have the broadcasting stopped because it prevents people from going to the races and paying for admission. The evidence shows that some people prefer hearing about the races as seen by Angles to seeing the races for themselves. The plaintiff contends that the damage which it thus suffers gives, in all the circumstances, a cause of action. The plaintiff’s case is put as an action upon the case for nuisance affecting the use and enjoyment of the plaintiff’s land. It is also contended that there is an unnatural user of Taylor’s land by Angles to which the Broadcasting Co is a party and of which it takes advantage. The unnatural user is, I understand, alleged to consist in the erection of the wooden structure on Taylor’s land which Angles uses and the use of the land for broadcasting purposes. It is contended that, there being this unnatural user of the land, the defendant is liable for all the damage which may happen to any person, including the plaintiff, as a result of such user. The first contention is that the plaintiff’s land has been made suitable for a racecourse, that by reason of the action of the defendants it has been deprived of at least some measure of that suitability, and that therefore this is a case of nuisance – an unlawful interference with the use and enjoyment of land. No analogous case has been cited to the court. I agree that the category of nuisance is not closed and that if some new method of interfering with the comfort of persons in the use of land emerges the law may provide a remedy. For example, the increasing use of electricity, with the possibility of the escape of electricity into an adjoining property, has provided a new possible source of interference with the use of land and the law provides a remedy in such a case. [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. In this case, however, in my opinion, the defendants have not interfered in any way with the use and enjoyment of the plaintiff’s land. I am unable to see that any right of the plaintiff has been violated or any wrong done to him. Any person is entitled to look over the plaintiff’s fences and to see what goes on in the plaintiff’s land. If the plaintiff desires to prevent this, the plaintiff can erect a higher fence. Further, if the plaintiff desires to prevent its notice boards being seen by people from outside the enclosure, it can place them in such a position that they are not visible to such people. At sports grounds and other places of entertainment it is the lawful, natural and common practice to put up fences and other structures to prevent people who are not prepared to pay for admission from getting the benefit of the entertainment. In my opinion, the law cannot by an injunction in effect erect fences which the plaintiff is not prepared to provide. The defendant does no wrong to the plaintiff by looking at what takes place on the plaintiff’s land. Further, he does no wrong to the plaintiff by describing to other persons, to as wide an audience as he can obtain, what takes place on the plaintiff’s ground. The court has not been referred to any principle of law which prevents any man from describing anything which he sees anywhere if he does not make defamatory statements, infringe the law as to offensive language, etc, break a contract, or wrongfully reveal confidential information. The defendants did not infringe the law in any of these respects It has been argued that by the expenditure of money the plaintiff has created a spectacle and that it therefore has what is described as a quasi-property in the spectacle which the law will protect. The vagueness of this proposition is apparent upon its face. What it really means is that there is some principle (apart from contract or confidential relationship) which prevents people in some circumstances from opening their eyes and seeing something and then describing what they see. The court has not been referred to any authority in English law which supports the general contention that if a person chooses to organise an entertainment or to do anything else which other persons are able to see he has a right to obtain from a court an order that they shall not describe to anybody what they see. If the claim depends upon interference with a proprietary right it is difficult to see how it can be material to consider whether the interference is large or small – whether the description is communicated to many persons by broadcasting or by a newspaper report, or only to a few persons in conversation or correspondence. Further, as I have already said, the mere fact that damage results to a plaintiff from such a description cannot be relied upon as a cause of action. I find difficulty in attaching any precise meaning to the phrase “property in a spectacle”. A “spectacle” cannot be “owned” in any ordinary sense of that word. Even if there were any legal principle which prevented one person from gaining an advantage for himself or causing damage to another by describing a spectacle produced by that other person, the rights of the latter person could be described as property only in a metaphorical sense. Any appropriate-ness in the metaphor would depend upon the existence of the legal principle. The principle cannot itself be based upon such a metaphor. Even if, on the other hand, a spectacle could be said to exist as a subject matter of property, it would still be necessary, in order to provide the plaintiff in this case with a remedy, to show that the description of such property is wrongful or that such description is wrongful when it is widely disseminated. No authority has been cited to support such a proposition. RICH J: In these circumstances the learned judge held that the case was one of damnum sine injuria. The question to be solved is, “How far can one person restrain another from invading the privacy of land which he occupies, when such invasion does not involve actual entry on the land?” (Professor Winfield, Law Quarterly Review, vol 47, p 24.) The defendants contended that the law provides no remedy as their action did not fall within any classifica-tion of torts and that the plaintiff’s remedy lay either in self-defence, for example, raising the height of the fences round the course, or in an application to the legislature. It does not follow that because no precedent can be found a principle 10 [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. does not exist to support the plaintiff’s right. Nuisance covers so wide a field that no general definition of nuisance has been attempted but only a classification of the various kinds of nuisance. Courts have always refrained from fettering themselves by definitions. Courts of equity constantly decline to lay down any rule, which shall limit their power and discretion as to the particular cases in which such injunctions shall be granted or withheld. And there is wisdom in this course; for it is impossible to foresee all the exigencies of society which may require their aid and assistance to protect rights, or redress wrongs. The jurisdiction of these courts, thus operating by way of special injunction, is manifestly indispensable for the purposes of social justice in a great variety of cases, and therefore should be fostered and upheld by a steady confidence. (Story’s Equity Jurisprudence, Lt Eng Ed (1881), s 959 (b), p 625.) The common law has not proved powerless to attach new liabilities and create new duties when experience has proved that it is desirable. That this was so in the older days was due to the wide scope of the action upon the case. The action upon the case was elastic enough to provide a remedy for any injurious action causing damage … When relationships come before the courts which have not previously been the subject of judicial decision the court is unfettered in its power to grant or refuse a remedy for negligence. The action on the case for negligence has no limits set upon its territory, save by previous decisions upon such specific relationships as have come before the courts. (Salmond on Torts, 9th ed (1936) (Stallybrass), pp 18, 19; cf Pollock, Torts, 13th ed (1929), p 22.) An action on the case in the nature of nuisance was one of the flexible remedies capable of adaptation to new circumstances falling within recognised principles. This case presents the peculiar features that by means of broadcasting – a thing novel both in fact and law – the knowledge obtained by overlooking the plaintiff’s racecourse from the defendants’ tower is turned to account in a manner which impairs the value of the plaintiff’s occupation of the land and diverts a legitimate source of profit from its business into the pockets of the defendants. It appears to me that the true issue is whether a non-natural use of a neighbour’s land made by him for the purpose of obtaining the means of appropriating in this way part of the profitable enjoyment of the plaintiff’s land to his own commercial ends – a thing made possible only by radio – falls within the reason of the principles which give rise to the action on the case in the nature of nuisance. There is no absolute standard as to what constitutes a nuisance in law. But all the surrounding circumstances must be taken into consideration in each case. As regards neighbouring properties their interdependence is important in arriving at a decision in a given case. An improper or non-natural use or a use in excess of a man’s right which curtails or impairs his neighbour’s legitimate enjoyment of his property is “tortious and hurtful” and constitutes a nuisance. A man has no absolute right “within the ambit of his own land” to act as he pleases. His right is qualified and such of his acts as invade his neighbour’s property are lawful only in so far as they are reasonable having regard to his own circumstances and those of his neighbour (Law Quarterly Review, vol 52, p 460; vol 53, p 3). The plaintiff’s case must, I am prepared to concede, rest on what is called nuisance. But it must not be overlooked that this means no more than that he must complain of some impairment of the rights flowing from occupation and ownership of land. One of the prime purposes of occupation of land is the pursuit of profitable enterprises for which the exclusion of others is necessary either totally or except upon conditions which may include payment. In the present case in virtue of its occupation and ownership the plaintiff carries on the business of admitting to the land for payment patrons of racing. There it entertains them by a spectacle, by a competition in the comparative merits of racehorses, and it attempts by all reasonable means to give to those whom it admits the exclusive right of witnessing the spectacle, the competition and of using the collated information in betting while that is possible on its various events. This use of its rights as occupier is usual, reasonable and profitable. So much no one can dispute. If it be true that an adjacent owner has an unqualified and absolute right to overlook an occupier whatever may be the enterprise he is carrying on and to make any profitable use to which what he sees can be put, whether in his capacity [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. of adjacent owner or otherwise, then to that extent the right of the occupier carrying on the enterprise must be modified and treated in law as less extensive and ample than perhaps is usually understood. But can the adjacent owner by virtue of his occupation and ownership use his land in such an unusual way as the erection of a platform involves, bring mechanical appliances into connection with that use, ie, the microphone and land line to the studio, and then by combining regularity of observation with dissemination for gain of the information so obtained give the potential patrons a mental picture of the spectacle, an account of the competition between the horses and of the collated information needed for betting, for all of which they would otherwise have recourse to the racecourse and pay? To admit that the adjacent owner may overlook does not answer this question affirmatively. The Silver Fox Case [1936] 2 KB 468 shows that an adjoining owner may not fire a gun in the breeding season so as to interfere with his neighbour’s usual or normal use of his land. The besetting cases indicate that at common law the concert of others is a material factor. Eavesdropping suggests that at common law calculated overhearing differs from the casual sort. … Nuisance is not trespass on the case and physical or material interference is not necessary. The “vibration” cases and the “besetting and eavesdropping” cases are certainly against such a contention. What appears to me to be the real point in this case is that the right of view or observation from adjacent land has never been held to be an absolute and complete right of property incident to the occupation of that land and exercisable at all hazards notwithstanding its destructive effect upon the enjoyment of the land overlooked. In the absence of any authority to the contrary I hold that there is a limit to this right of overlooking and that the limit must be found in an attempt to reconcile the right of free prospect from one piece of land with the right of profitable enjoyment of another. … Indeed the prospects of television make our present decision a very important one, and I venture to think that the advance of that art may force the courts to recognise that protection against the complete exposure of the doings of the individual may be a right indispensable to the enjoyment of life. For these reasons I am of opinion that the plaintiff’s grievance, although of an unprecedented character, falls within the settled principles upon which the action for nuisance depends. Holding this opinion it is unnecessary for me to discuss the question of copyright raised in the case. I think that the appeal should be allowed. … DIXON J: The plaintiff’s counsel relied in the first instance upon an action on the case in the nature of nuisance. The premises of the plaintiff are occupied by it for the purpose of a racecourse. They have the natural advantage of not being overlooked by any surrounding heights or raised ground. They have been furnished with all the equipment of a racecourse and so enclosed as to prevent any unauthorised ingress or, unless by some such exceptional devices as the defendants have adopted, any unauthorised view of the spectacle. The plaintiff can thus exclude the public who do not pay and can exclude them not only from presence at, but also from knowledge of, the proceedings upon the course. It is upon the ability to do this that the profitable character of the enterprise ultimately depends. The position of and the improvements to the land thus fit it for a racecourse and give its occupation a particular value. The defendants then proceed by an unusual use of their premises to deprive the plaintiff’s land of this value, to strip it of its exclusiveness. By the tower placed where the race will be fully visible and equipped with microphone and line, they enable Angles to see the spectacle and convey its substance by broadcast. The effect is, the plaintiff says just as if they supplied the plaintiff’s customers with elevated vantage points round the course from which they could witness all that otherwise would attract them and induce them to pay the price of admission to the course. The 12 [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. feature in which the plaintiff finds the wrong of nuisance is the impairment or deprivation of the advantages possessed by the plaintiff’s land as a racecourse by means of a non-natural and unusual use of the defendants’ land. This treatment of the case will not, I think, hold water. It may be conceded that interferences of a physical nature, as by fumes, smell and noise, are not the only means of committing a private nuisance. But the essence of the wrong is the detraction from the occupier’s enjoyment of the natural rights belonging to, or in the case of easements, of the acquired rights annexed to, the occupation of land. The law fixes those rights. Diversion of custom from a business carried on upon the land may be brought about by noise, fumes, obstruction of the frontage or any other interference with the enjoyment of recognised rights arising from the occupation of property and, if so, it forms a legitimate head of damage recoverable for the wrong; but it is not the wrong itself. The existence or the use of a microphone upon neighbouring land is, of course, no nuisance. If one, who could not see the spectacle, took upon himself to broadcast a fictitious account of the races he might conceivably render himself liable in a form of action in which his falsehood played a part, but he would commit no nuisance. It is the obtaining a view of the premises which is the foundation of the allegation. But English law is, rightly or wrongly, clear that the natural rights of an occupier do not include freedom from the view and inspection of neighbouring occupiers or of other persons who enable themselves to overlook the premises. An occupier of land is at liberty to exclude his neighbour’s view by any physical means he can adopt. But while it is no wrongful act on his part to block the prospect from adjacent land, it is no wrongful act on the part of any person on such land to avail himself of what prospect exists or can be obtained. Not only is it lawful on the part of those occupying premises in the vicinity to overlook the land from any natural vantage point, but artificial erections may be made which destroy the privacy existing under natural conditions. … If English law had followed the course of development that has recently taken place in the United States, the “broadcasting rights” in respect of the races might have been protected as part of the quasi-property created by the enterprise, organization and labour of the plaintiff in establishing and equipping a racecourse and doing all that is necessary to conduct race meetings. But courts of equity have not in British jurisdictions thrown the protection of an injunction around all the intangible elements of value, that is, value in exchange, which may flow from the exercise by an individual of his powers or resources whether in the organization of a business or undertaking or the use of ingenuity, knowledge, skill or labour. This is sufficiently evidenced by the history of the law of copyright and by the fact that the exclusive right to invention, trade marks, designs, trade name and reputation are dealt with in English law as special heads of protected interests and not under a wide generalization. In dissenting from a judgment of the Supreme Court of the United States by which the organised collection of news by a news service was held to give it in equity a quasi-property protected against appropriation by rival news agencies, Brandeis J gave reasons which substantially represent the English view and he supported his opinion by a citation of much English authority (International News Service v Associated Press (1918) 248 US 215; 63 Law Ed 211). His judgment appears to me to contain an adequate answer both upon principle and authority to the suggestion that the defendants are misappropriating or abstracting something which the plaintiff has created and alone is entitled to turn to value. Briefly, the answer is that it is not because the individual has by his efforts put himself in a position to obtain value for what he can give that his right to give it becomes protected by law and so assumes the exclusiveness of property, but because the intangible or incorporeal right he claims falls within a recognised category to which legal or equitable protection attaches. … In my opinion, the right to exclude the defendants from broadcasting a description of the occurrences they can see upon the plaintiff’s land is not given by law. It is not an interest falling within [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. any category which is protected at law or in equity. I have had the advantage of reading the judgment of Rich J, but I am unable to regard the considerations which are there set out as justifying what I consider amounts not simply to a new application of settled principle but to the introduction into the law of new doctrine. … EVATT J: In the present case, the plaintiff relies upon all the surrounding circumstances. Its use and occupation of land is interfered with, its business profits are lessened, and the value of the land is diminished or jeopardised by the conduct of the defendants. The defendants’ operations are conducted to the plaintiff’s detriment, not casually but systematically, not temporarily but indefinitely; they use a suburban bungalow in an unreasonable and grotesque manner, and do so in the course of a gainful pursuit which strikes at the plaintiff’s profitable use of its land, precisely at the point where the profit must be earned, viz, the entrance gates. Many analogies to the defendants’ operations have been suggested, but few of them are applicable. The newspaper which is published a considerable time after a race has been run competes only with other newspapers, and can have little or no effect upon the profitable employment of the plaintiff’s land. A photographer overlooking the course and subsequently publishing a photograph in a newspaper or elsewhere does not injure the plaintiff. Individuals who observe the racing from their own homes or those of their friends could not interfere with the plaintiff’s beneficial use of its course. On the other hand, the defendants’ operations are fairly comparable with those who, by the employment of moving picture films, television and broadcasting would convey to the public generally (i) from a point of vantage specially constructed, (ii) simultaneously with the actual running of the races, (iii) visual, verbal or audible representations of each and every portion of the races. If such a plan of campaign were pursued, it would result in what has been proved here, viz, actual pecuniary loss to the occupier of the racecourse and a depreciation in the value of his land, at least so long as the conduct is continued. In principle, such a plan may be regarded as equivalent to the erection by a landowner of a special stand outside a cricket ground for the sole purpose of enabling the public to witness the cricket match at an admission price which is lower than that charged to the public bodies who own the ground, and, at great expense, organise the game. In concluding that, in such cases, no actionable nuisance would be created, the defendants insist that the law of England does not recognise any general right of privacy. That is true, but it carries the defendants no further, because it is not merely an interference with privacy which is here relied upon, and it is not the law that every interference with privacy must be lawful. The defendants also say that the law of England does not forbid one person to overlook the property of another. That also is true in the sense that the fact that one individual possesses the means of watching, and sometimes watches what goes on his neighbour’s land, does not make the former’s action unlawful. … If I may borrow some phrases from the majority decision, I would say that in the present case it is indisputable that the defendant broadcasting company has “endeavoured to reap where it has not sown”, and that it has enabled all its listeners to appropriate to themselves “the harvest of those who have sown”. Here, too, the interference with the plaintiff’s profitable use of its land takes place “precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not”. (4) For here, not only does the broadcasting company make its own business profits from its broadcasts of the plaintiff’s races; it does so, in part at least, by conveying to its patrons and listeners the benefit of being present at the racecourse without payment. Indeed, its expert announcer seems to be incapable of remembering the fact that he is not on the plaintiff’s course nor broadcasting with its permission, for, over and over again, he suggests that his broadcast is coming from within the course. The fact that here, as in the International News Service Case (1918) 248 US 215; 63 Law Ed 211, the conduct of the defendants 14 [1.20]

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Victoria Park Racing and Recreation Grounds Co Ltd v Taylor cont. cannot be regarded as honest should not be overlooked if the statement of Lord Esher is still true that “any proposition the result of which would be to show that the common law of England is wholly unreasonable and unjust, cannot be part of the common law of England” (quoted in Donoghue v Stevenson [1932] AC, at 608, 609). The fact that there is no previous English decision which is comparable to the present does not tell against the plaintiff because not only is simultaneous broadcasting or television quite new, but, so far as I know, no one has, as yet, constructed high grandstands outside recognised sports grounds for the purpose of viewing the sports and of enriching themselves at the expense of the occupier. … McTIERNAN J: Passing from the question of nuisance the plaintiff would, of course, be entitled to redress if the broadcasting violated any right residing in it. In Hannam v Mockett (1824) 2 B & C 934, 937, Bayley J said: To maintain an action, the plaintiff must have had a right and the defendant must have done a wrong. A man’s rights are the rights of personal security, personal liberty, and private property. Private property is either property in possession, property in action or property that an individual has a special right to acquire … A man in trade has a right in his fair chances of profit, and he gives up time and capital to obtain it. It is for the good of the public that he should. But the element of exclusiveness is missing from the plaintiff’s right in the knowledge which the defendants participate in broadcasting. It was competent for the plaintiff to impose a condition on the right it granted to any patron to enter the racecourse that he would not communicate to anyone outside the racecourse the knowledge about the racing which he got inside. It would be actionable for a patron to break this condition or for any person to induce him to break his contract by disclosing the knowledge with a view to it being broadcast (Exchange Telegraph Co Ltd v Central News Ltd [1897] 2 Ch 48). But where the communication is not in breach of contract and there is no proof that what is communicated comes “from a source which could not honestly be made use of” its dissemination is not a matter in respect of which the court can give any relief. Angles got the information first hand from a position of vantage outside the racecourse. The law does not reserve to the plaintiff the exclusive right to broadcast or otherwise disseminate that which formed the subject matter of the broadcast-ing complained of. The case of Sports and General Press Agency Ltd v “Our Dogs” Publishing Co Ltd [1916] 2 KB 880, approved on appeal [1917] 2 KB 125, illustrates the limits of the plaintiff’s rights in the present case. It is quite true that, as they were in possession of the spot where it would probably be convenient to place the camera for the purpose of photographing, they had the advantage, so far as the land in their possession was concerned, of being the only persons who could conveniently take photographs, but that is a very different thing from saying that they had the sole right to photograph anything inside the show. If any person were to be in a position, for example from the top of a house, to photograph the show from outside it, the association would have no right to stop him (1916) 2 KB, at 884. In my opinion there are no legal principles which the court can apply to protect the plaintiff against the acts of the defendants of which it complains.

[1.25]

Notes

1. The definition of a proprietary interest in land flows in part from the extent of protection provided by tortious actions such as trespass and nuisance. The extent of my ownership of the air above my land depends in part on my ability to restrain by way of an action in [1.25]

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trespass overflying aircraft. My freedom from pollution in part flows from my ability in an action in nuisance to restrain my neighbour’s wood burning stove or heater. 2. The judgment of Rich J significantly points to the relationship between the decision and technological change. As the owner of a video camera can I be restrained from filming my neighbours talking in the street? in their own front yard? from submitting the film to one of the television programmes and having the film shown? from showing the film at a local public theatre? 3. Today activities in public places and on commercial premises are recorded by surveillance cameras; in Germany private surveillance of public places is prohibited. Furthermore satellite images of the earth’s surface overcome any of the barriers described by Latham CJ and are available through the internet; see http://www.googleearth.com. Clearly activities in a backyard swimming pool are technically available to the public at large, and increased picture resolution may allow the public to peer through unshuttered windows.

Kent v Johnson [1.30] Kent v Johnson (1973) 21 FLR 177 Supreme Court of the Australian Capital Territory SMITHERS J: The plaintiffs seek to restrain the defendants from constructing on the summit of Black Mountain in the City of Canberra a multi-purpose tower, providing television, radio, telephone and other communications services together with tourist and restaurant facilities. Black Mountain is about three-quarters of a mile from Civic and two miles from Parliament House. The site of the tower is about five acres at the summit surrounded by 1,280 acres of land declared to be public park comprising near natural bushland with native flora and fauna. Such an area is almost unique so close to a great city. The tower proposed is so large and the site so prominent that the tower will constitute a dominating and arresting feature in the Canberra scene. The natural outline of Black Mountain is a significant part of the skyline of the city. The contest is between those who see the tower as a necessary public work which will be an attractive addition to the capital and those who see it as a menace to the surrounding bushland, a gross distortion of the skyline of the city and incompatible visually and otherwise with the plan and conception of the national capital hitherto accepted and implemented. … Public nuisance – title of the relators On this issue the title of the plaintiffs to act as relators was challenged. It was said that so far as that title rested on their rights to use and enjoy the public park that such a right was not in its nature a property right or a right analogous thereto. It was said that at most a member of the public had a mere licence to go upon the park. In this context it is useful to consider the nature of a public nuisance. It is a criminal offence constituted by an unlawful act or omission to discharge a legal duty which act of omission endangers the lives, safety, health, property or comfort of the public or by which the public are obstructed in the exercise or enjoyment of any right common to all Her Majesty’s subjects. Clerk and Lindsell on Torts, 13th ed, p 1392. It is sufficient if it materially affects the reasonable comfort and convenience of a class of Her Majesty’s subjects who come within the sphere or neighbourhood of its operation, it may affect some to a greater extent than others, it is not necessary to prove that every member of the class has been 16 [1.30]

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Kent v Johnson cont. injuriously affected, and the question whether the number of persons affected is sufficient to constitute a class is one of fact: Attorney-General v PYA Quarries Ltd ([1957] 2 QB 169 at 184). In the case of a private nuisance the essence of the matter is that the right infringed is a right related to the ownership or occupation of land or of some easement, profit, or other right used or enjoyed in connexion with land: Clerk and Lindsell on Torts, 13th ed, p 1391. But a public nuisance is the invasion of a right in members of the public as such not necessarily related to land. Thus it is that public nuisances may be established in the case of exposing in public a person with an infectious disease, selling food unfit for human consumption, obstructing a highway, or allowing a house near a highway to be ruinous. Accordingly the contention that the plaintiffs lack a sufficient title to some interest in the nature of property in land is not relevant. However it is relevant to look at the nature of the rights of a member of the public in relation to land declared to be a public park pursuant to the Public Parks Ordinance 19281942. … Regulations applicable to all public parks and recreation reserves have been made. (Recreation Reserve Regulations of 1938.) They provide with respect to reserves, including public parks, that any person who without lawful excuse enters upon any portion of a reserve as to which a notice is posted that admittance is prohibited, or who takes any vehicles or rides any horse into any portion of a reserve except a portion especially provided therefor, shall be guilty of an offence. They prohibit unauthorised lighting of fires, camping, football, cricket or athletic sports save in portions set apart therefor, the taking on of dogs and various other activities. No portions of this park are set aside for horse riding or games or vehicular use. The result is that this park is substantially one for walking, resting, and relaxing in the atmosphere of wilderness created by the trees and other flora, and for those interested, studying the flora and fauna. But the existence of regulations under which the rights of members of the public cease to be absolute and pursuant to which some members of the public may have different privileges from others does not take away what may be called the public nature of the park or indicate that it lacks the essential quality of a public park, namely that it is set aside and used for the general welfare, open to common and general use for public health, recreation, enjoyment or the like. … Black Mountain Reserve – nature and qualities Black Mountain is a significant focal point in the Canberra landscape and an essential component of the mountain and lake concept of the Canberra scene. Its broad-scale scenic attributes give pleasure to many people living and working within a wide radius of the mountain as they go about their normal business or relax during their leisure hours. It has a more intimate appeal because of its attractive and varied complex of flora and fauna. Black Mountain reserve is unique in its setting within the inner boundary of the national capital. It is a remarkably preserved area in a condition near to what it was 200 years ago. … Public nuisance – disfiguring the skyline In my opinion a substantial deleterious unlawful interference with the nature and quality of the reserve as a park for one to use and enjoy as such as a member of the public would constitute a public nuisance. Injury to the flora and fauna seems to me to be the same class of interference with public rights as would be the fouling of a public swimming pool. [1.30]

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Kent v Johnson cont. The plaintiffs contend that the construction of the proposed tower would so interfere. In this connexion it is convenient to deal first with that aspect of public nuisance arising out of the contention that the proposed tower will permanently disfigure the natural skyline of Canberra. … Sir Keith Hancock expressed his feelings as follows: It would be like the tower of Babel reaching to high heaven. And if I were in the Parliamentary triangle I would never look at Parliament House, my eye would be all the time switched – to me it is a desecration of something lovely which belongs to this nation. There can be no doubt that these are views clearly, honestly and persuasively held by many people and they are the views in all or some of their aspects of all the witnesses but one who gave evidence on this aspect of the case. Various of the witnesses claimed no special expertise but merely spoke of the compatibility of the natural beauty of the mountain with the general aspect of Canberra as a city beautifully ringed with such hills and their feeling of dismay that this portion of the skyline should be dramatically changed by the construction of such a large building of technological purpose. But others were persons of town-planning and architectural skills and experience able to speak with expertise. I certainly believe that what was said by all these people constitutes opinion or real value from the point of view of the break in the skyline which the tower will create. But there is another point of view and this was expressed by Sir William Dargie. He spoke in enthusiastic terms of the design of the tower as such. He said he spoke as an artist, he was not a town planner. He praised its classical lines. He felt it would be an imposing piece of modern sculpture conforming however to a certain classical precept of design. It was made more interesting by the slender nature of what might be called the spindle upon which the bulky round objects are imposed which gives it almost a cathedral spire effect. He said he saw Black Mountain as an imposing podium for a structure, which if you are going to put it on Black Mountain has to be large. He added that he felt that Canberra, especially seen from a distance, seems to be laid out flat and needs accents of verticality here and there and that this building would lead to further such accents which would be all to the good of the whole visual environment of Canberra basin and hills. … And it is the existence of conflicting points of view which points up the difficulty of treating a dramatic change in the landscape which shocks those of one point of view, but does not shock but even attracts others, as a fit subject for public nuisance. It was put to me that the visual amenity of this skyline has a special factor in it, namely, that it is an amenity long established, deliberately planned, and historically implemented, hitherto accepted, and safeguarded as an integral feature of the national capital. It was conceded that there is no authority supporting the notion that interference with such an amenity is a wrongful act in the nature of a public nuisance. In these days one is familiar with the conception of the protection of the amenity of particular areas by official planning schemes, and preservation of the landscape is a recognised factor in such schemes. And in this case the preservation of this skyline is a factor for the attention of the NCDC. It is before such a tribunal that the conflicting interests concerned with the amenity of the area concerned are to be assessed and dealt with. But I do not find in the common law any recognition of a right in anyone to control what another may build upon his land by reference to its interference with his line of sight of the beauty or lack of it in what is built, or its incompatibility with the historical quality or character of the neighbourhood. 18 [1.30]

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Kent v Johnson cont. It was pressed upon me that the categories of nuisance are never closed and I accept this. See Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479 at 503 per Rich J. And it is true that nuisance covers so wide a field that no general definition of nuisance has been attempted but only classifications of various kinds of nuisance. But it is going much too far to suggest that it might be a crime to construct a building which offends even a large majority of citizens in some locality by reason that it is considered to break a skyline, to be too large, too dominating, incompatible with the local traditions or the hitherto accepted principles of the planning of the locality. Prima facie it is lawful to erect what one pleases on one’s own land (Rogers v Rajendro Dutt). In Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (29), the plaintiffs complained of the defendant broadcasting their dog races from a high platform erected on its own land outside the plaintiffs’ racecourse. McTiernan J said, “Even if, upon a comparison with other buildings in the locality, the structure holding the broadcasting equipment might have been regarded as peculiar or unusual the defendant had a right to have it erected.” ((1937) 58 CLR at 523.) … Findings In this case I find as follows: The interest of even a broad section of the community in the enjoyment of a particular skyline does not constitute a right in the public of such a nature that invasion of it constitutes a public nuisance. For recognition of such interests by law statutory provisions are necessary.

[1.35]

Notes

1. Is there any difference between the aesthetic assault on my senses of an ugly building and the assault by way of noise or smell or fumes? 2. The problem of formulating objective standards of aesthetic qualities is referred to in the case and emphasised by the change of perceptions in the time since the decision. Today most observers would rank the Black Mountain Tower as a significant attraction and not a detraction from the appearance of the public buildings at the heart of the national capital. 3. Whilst the courts have been reluctant to base any remedy in nuisance on aesthetic considerations, those same considerations have formed a central part of planning and development laws. In general, any building work on land requires consent from a relevant authority (normally the local council) and where discretion exists under those laws, amenity, which is a term encompassing aesthetics, is a key consideration. See also Fogg, Australian Town Planning Law: Uniformity and Change (AIUS, 1984). 4. Reference in the judgment to rights of view is probably a reference to the fact that the common law did not recognise a right of view as an easement. But are we seeing a subtle shift around the right to a view. Many jurisdictions, such as New South Wales and Queensland, New Zealand and England and Wales provide recourse for a land owner whose view is blocked by trees or hedges. The tribunals that adjudicate on these matters are required to balance the the interests of privacy with the aesthetics and economic value of a view. For a discussion of this issue, see the Tasmanian Law Reform Institute paper on high hedges (http://www.utas.edu.au/law-reform/). [1.35]

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Stow v Mineral Holdings (Australia) Pty Ltd [1.40] Stow v Mineral Holdings (Australia) Pty Ltd (1977) 180 CLR 295; 14 ALR 397 High Court of Australia AICKIN J: The appellants lodged with the warden objections in the form prescribed under the Mining Act. None of the objections claimed that the objector was a person “who claims any estate or interest in any land in the area in respect of which an advertisement” had been published. The grounds specified in each of the notices of objection were that the area was of scenic, recreational and scientific value, that prospecting or mining would damage the adjoining National Park, and that the land itself was under consideration by the National Parks and Wildlife Service for inclusion in the South-West National Park. The four objectors were described in their objections as being, respectively, the Secretary of the Tasmanian Conservation Trust, a person acting on behalf of the South-West Committee, a person who stated merely that he was interested in the preservation of an area said to contain a range of coastal mountain vegetation in a completely unspoilt condition, and the Secretary of the Launceston Walking Club. Evidence was given at the hearing before the warden by various persons, none of whom was one of the objectors. No evidence was led to the effect that any of the objectors claimed or had an estate or interest in the land. Evidence was given for the applicant as to the nature of the proposed prospecting operations. An initial objection taken before the warden was that none of the objectors was a person who had or claimed any estate or interest in the land in question. The warden ruled that the objectors did in fact have interests in the land sufficient to entitle them to object under the Act. The evidence given on behalf of the objectors was directed to giving a description of the area and the nature of the terrain and vegetation, as well as the nature of the use made of the land by campers, bushwalkers, naturalists and the like, and as to the risk of fire and destruction of the wilderness area which might arise from prospecting operations. The warden in his decision reviewed the evidence and concluded that the evidence was “overwhelming” that any mining activity would have a deleterious effect upon the environment of the locality, quite out of proportion to the supposed advantages which might result in the successful sampling of the deposits of limestone thought to be present in the area. He said: “In the circumstances I find that as alleged by the Tasmanian Conservation Trust, mining activity is not compatible with the recreational and aesthetic uses of this land and on the balance of the evidence before me, the advantages of retaining the area in its present primeval and pristine condition far outweigh the nebulous benefits to be derived from the mining activities proposed”, and expressed his decision by saying that: “the application for a special prospector’s licence by Mineral Holdings (Australia) Pty. Ltd will therefore be refused.” From this decision the respondent appealed to the Supreme Court on the ground that the warden was wrong in not upholding the contention that the objectors were not persons claiming any estate or interest in the land within the meaning of s 15c(1) and that the warden should have refused to hear them, that the warden was wrong in taking into consideration the evidence in various respects, and that he did not properly exercise his discretion and exceeded the powers given to him. That appeal came before Nettlefold J who ordered that the decision of the warden be reversed and that the objections be struck out as incompetent. From that decision the objectors appealed to the Full Court which unanimously dismissed the appeal. It is from that decision of the Full Court that the present appeal is brought. In the course of argument before Nettlefold J the applicant company Mineral Holdings (Australia) Pty Ltd objected that the warden had misunderstood the nature of the function committed to him because he had no jurisdiction to refuse the application. It was argued that under the Mining Act the decision to grant or refuse the application was for the Minister on the recommendation of the Director and not for the warden, whose only jurisdiction was “to hear and determine any objection to the granting of the application”. Nettlefold J accepted this submission and held that the warden had no 20 [1.40]

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Stow v Mineral Holdings (Australia) Pty Ltd cont. jurisdiction to make the order which he did make. He further held that the objectors had no estate or interest in the land and therefore were not persons entitled to object. For reasons set out below I am of opinion that he was right in each of those conclusions. He dealt also with the question of whether there was any right to appeal from the warden’s decision in the light of the provisions of s 2 defining the expression “Warden’s Court” and s 110 dealing with the right to appeal to the Supreme Court. He held that the warden in exercising the jurisdiction under s 15C was acting “in a judicial capacity” and that what he had done constituted a “final judgment determination or decision” within the meaning of s 110(1). The Full Court of the Supreme Court upheld the decision of Nettlefold J and agreed with his conclusions, and also said, as Nettlefold J had said, that, notwithstanding the words used, it was implicit in the warden’s decision that what he was doing was to uphold the objections. The critical question under the Act in its present form is the nature of the jurisdiction conferred upon the warden and the effect of an order made by him. It is in my opinion clear, as was held by the Supreme Court, that the warden has no power whatever to accept or reject an application; that is a power vested exclusively in the Minister who is to act upon the recommendation of the Director of Mines. It is for the Minister to determine whether as a matter of policy it is desirable that the licence should be granted or refused. It is for him to weigh up the relative merits of the economic advantages said to flow from the successful establishment of a mining operation and the interests of those concerned to preserve unchanged the environment of a particular area and other competing contentions as to what is, in the public interest, a suitable use to which the land may properly be put. The Act, although specifying the qualification which the objector must possess in order to lodge an objection, does not specify the nature of the grounds upon which an objection may be based or the considerations which the warden is to take into account in considering objections. The Act is moreover silent upon the consequences of a finding by the warden. Since the section requires the warden to “determine” the objections it may be that he can either reject or allow them, but it attributes in express terms no consequence to either decision. The Full Court took the view that for the warden to uphold the objections would be fatal to an application, but the Act does not say this in express terms any more than it says in express terms what is the consequence of the warden disallowing the objections, whether on the ground of want of the statutory qualification to object or on some other ground. Since the only permitted objectors are those claiming some estate or interest in the land, a possible implication is that the Act contemplates that objections will be based only on conflicting interests in the land or possible adverse effects upon the estate or interest of the objector. Some support for this may be found in the fact that s 15C also deals with exploration licences, which give certain rights to prospectors on private land – see s 15B(3) and (5), s 70(2), s 71 and s 72. There are some obvious possibilities of other interests in the land which would make it impossible to grant a special prospector’s licence, for example, an objector might object that the land is not “unoccupied land” within the definition, but is land held by him under a Crown Grant or a Crown Lease and thus entirely outside the scheme of the Act with respect to mining on Crown Land, or that, although the area is otherwise “unoccupied land” as defined, that objector is in lawful possession or occupation under the Mining Act. Such persons would be claiming an estate or interest in the land within the ordinary meaning of that expression. Section 15C(5) deals with the case of competing applications for special prospector’s licences or exploration licences in respect of the same land and gives priority to the person whose application was first lodged. It appears to be a necessary consequence that the Act does not contemplate that where a person has already been granted a special prospector’s licence, a further licence may be granted to some other person in respect of that land. A person holding a prospector’s or exploration licence or a miner’s right would however have an “estate or interest” in the land since he has at least some rights to occupy and to take minerals from the land (ss 15A, 15B, 15C and 16) and is described as “holding the land”. [1.40]

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Stow v Mineral Holdings (Australia) Pty Ltd cont. The first question to be considered is whether any of the objectors had an estate or interest in the land. In my opinion it is clear that none of them had an estate or interest in the land, and indeed none of them claimed to do so. The definition of the word “estate” in the Acts Interpretation Act 1915 (Tas) was relied upon. Section 46 of that Act provides that, in the absence of a contrary indication, “‘Estate’, used in reference to land shall include any estate or interest, easement, right, title, claim, demand, charge, lien, or encumbrance in, over, to, or in respect of such land”. The expression “interest in land” is not defined in any relevant Act, nor is the compound expression “estate or interest in land”. I do not consider that assistance is to be derived from an attempt to apply the statutory definition of “estate” to the compound expression “estate or interest in land”. The word “right” in that definition does not in its context mean a public right; it means an individual right of a proprietary nature and I do not think that the word “demand” in this context has any more extended meaning. In my opinion the ordinary meaning of the compound expression “estate or interest in land” is an estate or interest of a proprietary nature in the land. This would include legal and equitable estates and interests, eg, a freehold or a leasehold estate, or incorporeal interests such as easements, profits â prendre, all such interests being held by persons in their individual capacity. It does not embrace interests in which the person concerned has no greater claim than any other member of the public. All members of the public have a right to pass freely along or across public highways but none have in their capacity as members of the public any estate or interest in such land. Likewise members of the public generally may be entitled pursuant to particular statutes to use specified areas of Crown Land for the purpose of recreation. However statutes such as the National Parks and Wildlife Act 1970 (Tas) were relied on to give rights to members of the public as such. All members of the public may have the right to go upon such land in the sense that they may freely walk thereon or in defined portions thereof and may resist attempts by the Crown or anyone else to eject them from such land. The fact that some of them are more disposed to go upon the land than others, derive more benefit therefrom and use the statutory right more often than others, does not elevate that which is a public right enjoyed by all members of the public equally into a private right capable of being described as an estate or interest in the land. I agree with the reasons given by the Supreme Court for its conclusion that the applicants were not persons who either had or claimed any estate or interest in this land, and that they were therefore not competent under the Mining Act to object to the grant of the licence. As members of the public they may hold strong views as to how the Crown should deal with unoccupied Crown land, but that is a matter which is committed to the discretion of the Crown speaking through the relevant Minister upon the recommendation of the Director of Mines. Like other members of the public they could make representations to the Director of Mines or to the Minister as to the manner in which they should perform their functions under the Act but they are not persons entitled to maintain objections before the warden. Stephen and Mason JJ agreed. Barwick CJ and Murphy JJ dissented on the basis of a different issue.

[1.45]

Notes

1. It is possible to create proprietary interests in favour of the public generally by means of a public trust. A person may leave land by will to a person or corporation or public body to hold that land for the benefit of the public generally often in some specific use such as a reserve, cf Brisbane City Council v Attorney-General (Qld) [1978] 3 WLR 299. Even so the issue arises of the capacity of any member of the public to enforce that trust: cf City of 22

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Burnside v Attorney-General of South Australia (1993) 61 SASR 107; see also Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [6.205]. 2. In Australia because the States existed prior to the coming into being of the Commonwealth of Australia much unalienated land is held by the Crown in respect of each of the States. Specific statutes provide that public lands such as roads vest in local councils and parks in appropriate park authorities. Whilst the public has use of such land it does not have any proprietary interest in it. The absence of proprietary remedies does not exclude all remedies: statutes may impose duties on a public authority as to the use and management of public land and administrative remedies may be available to enforce those duties. In these cases again the most difficult issue may be standing to seek an administrative remedy, cf Australian Conservation Foundation Inc v Commonwealth (1986) 146 CLR 493 and Crowther v Brisbane City Council [2010] QCA 348.

Yanner v Eaton [1.50] Yanner v Eaton (1999) 201 CLR 351 High Court of Australia [An Aboriginal man used a traditional form of harpoon to catch two juvenile estuarine crocodiles in Queensland. He and some other members of his clan ate some of the crocodile meat and froze the rest. The man did not hold a licence, permit, certificate or other authority under the Fauna Conservation Act. He was charged with one count of taking fauna contrary to that Act. A magistrate found that the man’s clan had a connection with the land from which the crocodiles were taken which had existed before the common law of the colony of Queensland had come into being and which continued thereafter. The magistrate further held that it was a traditional custom of the clan to hunt juvenile crocodiles for food. He dismissed the charge on the basis that s 211 of the Native Title Act applied. The informant applied for review, contending that any native title right or interest to hunt crocodiles, which the man may have enjoyed, had been extinguished prior to the commencement of the Native Title Act by the enactment of s 7(1) of the Fauna Conservation Act.] GLEESON CJ, GAUDRON, KIRBY AND HAYNE JJ: The word “property” is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, “property” does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of “property” may be elusive. Usually it is treated as a “bundle of rights”. But even this may have its limits as an analytical tool or accurate description, and it may be, as Professor Gray (Gray K and Gray S F, “The Idea of Property in Land”, in Bright and Dewar (eds), Land Law: Themes and Perspectives (1998) 15, at p 16) has said, that “the ultimate fact about property is that it does not really exist: it is mere illusion”. Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by “property” in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of “property” as an analytical tool. No doubt the examples could be multiplied. Nevertheless, as Professor Gray also says, “An extensive frame of reference is created by the notion that ‘property’ consists primarily in control over access. Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or resource rather than a legally endorsed concentration of power over things and resources.” “Property” is a term that can be, and is, applied to many different kinds of relationship with a subject matter. It is not “a monolithic notion of standard content and invariable intensity”. That is why, [1.50]

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Yanner v Eaton cont. in the context of a testator’s will, “property” has been said to be “the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have”. Because “property” is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter. To say that person A has property in item B invites the question what is the interest that A has in B? The statement that A has property in B will usually provoke further questions of classification. Is the interest real or personal? Is the item tangible or intangible? Is the interest legal or equitable? For present purposes, however, the important question is what interest in fauna was vested in the Crown when the Fauna Act provided that some fauna was “the property of the Crown and under the control of the Fauna Authority”? The respondent’s submission (which the Commonwealth supported) was that s 7(1) of the Fauna Act gave full beneficial, or absolute, ownership of the fauna to the Crown. In part this submission was founded on the dictum noted earlier, that “property” is “the most comprehensive of all the terms which can be used”. But the very fact that the word is so comprehensive presents the problem, not the answer to it. “Property” comprehends a wide variety of different forms of interests; its use in the Act does not, without more, signify what form of interest is created. There are several reasons to conclude that the “property” conferred on the Crown is not accurately described as “full beneficial, or absolute, ownership”. First, there is the difficulty in identifying what fauna is owned by the Crown. Is the Fauna Act to be read as purporting to deal with the ownership of all fauna that is located within the territorial boundaries of the State but only for so long as the fauna is within those boundaries, or does it deal with all fauna that has at any time been located within those boundaries? That is, does the Fauna Act purport to give the Crown ownership of migratory birds only as they pass through Queensland, or does it purport to give ownership to the Crown of every bird that has ever crossed the Queensland border? Secondly, assuming that the subject matter of the asserted ownership could be identified or some suitable criterion of identification could be determined, what exactly is meant by saying that the Crown has full beneficial, or absolute, ownership of a wild bird or animal? The respondent (and the Commonwealth) sought to equate the Crown’s property in fauna with an individual’s ownership of a domestic animal. That is, it was sought to attribute to the Crown what Pollock called “the entirety of the powers of use and disposal allowed by law”. At common law, wild animals were the subject of only the most limited property rights. At common law there could be no “absolute property”, but only “qualified property” in fire, light, air, water and wild animals. An action for trespass or conversion would lie against a person taking wild animals that had been tamed, or a person taking young wild animals born on the land and not yet old enough to fly or run away, and a land owner had the exclusive right to hunt, take and kill wild animals on his own land. Otherwise no person had property in a wild animal. “Ownership” connotes a legal right to have and to dispose of possession and enjoyment of the subject matter. But the subject matter dealt with by the Fauna Act is, with very limited exceptions, intended by that Act always to remain outside the possession of, and beyond disposition by, humans. As Holmes J said in Missouri v Holland (1920) 252 US 416, 434: “Wild birds are not in the possession of anyone; and possession is the beginning of ownership.” Thirdly, there are several aspects of the Fauna Act which tend to suggest that the property in fauna conferred on the Crown may not easily be equated with the property an individual may have in a domestic animal. The property rights of the Crown would come and go according to the operation of the exception contained in s 7(1) of fauna taken or kept “otherwise than in contravention of this Act during an open season with respect to that fauna”. As open seasons were declared and fauna taken, what otherwise was the property of the Crown, ceased to be. Next there are the references in ss 71(2) 24 [1.50]

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Yanner v Eaton cont. and 83(3) to forfeiture of fauna to the Crown. Even accepting that s 84 says that these sections shall not prejudice or affect the rights of the Crown conferred by s 7, why were ss 71(2) and 83(3) necessary if the Crown owned the fauna? Then there are the provisions of s 7(2) that “[l]iability at law shall not attach to the Crown by reason only of the vesting of fauna in the Crown pursuant to this section”. The Crown’s property is property with no responsibility. None of these aspects of the Fauna Act concludes the question what is meant by “property of the Crown”, but each tends to suggest that it is an unusual kind of property and is less than full beneficial, or absolute, ownership. Fourthly, it is necessary to consider why property in some fauna is vested in the Crown. Provisions vesting property in fauna in the Crown were introduced into Queensland legislation at the same time as provisions imposing a royalty on the skins of animals or birds taken or killed in Queensland. A “royalty” is a fee exacted by someone having property in a resource from someone who exploits that resource. As was pointed out in Stanton v Federal Commissioner of Taxation (1955) 92 CLR 630 at 641: … the modern applications of the term [royalty] seem to fall under two heads, namely the payments which the grantees of monopolies such as patents and copyrights receive under licences and payments which the owner of the soil obtains in respect of the taking of some special thing forming part of it or attached to it which he suffers to be taken. That being so, the drafter of the early Queensland fauna legislation may well have seen it as desirable (if not positively essential) to provide for the vesting of some property in fauna in the Crown as a necessary step in creating a royalty system. Further, the statutory vesting of property in fauna in the Crown may also owe much to a perceived need to differentiate the levy imposed by the successive Queensland fauna statutes from an excise. For that reason it may well have been thought important to make the levy as similar as possible not only to traditional royalties recognised in Australia and imposed by a proprietor for taking minerals or timber from land, but also to some other rights (such as warren and piscary) which never made the journey from England to Australia. In light of all these considerations, the statutory vesting of “property” in the Crown by the successive Queensland fauna Acts can be seen to be nothing more than “a fiction expressive in legal shorthand of the importance to its people that a State have power to preserve and regulate the exploitation of an important resource”. So much was acknowledged in the second reading speech on the Bill which first vested property in fauna in the Crown. The Minister said: It [the fur industry] is an industry that really belongs to the people, and although the Bill, amongst other things, makes it quite clear that the native animals of the State belong to the people of the State, I do not think there is any doubt in the minds of any one regarding that question already. The native animals belong to the people in just the same way as the timber and the minerals belong to the people, and they cannot be sold without permission. Roscoe Pound (Pound, An Introduction to the Philosophy of Law (Revised ed, 1954, p 111) explained why wild animals and other things not the subject of private ownership are spoken of as being publicly owned. He said: We are also tending to limit the idea of discovery and occupation by making res nullius (for example, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (for example, of the use of running water for irrigation or for power) by declaring that they are the property of the state or are “owned by the state in trust for the people.” It should be said, however, that while in form our courts and legislatures seem thus to have reduced everything but the air and the high seas to ownership, in fact the so-called state ownership of res communes and res nullius is only a sort of guardianship for social purposes. It is imperium, not dominium. The state as a corporation does not own a river as it owns the furniture in the state house. It does not own wild game as it owns the cash in the vaults of the treasury. What is meant is that conservation of important social resources requires regulation of the use of res communes to eliminate friction and prevent waste, and requires limitation of the times when, places where, and persons by whom res nullius may be [1.50]

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Yanner v Eaton cont. acquired in order to prevent their extermination. Our modern way of putting it is only an incident of the nineteenth-century dogma that everything must be owned. The “property” which the Fauna Act and its predecessors vested in the Crown was therefore no more than the aggregate of the various rights of control by the Executive that the legislation created. So far as now relevant those were rights to limit what fauna might be taken and how it might be taken, rights to possession of fauna that had been reduced to possession, and rights to receive royalty in respect of fauna that was taken (all coupled with, or supported by, a prohibition against taking or keeping fauna except in accordance with the Act 1975). Those rights are less than the rights of full beneficial, or absolute, ownership. Taken as a whole the effect of the Fauna Act was to establish a regime forbidding the taking or keeping of fauna except pursuant to licence granted by or under the Act. [The appeal was allowed.]

[1.55]

Notes

1. The judgment points out that property in wild animals is often linked to property in fire, light, air and water. With respect to water, legislation in all States and Territories has vested property in water in watercourses and often that in underground aquifers in the State or Territory. As with the fauna discussed in the above case, water may flow out of the State or Territory or evaporate. The significance of the vesting of property in water is, therefore, as with the fauna, to regulate access to the water so that users require government permission. Private rights to take surface and ground water have been granted by the State in the form of statutory licences that are separate from land ownership. These rights are transferable and, according to economic theory, will be acquired by the person who places greatest value upon them and is the most efficient user: McKenzie, “Water Rights in NSW: Properly Property?” (2009) 31 Sydney Law Review 443. A recent constitutional challenge to a variation of such a licence, as it related to subsurface water in a particular geographical location in New South Wales, will be discussed in Note 4 below. 2. Whilst the case discusses property in relation to resources other than land, the concept of government ownership as a means of control rather than the normal use and enjoyment conferred by private ownership has implications for the nature of the Crown’s interest in land. Traditionally the doctrine of tenure has been taken to mean that all land vests in the Crown and private rights are lesser interests or estates flowing from grants by the Crown. However in Wik Peoples v Queensland (1996) 187 CLR 1, the High Court concluded that the residuary interest of the Crown after a grant for a limited period of time was different from a private reversion and not inconsistent with continuing native title. It is possible that in Australia the doctrine of tenure does not confer upon the Crown a normal ownership of land but more a form of control over the land. 3. It is rare for the courts to be discussing the meaning of property as opposed to an analysis of the incidents of a particular form of property or less commonly whether property rights exist in a particular situation. The reason for this rarity is that the meaning of so broad a concept as property is seldom the basis for the resolution of a dispute and its analysis tends to be the province of writers seeking to find common strands to a series of decisions. Disputes where the meaning of fundamental concepts are raised are likely to occur where the property issue is the basis of the existence of a general body of protection. For 26

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example, criminal laws protect persons with respect to interference with their “property” by others and constitutions protect citizens with respect to the taking of their “property” by governments (see Note 4). 4. Section 51(xxxi) of the Australian Constitution allows the acquisition of property for a purpose for which the Commonwealth has power to make laws, but only on the provision of just terms. This constitutional protection of property rights was recently considered in ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140. In this case ICM had its rights to take water from the Lower Lachlan Groundwater System, pursuant to a bore licence, replaced with less generous rights (in terms of the volume of water allowed to be taken) under an aquifer access licence. Although the water in the system was vested in the State of New South Wales and the licences had been granted pursuant to New South Wales legislation, four of the seven judges of the High Court who considered the issue found that, if there had been an acquisition of ICM’s property by New South Wales, s 51(xxxi) would be engaged. This was because the compensation paid to ICM, which the Commonwealth conceded did not amount to just terms, was provided by the Commonwealth pursuant to s 96 of the Constitution. Nevertheless, the High Court (Heydon J dissenting) concluded that there had not been an acquisition of property. Although Hayne, Kiefel and Bell JJ (as well as Heydon J) concluded that ICM’s statutory bore licence was a form of property (French CJ, Gummow and Crennan JJ not deciding the issue), six of their Honours held there had been no acquisition of property by New South Wales through its cancellation. This was because New South Wales did not acquire an identifiable and measurable benefit through the cancellation of the licence, as its rights with respect to the subsurface water had not been enlarged. The subsurface water itself in the System was a natural resource in which there were no specific private property rights. The water was vested in the State of New South Wales for the purpose of controlling access to it as a public resource. The statutory licences giving access to take specific volumes of that water were inherently fragile and susceptible to change: the volume of water allowed to be taken could be reduced from time to time, and the licence cancelled altogether in certain circumstances: (at 180, 200 – 202). Although ICM’S property rights had been varied or extinguished, there had been no acquisition of property by New South Wales. Accordingly, the Commonwealth had no obligation to provide just terms to ICM. 5. ICM Agriculture Pty Ltd v Commonwealth demonstrates that a claim for s 51(xxxi) protection of a proprietary interest that has its source in statute may face difficulties over and above the difficulties faced by a claim for the protection of a proprietary interest that exists at common law or in equity. (Also see Attorney-General (NT) v Chaffey (2007) 231 CLR 651 at 664 on this point.) This is because statutory rights may be seen as inherently vulnerable to amendment, so that the Commonwealth (or other third party) does not receive a benefit that can be characterised as proprietary when the right is so varied. However, the situation may be different where the statutory right is analogous to a proprietary right that exists under the general law. An example of this is the High Court’s decision in Wurridial v Commonwealth (2009) 237 CLR 309. As a part of its Northern Territory National Emergency Response, the Commonwealth compulsory imposed leases and rights of access over land vested in fee simple in the Arnhem Aboriginal Land Trust. A majority of the High Court (Crennan J disagreeing on, and Heydon J not deciding, this point) found that the diminution of the Trust’s interest in the land, to the benefit of the Commonwealth, constituted an acquisition of property. Even though the Trust’s fee [1.55]

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simple interest in the land was created and regulated by statute, it nevertheless approximated, just as a common law fee simple does, an exclusive right of ownership (at 361-362, 382-383, 421,466). The final result in Wurridial, however, was that there had not be a contravention of s 51(xxxi) because the Commonwealth had provided just terms for the acquisition. The case is also noteworthy as it confirms that s 51(xxxi) will apply to an acquisition of property effected by a law enacted pursuant to the “Territories power” (s 122) of the Constitution. 6. Introductory legal texts often use the example of the sign “trespassers prosecuted” as a blurring of the distinction between civil and criminal law. They point out that traditionally trespass to land was not of itself a criminal offence. However today criminal sanctions with respect to intentional unauthorised entries onto private land are increasing and the word “trespass”, although clearly from a civil law background as an actionable interference with property, is retained presumably because it conveys strongly the element of wrongfulness. The issues of the right to protect property by force and the imposition of criminal sanctions on those who interfere with property is discussed in R v McKay [1957] VR 560 at [1.105]. 7. The existence of constitutional protections and criminal sanctions add to the significance of any property right. However, the existence of a property right depends ultimately on the existence of a legal remedy to protect or enforce that right. As property rights are defined in terms of relationships with persons generally (or enforceability against the whole world) the remedy should be one able to be brought against any other person. Tortious remedies satisfy this requirement and, consequently, the availability of an action in trespass protects both real and personal property.

Parsons v Queen [1.60] Parsons v Queen (1999) 195 CLR 619 High Court of Australia GLEESON CJ, GAUDRON, MCHUGH, GUMMOW and HAYNE JJ: The Cheques Act 1986 (Cth) Before further considering the application of s 81 of the Crimes Act and the supporting definitions to the facts, it is convenient to consider the legal relationships for which the Cheques Act 1986 (Cth) (the Cheques Act) provided in respect of the various cheques and bank cheques, the dishonest obtaining of which was the subject of the counts to which the appellant pleaded guilty. It is convenient first to deal with the particular character of bank cheques. In Fabre v Ley (1972) 127 CLR 665, reference was made in the joint judgment of the whole Court to the practice in Australia for a considerable number of years of bankers issuing what have become known as “bank cheques” at the request of customers who have some reason to provide cash or its equivalent in commercial transactions [at 670]. Their Honours said [at 670-671]: These are drafts drawn by a bank usually on itself but occasionally upon another bank: in either case they are issued in the form of cheques. It has been questioned whether a draft of this kind is a cheque within such a provision as s 78 of the Bills of Exchange Act 1990. The question arose because the definition of cheque incorporates that of bill of exchange and a cheque drawn by a bank upon itself is not “addressed by one person to another” within the latter definition (which is now contained in s 8(1) of the Bills of Exchange Act): see McClintock v Union Bank of Australia Ltd (1920) 20 SR (NSW) 494. In 1932, s 88A was inserted in the Bills of Exchange Act making a banker’s draft payable on demand drawn by or on behalf of a bank upon itself a cheque for the purposes of the crossed cheque provisions of the Bills of Exchange 28

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Parsons v Queen cont. Act. However, although it may be more accurate to refer to a bill of exchange drawn by a bank on itself as a banker’s draft, the nomenclature “bank cheque” is, and has for long been, used in Australia to describe instruments of this kind. The Bills of Exchange Act has not, since the Cheques Act came into operation, applied to an instrument to which the Cheques Act applies. However, s 5(1) of the Cheques Act provides that, with certain specified exceptions, and unless the contrary intention appears, a reference in that statute to a cheque includes a reference to a bank cheque or a bank draft. Secondly, the cheques themselves were, within the meaning of the definition in s 10 of the Cheques Act, unconditional orders in writing addressed by the newsagent concerned to its bank, signed by the newsagent and requiring the bank to pay on demand a sum certain in money. The cheques were not wanting in any material particular necessary to render them complete on their face, and so were not inchoate instruments (s 18). Rather, they were bearer cheques and thus were to be taken to require the bank to pay the sum ordered to be paid by the cheques to bearer (s 22). Thirdly, the drawing of the cheques did not of itself operate as an assignment of funds available in the hands of the drawee bank for the payment of the cheque (s 88). As indicated by Barwick CJ in the passage from Croton v The Queen set out earlier in these reasons, the right of the drawer to recover from the bank the balance standing to the credit of that party in the account with the bank was a chose in action but the effect of s 88 is to emphasise that the drawing of a cheque does not of itself operate as an assignment of that chose in action or of part thereof. Rather, the generally accepted concept of a cheque is that of a “mandate”, addressed by the drawer to the banker directing the banker to effect a pro tanto satisfaction of the indebtedness of the banker to the drawer by honouring the cheque drawn on the banker. In this sense, a cheque “is merely a mandate, not a transfer of rights”. Fourthly, in its character as such a mandate, the bearer cheques, once drawn, and even in advance of delivery, had intrinsic value as instruments whereby the sums they specified might be drawn from the banks in question [cf Morison v London County and Westminster Bank Ltd [1914] 3 KB 356 at 379]. Fifthly, arising out of the drawing of the cheque, there was, by force of the Cheques Act (ss 25, 71), a contract, incomplete and revocable until delivery, whereby the drawer, the newsagent in question, undertook to compensate the holder or an indorser of the cheque who was compelled to pay it if it were dishonoured when duly presented for payment. Further, s 76 provides that, where a cheque (including by dint of s 5(1) a bank cheque) is dishonoured, the holder, being the bearer in respect of cheques payable to bearer, may recover as damages, from any person liable on the cheque, the face value of the cheque and the amount of interest that in accordance with Regulations made under the Cheques Act is payable in respect of that sum. In R v Preddy [1996] AC 815, 835, 836-837, Lord Goff of Chieveley said: I start with the time when the cheque form is simply a piece of paper in the possession of the drawer. He makes out a cheque in favour of the payee, and delivers it to him. The cheque then constitutes a chose in action of the payee, which he can enforce against the drawer. The reference in that passage to the chose in action of the payee which can be enforced against the drawer is to be understood, in the Australian context, by reference to ss 25 and 71 of the Cheques Act. However, as indicated in the points made above, a cheque has character-istics which render it more than a chose in action held by the payee against the drawer. The submissions by the appellant rested upon a contrary assumption, and that should not be accepted in construing s 81 of the Crimes Act. Moreover, the Cheques Act speaks, for example in s 116, of an action or proceeding being brought in a court “on a cheque”, and provision is made in s 116 whereby, on terms, the court may order that the loss or destruction of the cheque not be set up as a defence. Further, it is the cheque as an item in specie which is essential to the operation of negotiability. So, in the present case, every cheque, [1.60]

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Parsons v Queen cont. including any bank cheque, might be transferred by negotiation until it was discharged, the transfer being from the holder to another person in such manner as to constitute that other person the holder within the meaning of the Act (ss 39, 40). In addition, in respect of wrongful dealings by a third party with those instruments (including dealings with bank cheques), for example dealings by a collecting bank, the “true owner” would have its rights for damages in an action for conversion of the chattels in question. In Marfani & Co Ltd v Midland Bank Ltd [1968] 1 WLR 956; [1968] 2 All ER 573, a fraudulent employee of the plaintiff company obtained through the medium of the collecting bank payment to himself of a cheque drawn by the plaintiff on its bank in favour of another party as payee. Diplock LJ observed ([1968] 1 WLR 956, 970; [1968] 2 All ER 573, 577) that it might seem odd that the basis of the liability of the collecting bank was that a piece of paper on which the cheque was written was “goods” belonging to the plaintiff and that the act of the collecting bank in accepting possession of that piece of paper from the employee, in presenting it to the drawee bank and in accepting payment of it, constituted an unjustifiable denial by the collecting bank of the title of the plaintiff to its goods, from which damage flowed. His Lordship pointed out that this result, however, was the common law of England. It was the consequence of the application of the historic origin of the tort of conversion to negotiable instruments by treating them as “goods”. This development of the common law by treating as the chattel converted the piece of paper representing the cheque and the value of the chattel converted as the money received in payment of the cheque suggests some weakness in the earlier analysis, by such authorities as East, that securities, including bills of exchange, which concern mere choses in action were not the subject of larceny at common law because they were of no intrinsic value and did not import any property in possession of the person from whom they were taken. However that may be, there is every reason not to reinstate now such an analysis when construing the terms of the Crimes Act, in particular the definition of “property” in s 71(1). Section 81(1) of the Crimes Act and the present case The contracts arising by operation of ss 25 and 71 of the Cheques Act in respect of the bank cheques had been rendered complete and irrevocable upon their delivery to the newsagent by whom they had been purchased. There is thus no scope for any argument that when, in turn, possession and control of the bank cheques was taken by the appellant there was no pre-existing “chose in action” which the holder could enforce against the drawer, here the bank of the newsagent concerned. As to the cheques, at the time of their delivery to the appellant by the newsagents who had drawn them on their banks, the law of negotiable instruments now represented in the Cheques Act imparted to the cheques various legal characteristics giving them then a value beyond what otherwise was their quality as mere pieces of paper. The cheques, being complete in form, contained a mandate by the respective drawer to its bank to reduce the credit of its account by payment in favour of a person answering the statutory description of a holder. Further, arising out of the drawing of the cheques, there was, albeit incomplete and revocable until delivery, the contract by the drawer referred to in ss 25 and 71 of the Cheques Act. It follows that both the bank cheques and the cheques, at the time they were, by a deception, dishonestly obtained by the appellant, were property within the meaning of the definition in s 71(1) of the Crimes Act. These instruments were property belonging to the newsagents within the meaning of s 71(2) because the newsagents had possession or control of them and, in accordance with the above analysis, also had proprietary rights or interests therein. Possession or control of these instruments was “obtained” by the appellant and the terms of s 81(2) make it plain that it is no denial of that proposition to say (if it had been the case) that the appellant did so “for” Canyon Bay into whose account with the ANZ Bank the instruments were deposited. 30

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Parsons v Queen cont. Further, the characteristics which the Cheques Act and the law with respect to conversion attached to the instruments in the hands of a bearer would support the conclusion that there was also an obtaining of what in s 81(2) is called “ownership”. [T]here can have been no intention on the part of the payee permanently to deprive the drawer of the cheque form, which would on presentation of the cheque for payment be returned to the drawer via his bank. The appeal should be dismissed.

[1.65]

Notes

1. The ownership of ideas has previously been seen as an example of what are described as intangible property rights, as they are rights enforceable against persons generally but do not relate to any thing (land or chattel). The concept of a chose in action further blurs the boundary between property rights and contractual rights. A property right has been described as a right enforceable against persons generally, whereas a contractual right is one enforceable against only those persons with whom the contract has been made. However, a contractual right is likely to have a financial value and in the case of the entitlement to repayment of a debt the contractual right has a readily calculable value – the amount to be paid is discounted for the extent of future performance and the risk of default in payment. Our legal system allows for the assignment of choses in action (by writing with notice to the debtor) and ease of transfer of a debt is secured through the use of special forms of documents by which the debt is created. These documents are described as negotiable instruments. Cheques are a form of payment widely used in Australian society and are derived from the practices and laws of negotiable instruments. However they have evolved as an independent species. Today they are not used with an intention that the person entitled to the benefit should be able to freely transfer that interest but rather as a payment for that person alone effected through the medium of the banking system. Consequently cheques are commonly marked “not negotiable” to reflect a desire to restrict the ease of transfer. As explained later in connection with the case of Arab Bank Ltd v Ross [1952] 2 QB 216 at [10.175] this marking in its strict legal effect restricts the passing of title rather than the capacity to transfer. A transaction involving a credit card has similar features to a payment by cheque with computerisation being used to provide assurance as to the existence of sufficient funds to support the payment and to give almost instant effect to the transaction. Again legal problems arise from the identification of the person making the payment – a common problem in many property transactions. 2. The analysis in the above case points out that the cheques have two proprietary aspects – they are the piece of paper on which the cheque is written and the debt which is evidenced by that paper. The law of larceny which constituted the major criminal law protection for personal property was based on penalising any unlawful interference with possession of an object. The wrongful taking of the piece of paper was, therefore, more readily able to be classified as larceny than the wrongful appropriation of the proceeds of the cheque although over time the courts and the legislatures have attempted to address this problem. [1.65]

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3. The above case points out that the pieces of paper are classified as “goods” whereas the debt is a thing (chose) in action. The subject-matter of property could be land, goods or intangible rights such as copyright. However the major classification of property is the division between real and personal property. Only freehold interests in land constitute real property and significantly leasehold interests in land are classified as personal property in the sub-category of chattels real. Personal property also includes intangible rights. Today there are no rights which flow from the division between real and personal property but the terms are still used in documents and the technical division may be inadvertently be adopted, for example, in a will which has been more to impress, than to apply terms accurately. 4. The history of the application of the division between real and personal property in Australia is discussed in Buck A, “Attorney-General v Brown and the Development of Property Law in Australia” (1994) 2 Aust Prop LJ 128. 5. An analysis by the courts of the nature of property occurs in relation to the protection of confidential information, see Oxford v Moss (1979) 68 Cr App R 182 at [4.145]. 6. In the well-known article “The New Property” (1964) 73 Yale LJ 733 Charles Reich argued that under the welfare state, claims against government represented a major source of wealth and power and should be assimilated to proprietary rights.

WRITINGS ON THE MEANING OF PROPERTY Introduction: Some Theses on Property [1.70] Erh-Soon Tay A and Kamenka E, “Introduction: Some Theses on Property” (1988) 11 UNSWLJ 1 [Footnotes have been omitted.] I. The concept of property 1. Property is that which is owned. Ownership is the prima facie ultimate power and right to use, control, enjoy and exclude others. It is a relationship both to the item owned and to other people. There is no ownership where it is impossible, in logic or in fact, to reduce something to possession and control. What Marxists and others have seen as the ever-increasing reduction of the world and everything in it to private property rests on the constant extension of the possibility of ownership as a result of scientific, technological and economic capacity to use. 2.

States extend their possessions in the same way as individuals; so do tribes and communities. The treasures of the earth and of the seabed, land, air and water, and even heavenly bodies, are now susceptible of ownership in a way and on a scale not known in most of human history. Socialist and Marxist-socialist states exercise their claims to sovereignty and the ownership it involves in ways and by means which are in no manner different from those pursued by states that recognise as central to their social systems the possibility of both “private” and “public” ownership of the means of production, distribution and exchange. They do so in relation to other countries and in relation to their own citizens. Their interest in ownership and control is the same as anybody else’s: the exploitation of a resource for defence, for production, for wealth, or prestige. These are infrajural facts – a useful reminder that the world is not simply the product of ideology or of law.

3.

The distinction between private ownership and public ownership is not central or even important for a general theory of ownership, or for a discussion of many of its social effects. Nor is it central to a

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Introduction: Some Theses on Property cont. general theory of law or to the overcoming of so-called economic “contra-dictions”, of the fact that resources have to be allocated between alternative uses without meeting all possible demands or treating everyone equally. 4.

All ownership, and therefore all property, is in an important sense private or privatising. It divides those who have the power and the right to exclude from, to control and dispose of a particular item of property from those who do not, who have no privileged connection with it. In that respect, “public” ownership is the same ownership as “private”, individual or corporation ownership; state ownership the same as community ownership; clan ownership the same as that of persons. “Private” does not mean individual, just as “owner” does not and need not mean a single person or even a human being at all. In Ancient Sumeria, the temple and the associated workshops belonged to the god of the temple, in whose name and on whose behalf the temple manager – the ensi – issued commands that did not simply reflect the manager’s will. To say anyone may use, control or dispose of without let or hindrance is to say this is not, or this is no longer, owned. A “common” is a true common if and only if anyone has access for any purpose at any time and no one is excluded. Historically, that has not been the meaning of “a common”.

5.

In discussing the core meaning of the concept of ownership or of property, it is not useful to import differences between types of owners or changes in some of the social functions and importance of property into the core concept of ownership itself. We should not convert material differences into logical or conceptual differences, confuse a legal concept with its role and effects, whether in society or the law. The meaning of a concept is not simply its use; something about it determines how and where it can be used.

6.

In all societies, there are things that are owned, that constitute property that is in our sense private, and things that are not. Communist constitutions protect personal property. Many Utopian constitutions, like monastic orders, professed not to, but protected state or community property. Even in comparatively undifferentiated societies with no ranks or classes and no, or little, agricultural use of land, there will be sacred things, symbols of authority, objects used in ritual, wives and other personal possessions for which some people are owners or custodians and from which some or all others are excluded. Nothing indicates the role of property in such societies more clearly than the social importance of the formalised exchange of gifts in such societies. Concepts of ownership may be very weakly developed, unimportant in the wider context of conceptions of the inherently sacred and powerful, or of the claims of the tribe or group, but they exist. For the tribal infant “promised in marriage”, they are very important indeed. Some things – such as air or water or even land – may be seen by particular societies as physically or morally incapable of being owned, as more powerful than human beings. The same or other items may be specifically excluded from ownership by custom or law.

7.

There are no natural eternal necessities in the matter of the scope of ownership, though the physical capacity to control may vary over time as a result of both technological and political change. The territorial claims of countries can contract and expand, advances in science and technology producing some striking expansions. A cadaver may be incapable of being owned for non-material reasons-until it becomes a source of valuable products: soap for the Nazis, organs for those needing a transplant. Then decent societies and lawyers cogitate, while the Hitlers and the Himmlers simply cut the Gordian Knot.

8.

There are and there have been no enduring social owners or rulers whose power over their property is logically absolute. The sixteenth-century Ottoman Sultan Suleiman (The Magnificent, The Educator, the pattern for Max Weber’s conception of sultanism as arbitrary personal power to rule) was subject to the laws of Islam. He had to recognise, for instance, quite different forms of [1.70]

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Introduction: Some Theses on Property cont. tenure for conquered lands, for traditional Muslim lands, for Mecca and Medina, for Muslims and for infidels. His claim to ownership of land conquered from infidels was based on Islamic law. In China, a renewed attempt to introduce state distribution and control of land on different terms for different purposes was inaugurated by the Northern Wei from 485 AD and applied more universally under the Sui and the Tang; it became inoperable because the landholdings of officials and of Buddhist monasteries retained their independence. In England after the Conquest, the King had ultimate ownership of all land; in European monarchies the sovereign had not but could be subject as Holy Emperor or Prince to the Court in Vienna in respect of complaints by subject or prince. Neither the crown nor its power was indivisible. Further, the power ascribed to ownership, like all other social power, is distributed along a continuum which ranges in principle from utter impotence to absolute irresistibility, but in fact rarely reaches either end. Nor are the most common forms of interference with ownership necessarily based on competing claims to ownership; people are deprived of their lands and possessions for specific reasons – rebellion, felony, the requirements of war or raison d’état. They may be forced, as a matter of social policy, to recognise the claims of heirs and dependants, of wider social concerns, of the King, the Church and of the Social Plan. 9.

In law and social life, ownership is a burden as well as a privilege, a responsibility as well as an advantage. The need to make someone ultimately responsible for the care and control of property and for harm that flows from it is the reason that the concept of property has not been excised from any modern socialist or Marxist-socialist legal system. State and “collective” property and delegated operational management remain central to economics that reject – or rejected until recently – “private” property in the means of production, distribution and exchange. “Collective” ownership does not mean ownership by all the people. Ownership will continue to remain central to some aspects of social control, as it remained in the utopian fantasies of the past and in Babeuf’s and Saint-Simon’s projects for the future. There it was concealed under such phrases as “the social fund” that constitutes the material wealth of a society and the administrators who will decide on its allocation. To make property a public function – the favourite slogan of the socialist Saint-Simonians gathered around Le Globe – is not to abolish the concept or to universalise effective power and control. It is to shift the practical focus from ownership to authorised administrative control.

10.

The rights and powers conferred by ownership are not and never have been indefeasible or unlimited, in law or in administrative reality. The respect accorded to the rights of the property owner including even the state can change, and has changed, dramatically. So can and do the respect and importance ascribed to different types of property and to different types of property owners. Neither the concept of property nor the social and legal importance of that concept in the abstract need be affected by that. The distinction between the kinds of items owned and the different uses they are put to is crucial in considering the controls and limitations that may properly be put upon ownership rights. Such distinctions have been made throughout history and continue to be made as differences between the character and economic uses of property multiply. There are limitations, too, on the scale of ownership in certain areas, on concentration of ownership, on ownership in politically or socially sensitive areas.

11.

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Ownership, even in its core meaning, is not a logical simple. Its various components – for ownership is a bundle of rights and powers – are differentiable both as rights and as realities. They can and do come apart. There are degrees of enjoyment, of capacity to use, of control, of power to alienate. Formal ownership and actual control can and do part company, especially conspicuously in modern times as they did in feudal times. Further, the sort of rights that owners and others claim and exercise need not always be derived from or justified by the [1.70]

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Introduction: Some Theses on Property cont. concept of ownership, though the Common Law did, for a long period, feel more comfortable with those rights against property – such as easements – which were themselves attached to property. There are traditional rights to use temporarily or at will, sacred sites to gather fruits of the field or wood from the forest, to cross boundaries in search of pasture, to have peaceful enjoyment, etc. Not the abstract rights of ownership but new economic uses, population pressures, conquest, etc. Provide the motive power that most frequently creates or destroys such rights. Socially, ownership is not the be-all and end-all of human relationships to things or persons that can be owned. Slaves, in Rome and elsewhere, commanded Caesar’s household and the free or freed men who served in it. Paradoxically, slavery was a legal concept but not an economic one. Similarly, there are grades and gradations between property and the res nullius – not all relationships to land or objects can be forced into one of these two pigeonholes. Law has more than one principle and more than one set of classifications. We do no service to law or to humanity in the long run by seeking to vindicate rights we seek or approve of by attaching them to the nearest sacred cow – whether it be property, or the right over one’s body, or privacy or the freedom of speech. Constitutions can come and go; rights are not all derivable from one right. Lists of rights are not, by their nature, finite or uncriticisable. Advocacy is not the same as thinking about law of society. Property is not and never has been the foundation of all rights, of all social power, or of all social evils. It has been a significant bulwark against political, governmental and religious power, not by standing in principle opposed to them but by fragmenting or helping to fragment and balance competing claims of King, baron, church and corporations, of state and citizens, of bureaucracies and those whom they administer. For ownership, as we have said, privatises-though only within limits. Exploitation can be based on proprietorial power; the worst forms of exploitation known to history were not. Neither were the theory of so-called bourgeois democracy, or of nineteenth-century liberalism, confined to the defence of property or derived from it. A history of modern Europe that reduces Protestantism, the Enlightenment and the French Revolution to the defence of “bourgeois” private property and the free market is bad history and worse social theory. II. Changes in the nature and power of ownership 1. The concepts of ownership and possession tempt us, as they tempted Blackstone, to begin with the primary model of a relationship between a human owner or possessor and a corporeal thing that is owned or possessed. English law, unlike Roman law, recognised early the ownership or possession of incorporeal hereditaments and even of rights not necessarily connected with land, for example, a chose in action. The advantages and disadvantages of following the English course cannot be elucidated by inspecting the core concept of ownership; to follow one course or another is not to make a mistake about the meaning of ownership. It is to construct a legal system along one of several possible lines. It is only in relation to the implications for the systematic development of law, or at least for a branch of law, that one can decide whether people should simply have rights or own them – be, as they once were, seised of them. The contemporary interest in treating welfare rights, pension rights etcetera as forms of property, or as deserving the protection given to property rights, derives partly from a specifically American constitutional guarantee; but it also reflects the attempt to confer on dependants the dignity of ownership and on claimants its security. 2.

No one can look at legal or economic history over the last few centuries without recognising the extent to which tangible, material possession and control have given way to indicia of title and of power to control, to buy, to hold and sustain. In part, such powers are conferred by law and not simply recognised by it – the property – were not only the focus of everyday economic activity, but to a considerable extent the base and organising principle of social duties and [1.70]

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Introduction: Some Theses on Property cont. relationships, of the order of labour, of social welfare, etcetera. Of course, this was never the whole story. There were duties to King or prince, to the church, to the (external) Law. Nevertheless, for much of the population, property – tangible, material property – or holding and the relations that sprang from it seemed the centre and basis of their lives that would continue to be the centre and basis of their children’s lives. 3.

The commercialisation of society, or of significant parts of it, did not begin with the sixteenth and seventeenth-century development of a conscious European urban bourgeoisie. Contracts and exchange, the registration of deeds and covenants, were well-known to the Mesopotamians and the Egyptians two thousand years before Christ. The private law of the Romans was the law first of a great commercial city full of strangers and then of a great commercial empire full of nations. The basic principles, procedures and forms of so-called bourgeois law may have been used but they were certainly not created by the bourgeoisie. Neither were the power and independence of money, as Octavian-Augustus was well aware while using his privy purse – the revenues of Egypt – against the Senate.

4.

A host of modern developments from the eighteenth century onward have nevertheless fatally undermined, in many areas, the paradigm of ownership as direct possession and control of a tangible material thing allegedly fused with one’s own labour or a concretisation of individual will. We are now more conscious than ever that ownership consists of a bundle of rights and powers, none of which are absolute in practice and any one of which can be separated or dealt with individually. Professor A M Honoré, in his essay on Ownership in the first (1961) Oxford Essays in Jurisprudence, saw “full” (or the “liberal” concept of) ownership as involving eleven elements or legal incidents: the right to possess – ie, to exclusive physical control, literally or metaphorically; the right to use; the right to manage; the right to the income; the right to the capital – ie the power to alienate, consume, waste, modify or destroy; the right to security; the power to transmit, to devise or bequeath; the absence of a term to one’s ownership rights; responsibility for harmful use; liability to execution; and that there will be rules governing the reversion of lapsed ownership rights. These elements of full legal ownership, Professor Honoré argued, are found in all “mature” legal systems, though each of them is susceptible of varying definitions that affect emphasis and practical consequences. But in all such systems the practical separability of these elements is also recognised. In England, the eighteenth-century movement toward creating certainty and security of title, accompanied by a most sophisticated recognition of simultaneous variety of interests in a single piece of land, facilitated their mortgageability and made possible much of the economic leap forward in the latter part of that century. The commercial share did even more to separate, physically, interests in property from actual physical contact with it or awareness of it; it assumed an incorporeal life of its own. Money and investments produced interest, dividends; at the same time, in relation to material property – to factories, mines, banks – they fragmented ownership, even more so as pension funds, trusts and holding companies came to own more and more shares. Finance capitalism, as the Marxists call it, was not based on or suited to the paradigm of the mill owner directly exercising authority over his mill and the workers employed in it. At the general level of social and legal ideology, much the same must be recognised of the rights of and to property. As the creation of objects becomes less arduous and the cost of labour continues to rise, the value placed on human life has risen sharply in relation to that placed on property – though it has not done so in those countries where labour is cheap and the standard of living is low. In our own society, though, one has to recognise the importance of property as part of reasonable living conditions and standards. It is, on the positive side, a guarantee for the individual of space to develop capacities and live as he or she wishes to and as a basis for the enterprise, responsibility and involvement that a society needs in its economic

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Introduction: Some Theses on Property cont. activities, in encouraging production and in sheeting home responsibility for harm. Simply to pass over in silence the right to property that was incorporated in the Universal Declaration of Human Rights and then drop it in subsequent UN Covenants is preposterous. At the same time, property rights, like many other rights, are defeasible. In specific social contexts, they can and do compete and conflict with other rights, they can bear savagely on those who do not own or control. They are no longer and never should have been trumps in the game of life. Deciding when and how and to what extent, they should be limited, interfered with, modified, supervised and controlled, by law, by regulation, by administrative discretion, is a matter that requires care and consideration, rather than trumpet blasts and emotive advocacy. It is, in short, a moral question, for which no handbook provides simple and timeless answers. In so far as it is also a legal question, the trend – here as in relation to other fundamental legal concepts – is increasingly practical, fragmenting, geared to particular problems or areas. Property for the purposes of the Family Law Court parts company from property for the purposes of probate or trust. Today more than ever, we focus on consequences, on remedies, rather than conceptual foundations and theoretical coherence. In law, as in ideology, we have gone beyond the simple-minded stage of being for or against property.

Property in Thin Air [1.75] Gray K, “Property in Thin Air” [1991] Cambridge Law Journal 252 Proudhon got it all wrong. Property is not theft – it is fraud. Few other legal notions operate such gross or systematic deception. Before long I will have sold you a piece of thin air and you will have called it property. But the ultimate fact about property is that it does not really exist: it is mere illusion. It is a vacant concept – oddly enough rather like thin air. With private property, as with many illusions, we are easily beguiled into the error of fantastic projection upon the beautiful, artless creature that we think we see. We are seduced into believing that we have found an objective reality which embodies our intuitions and needs. But then, just as the desired object comes finally within reach, just as the notion of property seems reassuringly three-dimensional, the phantom figure dances away through our fingers and dissolves into a formless void. Of course, legal theorists have long sought to sidestep the unattainable quality inherent in the notion of private property by conceptualising property not as a thing but rather as a “bundle of rights”. Now, if one accepts for a moment the “bundle of rights” explanation, it is clear that in jurisdictions of common law derivation the amplest or fullest bundle of rights which can exist in relation to land is the estate in fee simple. The rights enjoyed by the owner of the fee simple came closest to the dominium spoken of by civil lawyers, and indeed represent the nearest approximation to absolute ownership known in our modern system of law. For lawyers therefore the fee simple estate occupies a pre-eminent position in the more general field of property concepts. It carries a plenitude of rights and powers over the ultimate immovable – land. Something of this plenitude used to be captured, albeit over-enthusiastically, in the medieval Latin maxim Cuius est solum, eius est usque ad coelum et ad inferos. That is, the owner of the soil has a prima facie ownership of everything reaching up to the very heavens and down to the depths of the earth. This brocard appeared first in the writings of the 13th century Accursius of Bologna, and was rapidly incorporated into the rhetoric of the common law estate in fee simple. In its original context the phrase seemed to articulate the extensive nature of private property rights in land. … [1.75]

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Property in Thin Air cont. I. Rights in airspace [As] an issue of strict definition, the term “land” is quite capable of including a cubic space of lower stratum air which is separate from the physical solum. From this there follows the seemingly improbable idea that a fee simple estate (or even a term of years) can exist literally in thin air, a proposition which neatly gives the lie to any assumption that land is necessarily a tangible resource. A three-dimensional quantum of airspace can exist as an “independent unit of real property”. Impeccable case law authority confirms that such airspace can be conveyed in fee simple; it can be leased; it can be subdivided; and it can even be subjected to land taxes. So there you are: I can sell you thin air and, like it or not, you have to agree that there has been a transfer of property. II. Visual trespass It is perhaps just as well that we accepted earlier that property is not a “thing”. When I sell you a quantum of airspace the whole point is that-apart from molecules of thin air – there is absolutely nothing there. (Indeed I would be in breach of my agreement with you if it were otherwise.) The key is, of course, that I have transferred to you not a thing but a “bundle of rights”, and it is the “bundle of rights” that comprises the “property”. But what are the rights in the property bundle? Or, more accurately, wherein lies the “property” character of the rights in the bundle? What constitutes the “propertiness” of “property”? One possible approach to this question runs as follows. Absent some legal disposition or resumption the landowner of course owns the fee simple estate in his lower stratum airspace. His various rights in this quantum of thin air merit investigation, but let us concentrate our attention specifically on the subject of abstract or non-corporeal incursion into this airspace. Has the owner any right, for instance, to resist merely visual intrusion into his airspace? Here, in effect, we are questioning the legal plausibility of trespass without entry. Can I, the fee simple owner of land, claim any legal remedy merely on the ground that you, without physically entering my premises, invade my privacy by visual penetration of my airspace? Does such intrusion detract from the sum total of my property rights? Does it, we might say, take away any of my “property”? In short, does the intrusion have any proprietary impact or register? … By the narrowest of majorities the High Court of Australia decided [in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor] that the facts disclosed no wrong known to the law. Latham CJ relied heavily on the 19th century cases on “overlooking” of property, and insisted that “[a]ny person is entitled to look over the plaintiff’s fences and to see what goes on in the plaintiff’s land”. If the plaintiff desired to prevent this, the plaintiff could erect a higher fence; the law would not by means of injunction “in effect erect fences which the plaintiff is not prepared to provide”. In the meantime, and notwithstanding the defendants’ activities, the racecourse remained “as suitable as ever it was for use as a racecourse”. Latham CJ also rejected the allegation that broadcasting the numbers of the placings as notified on boards within the ground constituted a breach of copyright. Dixon and McTiernan JJ entered strong supporting judgments in favour of the Chief Justice’s conclusions. It was left to Rich and Evatt JJ to argue in the minority that a justiciable wrong had been inflicted upon the plaintiff company and that this wrong was remediable in the law of nuisance. Rich J thought that the right of view or observation from adjacent land had never been “absolute …and exercisable at all hazards notwithstanding its destructive effect upon the enjoyment of the land overlooked”. Evatt J agreed and, seeing the matter as one involving unfair commercial competition by the defendants, was minded to award damages to the plaintiff even though no damages claim had in fact been made. III. The “propertiness” of property Perhaps the lasting significance of Victoria Park Racing lies in the fact that the conflict between the majority and minority views in this case throws up critical clues to the identification of the 38 [1.75]

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Property in Thin Air cont. “propertiness” of property. True it is that much of the discussion in Victoria Park Racing was conducted obliquely in terms of the law of nuisance. But the central issue – so central that it lay largely unspoken – was whether the defendants had taken anything that might be regarded as the plaintiff’s “property”. We must always be ready to hear the resonance of property in the dialogue of trespass and nuisance. There can be no doubt – and there was certainly none in the High Court – that in Victoria Park Racing the defendants had exploited a competitive commercial opportunity, in circum-stances of no great credit to themselves, in order to profit from a market of horseracing enthusiasts who would otherwise have paid a lot of money to the plaintiff. In this sense the defendants had clearly taken something from the plaintiff – but had they taken the plaintiff’s property? Were the defendants guilty, as Dixon J put it, of “misappropriating or abstracting something which the plaintiff has created and alone is entitled to turn to value”? In answering this question the majority and minority in the High Court were divided by fundamentally differing views of the phenomenon of “property”. The minority judges clearly believed that there had been a misappropriation. Rich J spoke of each defendant as “appropriating … part of the profitable enjoyment of the plaintiff’s land to his own commercial ends …” In his view the conduct complained of had wrongfully diverted a “legitimate source of profit from [the plaintiff’s] business into the pockets of the defendants”. Evatt J’s judgment echoed just as strongly the language of misappropriation. Evatt J thought it “an extreme application of the English cases to say that because some overlooking is permissible, all overlooking is necessarily lawful”. Here the overlooking engaged in by the defendants had enabled the broadcasting company “to reap where it had not sown”. The defendants stood condemned of an unfair “appropriation” or “borrowing” of the plaintiff’s investment of capital and labour. This had in turn enabled the listening public to “appropriate to themselves the harvest of those who have sown”. By contrast the majority judges in Victoria Park Racing denied, each in his different way, that the case involved any relevant misappropriation: the plaintiff had suffered no deprivation of any vested legal entitlement. Freedom from view or inspection, said Dixon J, although it may be a natural or acquired physical characteristic of a site, is not a legally protected interest. McTiernan J stressed that the plaintiff had no legal right to the continued operation of its enterprise in circumstances conducive to profit: the plaintiff “took the risk of a change in those circumstances”. Dixon J, citing the famous dissent of Justice Brandeis in International News Service v Associated Press, confirmed the absence of any general cause of action based on allegedly unfair competition. For property lawyers by far the most interesting feature of Victoria Park Racing is the High Court majority’s unanimous rejection of the plaintiff’s claim that there could be “property” or even “quasi-property” in a spectacle. Latham CJ declared in his usual acerbic style that he could attach no precise meaning to the phrase “property in a spectacle”, and that the phrase functioned if at all only as an extra-legal metaphor. A spectacle, he said, “cannot be ‘owned’ in any ordinary sense of that word”. At this point, of course, we are again confronted by a stern refusal to propertise a particular resource – always an occasion of some moment in the jurisprudence of property. The enduring significance of Victoria Park Racing is that in this decision we are offered a rare opportunity to learn something of the tacit rules which govern the propertisation of resources. Unpropertised resources remain in the commons, available for use and exploitation by all. The primordial principle which emerges from the majority judgments in Victoria Park Racing is that a resource can be propertised only if it is – to use another ugly but effective word – “excludable”. A resource is “excludable” only if it is feasible for a legal person to exercise regulatory control over the access of strangers to the various benefits inherent in the resource. A classic example of a non-excludable resource is the beam of light thrown out by a lighthouse. To be sure, the lighthouse-keeper may control access to the benefits of the light by the simple action or inaction of never switching on the light. But if the light is allowed to operate at all, it is necessarily on terms that its [1.75]

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Property in Thin Air cont. benefits are distributed indiscriminately. The light cannot be artificially confined to a subset of the seafarers within its broad sweep. In this sense the beam of light – if it exists at all – is non-excludable, and non-excludable resources are retained in the commons. Somebody may have “property” in the lighthouse, but nobody can have “property” in light. The notion of excludability thus imports a hidden structure of rules which critically define the legal phenomenon of private property. Excludability is, however, a more complex idea than is indicated by the example of the lighthouse. A resource may remain non-excludable for reasons which go far beyond the essentially factual and distributional contingencies which govern a beam of light. It is here that Victoria Park Racing comes into its own, for quietly but persistently the majority judgments press home the message that a resource may be non-excludable for any or all of three different sorts of reason. These three bases may broadly be described as physical, legal and moral. A resource cannot be propertised if, on any of these grounds, it lacks the quality of excludability. Non-excludable resources thus lie outside the field of private property; they remain in the commons. … IV. “Property” as control over access And so continues our search for the inner mystery of “property”. Let us look back and see how far we have got since we started. There is no real likelihood that we have arrived at our destination, for the quest for the essential nature of “property” has beguiled thinkers for many centuries. The essence of “property” is indeed elusive. That is why, in a sense, we have tried to catch the concept by surprise by asking not “What is property?” but rather “What is not property?” We have started from the other end of the earth – both geographically and conceptually – and we have deliberately come by the direction which seemed least probable. But along the way we may have discovered something of value. We may have discovered the irreducible conditions which underlie any claim of “property”. The classic common law criteria of “property” have tended to rest a twin emphasis on the assignability of the benefits inherent in a resource and on the relative permanence of those benefits if unassigned. Before a right can be admitted within the category of “property” it must, according to Lord Wilberforce in National Provincial Bank Ltd v Ainsworth, be “definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability”. This preoccupation with assignability of benefit and enforceability of burden doubtless owes much to the fact that the formative phases of the common law concept of property coincided with a remarkable culture of bargain and exchange. Non-transferable rights or rights which failed on transfer were simply not “property”. Within the crucible of transfer lawyers affected to demarcate rights of “property” from rights founded in contract and tort or, for that matter, from human rights and civil liberties. Only brief reflection is required in order to perceive the horrible circularity of such hallmarks of “property”. If naively we ask which rights are proprietary, we are told that they are those rights which are assignable to and enforceable against third parties. When we then ask which rights these may be, we are told that they comprise, of course, the rights which are traditionally identified as “proprietary”. “Property” is “property” because it is “property”: property status and proprietary consequence confuse each other in a deadening embrace of cause and effect. Nor have the philosophers given significantly greater assistance in explaining the phenomenon of “property”. Perhaps inevitably lawyers have concentrated their attention on locating the ownership of “property”, this task of identification assuming vital significance in a legal culture dominated by transfer and conveyance. By contrast philosophers have directed their efforts principally towards rationalising the institution of “property”. While lawyers discuss who owns what, philosophers ask why anyone can legitimately claim to own anything. Justificatory theories of “property” range diversely from appeals to the investment of labour or the existence of a social contract to arguments based upon first occupancy, utility or personhood. A pervasive influence in all philosophical thinking on 40 [1.75]

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Property in Thin Air cont. “property” is still the brooding omnipresence of John Locke. But Locke’s concentration on original acquisition ill suits legal discourse in a modern world which is based on derivative acquisition and in which original acquisition (except perhaps in the area of intellectual property) is now virtually impossible. Even Locke himself cannot have believed that in late 17th century England the “Commons” still contained many unappropriated acorns yet to be “pickt up under an Oak” or apples to be “gathered from the Trees in the wood”, even if he did think that “property” in such things was “fixed” by the labour invested in their “first gathering”. As Walton Hamilton noted much later, Locke’s natural state is “a curious affair, peopled with the Indians of North America and run by the scientific principles of his friend Sir Isaac Newton”. In their respective preoccupations with resource allocation and institutional justification, lawyers and philosophers alike have largely failed to identify the characteristic hallmark of the common law notion of “property”. If our own travels in search of “property” have indicated one thing, it is that the criterion of “excludability” gets us much closer to the core of “property” than does the conventional legal emphasis on the assignability or enforceability of benefits. For “property” resides not in consumption of benefits but in control over benefits. “Property” is not about enjoyment of access but about control over access. “Property” is the power-relation constituted by the state’s endorsement of private claims to regulate the access of strangers to the benefits of particular resources. If, in respect of a given claimant and a given resource, the exercise of such regulatory control is physically impracticable or legally abortive or morally or socially undesirable, we say that such a claimant can assert no “property” in that resource and for that matter can lose no “property” in it either. Herein lies an important key to the “propertiness” of property. Here too lies the key to the divergent approaches evident in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor. The minority in the High Court of Australia found a misappropriation of “property” in the sheer fact that the defendants had diminished the plaintiff’s access to the benefits of certain resources. By contrast the majority found that there had been no taking of “property”, precisely because the defendants’ conduct could never in any event have deprived the plaintiff of control over access to those resources. For a variety of reasons the resources in dispute had remained at all times inherently non-excludable. The plaintiff might have enjoyed access to the benefits of the contested resources, but it never had a control over access which could be prejudiced by the actions of the defendants. The resources in issue could never have sustained any claim of “property” by the plaintiff and could not now therefore support any allegation of loss or misappropriation. Whatever it was the defendants took – and they undeniably took something-they took none of the plaintiff’s “property”. The concept of excludability thus takes us some way towards discovering a rationally defensible content in the term “property”. The differentiation of excludable and non-excludable resources points up the irreducible elements which lie at the core of the “property” notion. But these irreducibles, once isolated and identified, leave little if anything of value to be gathered from the traditional indicia of “property”. The concept of excludability does not, of course, resolve entirely the issue of justice in holdings; it merely demarcates the categories of resource in which it is possible to claim “property”. It sets outer limits on claims of “property”, but provides no criteria for justifying such claims on behalf of particular individuals – except to the extent that we accept the initially unpalatable (but historically attested) proposition that the sustained assertion of effective control over access to the benefits of a resource tends ultimately to be constitutive of “property” in that resource. The precise allocation of “property” in excludable resources is left to be determined – is indeed constantly formulated and reformulated – by various kinds of social and moral consensus over legitimate modes of acquisition and the relative priority of competing claims. This consensus is reinforced by a machinery of legal recognition and enforcement which thus adds or withholds the legitimacy of state sanction in relation to individual assertions of “property”. [1.75]

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Property in Thin Air cont. V. Conclusions If “property” is a power-relation constituted by legally sanctioned control over access to the benefits of excludable resources, certain conclusions follow. A. “Property” is a relative concept Since the physical, legal and moral conditions of excludability may vary according to time and circumstance, it becomes clear that the notion of “property” in a resource is not absolute, but relative. The concept of “property” is not static, but dynamic. I may have “property” in a resource today, but not tomorrow. I may have “property” in a resource for one purpose but not for another. I may have “property” in a resource as against X but not necessarily as against Y or Z. It may be that P and Q can both claim “property” in the same resource although their respective interests are mutually opposed. It is not even inevitable that there should be a quantum step between having “property” in a resource and not having “property” in it. Propertiness is represented by a continuum along which varying kinds of “property” status may shade finely into each other. B. “Property” has moral limits The essential relativity of “property” emerges perhaps most clearly in the proposition, discussed earlier in this paper, that claims of “property” may be abridged in order to further more highly rated social objectives. “Property” is not a value-neutral phenomenon. “Property” in a resource stops where the infringement of more basic human rights and freedoms begins. There are distinct moral limits to the concept of “property”. As the Supreme Court of New Jersey observed in State v Shack, “[p]roperty rights serve human values. They are recognised to that end, and are limited by it.” The same Court confirmed that “an owner must expect to find the absoluteness of his property rights curtailed by the organs of society, for the promotion of the best interests of others for whom these organs also operate as protective agencies”. Quite profound – although as yet barely acknowledged – consequences flow from this recognition of the moral limits of “property”. The moral qualification has, of course, a major significance for those who endorse the rhetoric of stewardship and the communitarian theory that the earth’s resources are effectively held on trust for a number of social and environ-mental interests. Thin air, for instance, may not be made thick with pollutants. Land in particular takes on the character of a social commodity – a realisation which impacts just as keenly on patterns of land use and development as it now does on the increasingly contentious issue of recreational access to wild country. In some deeper and broader sense it is the collectively defined moral baselines of the property concept which alone secure the foundations for cultural development, personal fulfilment and the enjoyment of a civilised and dignified way of life. Vast areas of human resource and human capacity are excluded so effectively that we rarely pause to reflect either that it might have been otherwise or, more ominously, that some day it may yet be. In most societies, for instance, there is a general consensus that no attempt should be made to propertise certain ranges of humane, intellectual or sensory experience. There is no “property” in the right to listen to Chopin nocturnes; or to play the saxophone; or to engage in sexual intercourse; or to reproduce children. Nobody can assert that he (or some restric-tively defined group of “owners”) has an exclusive right to determine who may read novels or paint pictures or go to the theatre or climb mountains. There is no such phenomenon as “property” in the game of golf or in the right to play chess. (Even William Webb Ellis, who in 1823 first lifted the ball and ran with it, claimed no “property” in the resulting game of rugby football.) For the most part no one “owns” the right to consume certain kinds of food or drink. Nowadays at least there is no “property” in the right to vote or to be eligible for public office, and every democratic society is ultimately underpinned by the denial that there can be any “property” in political thought. But it is salutary to reflect that none of this need be so. The current range of the world’s propertised resources in indeed much more limited than we might imagine. Only a relatively small part of the total field of economic facility and human capacity is at 42 [1.75]

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Property in Thin Air cont. present permitted to be the subject of private claims of “property”. Amongst the challenges of the 21st century will be the question whether such “property” claims are to be allowed in relation to a wider group of assets and resources. The ambit of eligibles will include resources which range variously from human body parts and cells to fecundity, reproductive capacity and live babies; from the exploitable aspects of the human persona to the asset of commercial product goodwill; from leisure options to the eventual cure for AIDS and cancer; from Antarctica to outer space. It is at this point that we will really test the proposition that there are moral limits to the notion of “property”. C. “Property” is a term of wide signification Leaving aside for a moment the issue of moral limitation, it is clear that the perspective of excludability has an otherwise liberating impact on the identification of “property”. An extensive frame of reference is created by the notion that “property” consists primarily in control over access. Much of our false thinking about property stems from the residual perception that “property” is itself a thing or resource rather than a legally endorsed concentration of power over things and resources. If “property” is not a thing but a power-relation-ship, the range of resources in which “property” can be claimed is significantly larger than is usually conceded by orthodox legal doctrine. (This is indeed the source of both the greatest challenge and the greatest danger confronting the law of property in the 21st century.) The limits on “property” are fixed, not by the “thinglikeness” of particular resources but by the physical, legal and moral criteria of excludability. By lending the support of the state to the assertion of control over access to the benefits of particular resources, the courts have it in their power to create “property”. But of critical importance in this definitional process is obviously the care with which the courts determine which resources are recognisably non-excludable. 1. “Property” in labour-power The scope of “property” is potentially far-reaching. There is, for example, no monstrous implausibility in the idea that a person may have a “property” in the resource of his labour-power. Indeed the recognition of “excludability” as a key component of “property” makes heightened sense of much of the law relating to employment. To the extent that he propertises this resource through the contract of employment, the employee has a “property” in his labour-power and arguably, therefore, in his job. The contract certainly underlines the employee’s control over the access which strangers may have to the benefits of his labour-power. For precisely the same reason the contract of employment, being bilateral in character, confers also on the employer a “property” in the employee’s labour-power. There are, however, clear moral limits on the “property” which either employer or employee may claim in the resource of labour-power. The employee is no longer competent to contract away his labour-power for life or in conditions of bondage or slavery. Likewise the rules on restraint of trade significantly limit the employer’s right to constrain the employee’s exploitation of his labour-power during or after termination of the employment nexus. Both the rules on slavery and the rules on restraint of trade effectively recognise that there are moral (and perhaps even physical) limits on the degree to which a person’s labour-power can ever be the subject of control by another. 2. “Property” in confidential information Further evidence of the utility of the “control over access” explanation of “property” can be seen elsewhere. If there is one area of the law which places a premium on the assertion of control over the access of strangers to the benefits of a particular resource, it is the legal protection of confidential information. It ought on this basis to be possible to claim “property” in confidential information. Until recently, however, such a conclusion has tended to be countered with reference to Justice Holmes’s famous aphorism that the word “property” as applied in the field of intellectual property is merely “unanalysed expression of certain secondary consequences of the primary fact that the law makes some rudimentary requirements of good faith”. It is significant that in his recent decision in Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health, Gummow J of the Federal Court of Australia found [1.75]

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Property in Thin Air cont. Justice Holmes’s dictum of little assistance in illuminating the modern development of the equitable jurisdiction to grant relief against actual or threatened abuses of confidential information. In Gummow J’s view, “[t]he degree of protection afforded by equitable doctrines and remedies to what equity considers confidential information makes it appropriate to describe it as having a proprietary character”. This conclusion followed, not because property is the basis upon which that protection is given, but “because of the effect of that protection”. The result in Smith Kline & French was that Gummow J was prepared to hold that the reception and use of confidential information by a governmental agency comprised an “acquisition of property” for the purpose of the constitutional protection against unjust takings. Indeed the existence of eminent domain powers and “just takings” clauses provides in general an excellent reason for the exercise of care in ensuring a suitably comprehensive definition of the concept of “property”. D. “Property” is definable otherwise than in terms of proprietary consequence The adoption of excludability as the constitutive criterion of “property” brings about the further result that the legal concept of “property” need no longer be defined tautologously in terms of legal consequence. Whether X has or has not “property” in a given resource should not depend on whether his rights are assignable to Y or are binding upon Z, any more than the transferability or enforceability of X’s rights should turn on some obscure characterisation of those rights as “property”. Both formulae exhibit a similar infirmity in so far as each tends to link property status incestuously with proprietary consequence. The attribution of property status is instantly rescued from such circularity of argument if “property” is defined, not by reference to the traditional indicia of assignability and enforce-ability, but rather by independent reference to the free-standing criterion of excludability. This substitution is easily defensible on the ground that the notion of excludability offers an immeasurably more convincing explanation of the legal phenomena of assignability of benefit and enforceability of burden. Assignment (whether voluntary or involuntary) constitutes the ultimate release or abnegation of control over the access of strangers to the benefits of an excludable resource. In the absence of such assignment, “property” in an excludable resource can be vindicated against third parties precisely because the resource is excludable. E. “Property” is assimilable within consensual theory In conventional legal doctrine much energy is devoted to patrolling the frontier between property and contract. Property lawyers keep especially vigilant watch for those fugitive varieties of contractual right which threaten to cross the frontier and settle in property territory. Much fuss is made whenever the conceptual border is realigned and rights of “contract” are brought within the province of “property”. Thus, for instance, the decision in Tulk v Moxhay is generally considered to have elevated the restrictive covenant from contractual to proprietary status. Three centuries earlier – with the more sophisticated development of the action of ejectment – the lease of land had likewise crossed the boundary from contract to property. It may well be that exactly the same transition is occurring in the context of the modern contractual licence. The test of excludability throws into severe doubt the validity of any sharp dichotomy between contract and property. The ambivalent quality, for example, of the contractual chose in action provides a constant reminder of the fluid nature of such classifications. It may be, however, that instead of straining to see which contractual rights can be forced upwards on the plane of property, we should instead have been observing that there are remarkably few rights of so-called “property” which cannot be assimilated or rationalised within some form of consensual theory. Every gift, lease, trust and security has its origins in some arrangement of consent or assent. Behind every conveyance of land in fee simple lies the historic shadow of innumerable contracts or assents which provide the chain of title. Behind every title in property (real or personal) there lies ultimately a social contract, under which we 44 [1.75]

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Property in Thin Air cont. each accept the historic distribution of holdings – usually for no better reason than the awesome degree of social conflict and disorder which would otherwise ensue. Such realisations should lead us towards a radical redefinition of the relationship between property and contract. If this paper conveys any message at all for conventional property lawyers, it is that “property” is not all it is cracked up to be. By now it should be becoming obvious that the notion of “property” readily collapses back into contract or, more broadly, into a number of arrangements based on assent. No quantum step differentiates contract from “property”, for “property” has no clear threshold. There exists instead a spectrum of “proper-tiness” in which obligations which derive their moral force from discrete acts of affirmative consent shade gradually and almost imperceptibly into obligations whose social persuasive-ness rests upon the collective acceptance of sustained acts of assertive control. This is an age when major categories of private law seem to be tending towards coalescence – contract with tort, tort with trust, trust with contract. These are days in which it is possible to suggest, apparently seriously, that the constructive trust is available as a remedy for breach of contract and even for the commission of torts. The time may also have come for a recognition that the “property” notion should be read down and assimilated within a more general heading of civil remedy. It is no accident that the case which, in so many ways, provides the focus of the present paper is one which raises, in almost inseparable conjunction, issues which related variously to real property, intellectual property, tort, contract, privacy, unfair competition, and (last but not least) the principle of restitution. F. “Property” is never truly private There is another, perhaps even more far-reaching, implication of the relativity of “property”. We have described “property” as turning on a criterion of excludability which is defined, in part, in social and moral terms. There is therefore in every property drama a third actor in addition to the plaintiff and the defendant. This third actor – much overlooked in the traditional common law accounts of private property – is, of course, the state, expressing its collective judgment through the voice of the courts. In this sense the state takes on a critical, and so far little explored, role in defining the concept of “property”. The state itself becomes a vital factor in the “property” equation: all “property” has a public law character. Private “property” is never truly private. The control function of “property” is delegated sovereignty, and in underpinning the law of “property” the state indirectly adjudicates an exceedingly broad range of the power-relations permitted within society. Yet even in the playing out of this arbitral function, the state’s role suddenly appears to mirror the role of the property concept itself. In determining the limits of “property”, the collective voice has already begun to assert that sort of control over access to resources which is the characteristic component of the right of “property”. Behind the “owner” of “private property” stands the guardian of “public property” and the “commons”; and behind this guardian lie centuries of social thought about the ways in which the earth’s resources should be shared and distributed. Viewed thus, the concept of “property” conforms to a kind of chaos theory which steadily reveals pictures of ever intensifying complexity receding infinitely into the distance. G. “Property” is the gateway to access The concept of “property” is a gateway and, like most gateways, is just as important for what it keeps out as for what it lets in. The courts stand as the guardians at the gate, looking both ways. As gatekeepers, the courts regulate traffic backwards and forwards between a city-state ruled by the regime of private property and the largely unregulated commons which lies outside its walls. Thus it is that the withholding of property status from certain crucial human resources gives a new and invigorated content to the assertion that property jurisprudence is ultimately concerned with claims of access to social goods. This understanding of property may help to resolve CB Macpherson’s famous tension between property as a right to exclude and property as a right of access. In Macpherson’s view [1.75]

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Property in Thin Air cont. property consists not so much in the right to exclude strangers from privately owned resources, as in the assertion of public rights to share in a number of socially valued resources which enable us to lead fulfilled and dignified lives. Maybe the essential truth in the Macpherson thesis is that the role of property in not simply to guarantee the private ownership of certain goods, but also to stop others more powerful than ourselves from propertising all the goods of life and thereby precluding general access. In this way “property” is a bivalent concept, operating just as significantly (if more silently) to assure us of our continuing vested rights in the social goods which remain in the commons. H. “Property” is a category of illusory reference In the exercise of this dual role the notion of “property” serves both to concretise individual material needs and aspirations and to protect a shared base for constructive human inter-actions. Indeed, in a subtle mimicry of our thoughts and emotions, the language of “property” catches in a peculiarly acute form many of our reactions to the experience of living. The present paper has sought, however, to articulate a deep scepticism about the meaning and terminology of property. “Property” is a term of curiously limited content; as a phrase it is consistently the subject of naive and unthinking use. “Property” comprises, in large part, a category of illusory reference: it forms a conceptual mirage which slips elusively from sight just when it seems most attainably three-dimensional. Perhaps more accurately than any other legal notion it was “property” which deserved the Benthamite epithet, “rhetorical nonsense – nonsense upon stilts”. “Property” remains ultimately an emotive phrase in search of a meaning. The value-laden mystique generated by appeals to “property” exerts a powerful and yet wholly spurious moral leverage. At the beginning of all taking was not a right but a wrong. The first takers were not, however, guilty of theft; they were guilty of believing the deception of the serpent. This deception consisted in the assumption that the fruit of every tree in the Garden is necessarily a fit subject of private taking; that there can be “property” in all of the goods of life; that human value in its totality is apprehensible through the private exercise of eminent domain. In the allegory of the Garden it is significant that the symbolic act of sin consisted of a usurpation of control over access to an especially desirable resource. When Eve seized and ate the fruit of the tree of wisdom – the tree of the knowledge of good and evil – “and gave also unto her husband with her”, her act was one not of altruism but of beneficial control. It affirmed for ever the primal – the primal – the visceral – impulse of meum and tuum. Out of this act of arrogation was born the global pretence of comprehensively individualised rights of “property”. It is this hidden dynamic of “property” – the deep resonance of meum and tuum – which pervades so much of our private law thinking today. It is this inner dynamic which silently imparts critical baselines to the law relating to torts, trusts, commercial competition, the fiduciary principle, restitution, unjust enrichment, privacy, the preservation of confidence, and the reward of industrial and intellectual effort. Irrespective of the precise language chosen to serve as the doctrinal vehicle, the major inarticulate premise in each of these areas is generated by some underlying half-conscious perception of “property”. There can indeed be little doubt that property thinking is deeply embedded in the human psyche. But despite its insinuating omnipresence in private law, the meaning of “property” remains strictly limited. It may be that the only positive content truly comprised within the “property” notion is that which delimits the range of resources in respect of which society will tolerate the claims of meum and tuum. Beyond the irreducible constraints imposed by the idea of excludability, “property” terminology is merely talk without substance – a filling of empty space with empty words. When subjected to close analysis the concept of “property” vanishes into thin air just as surely and elusively as the desired phantom with which we began. Claims of meum and tuum do not protect rights of any sacrosanct or

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Property in Thin Air cont. a priori nature, but merely purport with varying degrees of sophistication to add moral legitimacy to the assertion of self-interest in the beneficial control of valued resources. In the end the “property” notion, in all its conceptual fragility, is but a shadow of the individual and collective human response to a world of limited resources and attenuated altruism.

Notes

[1.80]

1 A pedantic literalist may observe that property rights in polluted air result from current attempts to tackle global warming through the grant of rights to emit pollutants into the air. These rights are planned to be transferable and, as with the earlier discussed water rights, should be of most value to the most efficient polluters; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [1.160]. 2 One aspect of property rights not emphasised in the article is the ability to take physical measures to defend property (both land and goods) from intruders; see the next section of this chapter. 3 In a later article, Gray, (“Regulatory Property and the Jurisprudence of the Quasi-Public Trust” (2010) 32 Sydney Law Review 237) argued that there are certain undertakings that are so embedded within the public psyche that they may well impose obligations on the proprietary holders as well as rights.

Property and Sovereignty [1.85] Cohen M R, “Property and Sovereignty” (1927) 13 Cornell LQ 8 [Footnotes have been omitted.] Property and sovereignty, as every student knows, belong to entirely different branches of the law. Sovereignty is a concept of political or public law and property belongs to civil or private law. This distinction between public and private law is a fixed feature of our law-school curriculum. It was expressed with characteristic 18th century neatness and clarity by Montesquieu, when he said that by political laws we acquire liberty and by civil law property, and that we must not apply the principles of one to the other. Montesquieu’s view that political laws must in no way retrench on private property because no public good is greater than the maintenance of private property, was echoed by Blackstone and became the basis of legal thought in America. Though Austin, with his usual prolix and near-sighted sincerity, managed to throw some serious doubts on this classical distinction, it has continued to be regarded as one of the fixed divisions of the jural field. In the second volume of his Genossen-schaftsrecht the learned Gierke treated us to some very interesting speculations as to how the Teutons became the founders of public law just as the Romans were the founders of private law. But in later years he somewhat softened this sharp distinction; and common law lawyers are inclined rather to regard the Roman system as giving more weight to public than to private law. The distinction between property and sovereignty is generally identified with the Roman discrimination between dominium, the rule over things by the individual, and imperium, the rule over all individuals by the prince. Like other Roman distinctions, this has been regarded as absolutely fixed in the nature of things. But early Teutonic Law, the law of the Anglo-Saxons, Franks, Visigoths, Lombards and other tribes, makes no such distinction; and the state long continued to be the prince’s estate so that even in the 18th century the Prince of Hesse could sell his subjects as soldiers to the King of England. The essence of feudal law – a system not confined to medieval Europe – is the inseparable [1.85]

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Property and Sovereignty cont. connection between land tenure and personal homage involving often rather menial services on the part of the tenant and always genuine sovereignty by the landlord. The feudal baron had, for instance, the right to determine the marriage of the ward, as well as the right to nominate the priest; and the great importance of the former as a real property right is amply attested in Magna Carta and in the Statute Quia Emptores. Likewise was the administration of justice in the baron’s court an incident of land ownership; and if, unlike the French up to the Revolution, the English did not regard the office of judge as a revenue-producing incident of seigniorage to be sold in the open market (as Army Commissions were up to the time of Gladstone) the local squire did in fact continue to act as Justice of the Peace. Ownership of the land and local political sovereignty were inseparable. … II The justification of property 1. The occupation theory The oldest and up to recently the most influential defense of private property was based on the assumed right of the original discoverer and occupant to dispose of that which thus became his. This view dominated the thought of Roman jurists and of modern philosophers – from Grotius to Kant – so much so that the right of the laborer to the produce of his work was sometimes defended on the ground that the laborer “occupied” the material which he fashioned into the finished product. It is rather easy to find fatal flaws in this view. Few accumulations of great wealth were ever simply found. Rather were they acquired by the labor of many, by conquest, by business manipulation, and by other means. It is obvious that today at any rate few economic goods can be acquired by discovery and first occupancy. Even in the few cases when they are, as in fishing and trapping, we are apt rather to think of the labor involved as the proper basis of the property acquired. Indeed, there seems nothing ethically self-evident in the motto that “findings is keepings”. There seems nothing wrong in a law that a treasure trove shall belong to the king or the state rather than to the finder. Shall the finder of a river be entitled to all the water in it? Moreover, even if we were to grant that the original finder or occupier should have possession as against anyone else, it by no means follows that he may use it arbitrarily or that his rule shall prevail indefinitely after his death. The right of others to acquire the property from him by bargain, by inheritance, or by testamentary disposition, is not determined by the principle of occupation. Despite all these objections, however, there is a kernel of positive value in this principle. Protecting the discoverer or first occupant, is really part of the more general principle that possession as such should be protected. There is real human economy in doing so until somebody shows a better claim than the possessor. It makes for certainty and security of transaction as well as for public peace – provided the law is ready to set aside possession acquired in ways that are inimical to public order. Various principles of justice may determine the distribution of goods and the retribution to be made for acts of injustice. But the law must not ignore the principle of inertia in human affairs. Continued possession creates expectations in the possessor and in others and only a very poor morality would ignore the hardship of frustrating these expectations and rendering human relations insecure, even to correct some old flaws in the original acquisition. Suppose some remote ancestor of yours did acquire your property by fraud, robbery or conquest, eg in the days of William of Normandy. Would it be just to take it away from you and your dependents who have held it in good faith? Reflection on the general insecurity that would result from such procedure leads us to see that as habit is the basis of individual life, continued practice must be the basis of social procedure. Any form of property which exists has therefore a claim to continue until it can be shown that the effort to change it is worth while. Continual changes in property laws would certainly discourage enterprise. 48 [1.85]

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Property and Sovereignty cont. Nevertheless, it would be as absurd to argue that the distribution of property must never be modified by law as it would be to argue that the distribution of political power must never be changed. No less a philosopher than Aristotle argued against changing even bad laws, lest the habit of obedience be thereby impaired. There is something to be said for this, but only so long as we are in the realm of merely mechanical obedience. When we introduce the notion of free or rational obedience, Aristotle’s argument loses its force in the political realm; and similar considerations apply to any property system that can claim the respect of rational beings. 2. The labor theory That everyone is entitled to the full produce of his labor is assumed as self-evident by both socialists and conservatives who believe that capital is the result of the savings of labor. However, as economic goods are never the result of any one man’s unaided labor, our maxim is altogether inapplicable. How shall we determine what part of the value of a table should belong to the carpenter, to the lumberman, to the transport worker, to the policeman who guarded the peace while the work was being done, and to the indefinitely large numbers of others whose cooperation was necessary? Moreover, even if we could tell what any one individual has produced – let us imagine a Robinson Crusoe growing up all alone on an island and in no way indebted to any community – it would still be highly questionable whether he has a right to keep the full produce of his labor when some shipwrecked mariner needs his surplus food to keep from starving. In actual society no one ever thinks it unjust that a wealthy old bachelor should have part of his presumably just earnings taken away in the form of a tax for the benefit of other people’s children, or that one immune to certain diseases, should be taxed to support hospitals, etc. We do not think there is any injustice involved in such cases because social interdependence is so intimate that no man can justly say: “This wealth is entirely and absolutely mine as the result of my own unaided effort”. The degree of social solidarity varies, of course; and it is easy to conceive of a sparsely settled community, such as Missouri at the beginning of the 19th century, where a family of hunters or isolated cultivators of the soil might regard everything which it acquired as the product of its own labor. Generally, however, human beings start with a stock of tools or information acquired from others and they are more or less dependent upon some government for protection against foreign aggression, etcetera. Yet despite these and other criticisms, the labor theory contains too much substantial truth to be brushed aside. The essential truth is that labor has to be encouraged and that property must be distributed in such a way as to encourage ever greater efforts at productivity. As not all things produced are ultimately good, as even good things may be produced at an unjustified expense in human life and work, it is obvious that other principles besides that of labor or productivity are needed for an adequate basis or justification of any system of property law. We can only say dialectically that all other things being equal, property should be distributed with due regard to the productive needs of the community. We must, however, recognise that a good deal of property accrues to those who are not productive, and a good deal of productivity does not and perhaps should not receive its reward in property. Nor should we leave this theme without recalling the Hebrew-Christian view – and for that matter, the specifically religious view – that the first claim on property is by the man who needs it rather than the man who has created it. Indeed, the only way of justifying the principle of distribution of property according to labor is to show that it serves the larger social need. The occupation theory has shown us the necessity for security of possession and the labor theory the need for encouraging enterprise. These two needs are mutually dependent. Anything which discourages enterprise makes our possessions less valuable, and it is obvious that it is not worth while engaging in economic enterprise if there is no prospect of securely possessing the fruit of it. Yet there is [1.85]

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Property and Sovereignty cont. also a conflict between these two needs. The owners of land, wishing to secure the continued possession by the family, oppose laws which make it subject to free financial transactions or make it possible that land should be taken away from one’s heirs by a judgment creditor for personal debts. In an agricultural economy security of possession demands that the owner of a horse should be able to reclaim it no matter into whose hands it has fallen. But in order that markets should be possible, it becomes necessary that the innocent purchaser should have a good title. This conflict between static and dynamic security has been treated most suggestively by Demogue and I need only refer you to his masterly book, Les Notions fondementales du Droit privŽ. 3. Property and personality Hegel, Ahrens, Lorimer, and other idealists have tried to deduce the right of property from the individual’s right to act as a free personality. To be free one must have a sphere of self-assertion in the external world. One’s private property provides such an opportunity. Waiving all traditional difficulties in applying the metaphysical idea of freedom to empirical legal acts, we may still object that the notion of personality is too vague to enable us to deduce definite legal consequences by means of it. How, for example, can the principle of personality help us to decide to what extent there shall be private rather than public property in railroads, mines, gas-works, and other public necessities? Not the extremest communist would deny that in the interest of privacy certain personal belongings such as are typified by the toothbrush, must be under the dominion of the individual owner, to the absolute exclusion of everyone else. This, however, will not carry us far if we recall that the major effect of property in land, in the machinery of production, in capital goods, etcetera, is to enable the owner to exclude others from their necessities, and thus to compel them to serve him. Ahrens, one of the chief expounders of the personality theory, argues “It is undoubtedly contrary to the right of personality to have persons dependent on others on account of material goods”. But if this is so, the primary effect of property on a large scale is to limit freedom, since the one thing that private property law does not do is to guarantee a minimum of subsistence or the necessary tools of freedom to everyone. So far as a regime of private property fails to do the latter it rather compels people to part with their freedom. It may well be argued in reply that just as restraining traffic rules in the end give us greater freedom of motion, so, by giving control over things to individual property owners, greater economic freedom is in the end assured to all. This is a strong argument, as can be seen by comparing the different degrees of economic freedom that prevail in lawless and in law abiding communities. It is, however, an argument for legal order rather than any particular form of government or private property. It argues for a regime where every one has a definite sphere of rights and duties, but it does not tell us where these lines should be drawn. The principle of freedom of personality certainly cannot justify a legal order wherein a few can, by virtue of their legal monopoly over necessities, compel others to work under degrading and brutalizing conditions. A government which limits the right of large land-holders limits the rights of property and yet may promote real freedom. Property owners, like other individuals, are members of a community and must subordinate their ambition to the larger whole of which they are a part. They may find their compensation is spiritually identifying their good with that of the larger life. 4. The economic theory The economic justification of private property is that by means of it a maximum of productivity is promoted. The classical economic argument may be put thus: The successful business man, the one who makes the greatest profit, is the one who has the greatest power to foresee effective demand. If he has not that power his enterprise fails. He is therefore, in fact, the best director of economic activities. 50 [1.85]

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Property and Sovereignty cont. There can be little doubt that if we take the whole history of agriculture and industry, or compare the economic output in countries like Russia with that in the United States, there is a strong prima facie case for the contention that more intensive cultivation of the soil and greater productiveness of industry prevail under individual ownership. Many a priori psychologic and economic reasons can also be brought to explain why this must be so, why the individual cultivator will take greater care not to exhaust the soil, etc. All this, however, is so familiar that we may take it for granted and look at the other side of the case, at the considerations which show that there is a difference between socially desirable productivity and the desire for individual profits. In the first place let us note that of many things the supply is not increased by making them private property. This is obviously true of land in cities and other monopoly or limited goods. Private ownership of land does not increase the amount of rainfall, and irrigation works to make the land more fruitful have been carried through by government more than by private initiative. Nor was the productivity of French or Irish lands reduced when the property of their landlords in rent charges and other incidents of seigniorage was reduced or even abolished. In our own days, we frequently see tobacco, cotton or wheat farmers in distress because they have succeeded in raising too plentiful crops; and manufacturers who are well-informed know when greater profit is to be made by decreased output. Patents for processes which would cheapen the product are often bought up by manufacturers and never used. Durable goods which are more economic to the consumer are very frequently crowded out of the market by shoddier goods which are more profitable to produce because of the larger turnover. Advertising campaigns often persuade people to buy the less economical goods and to pay the cost of the uneconomic advice. In the second place, there are inherent sources of waste in a regime of private enterprise and free competition. If the biologic analogy of the struggle for existence were taken seriously, we should see that the natural survival of the economically fittest is attended, as in the biologic field, with frightful wastefulness. The elimination of the unsuccessful competitor may be a gain to the survivor but all business failures are losses to the community. Finally, a regime of private ownership in industry is too apt to sacrifice social interests to immediate monetary profits. This shows itself in speeding up industry to such a pitch that men are exhausted in a relatively few years whereas a slower expenditure of their energy would prolong their useful years. It shows itself in the way in which private ownership enterprise has wasted a good deal of the natural resources of the United States to obtain immediate profits. Even when the directors of a modern industrial enterprise see the uneconomic consequences of immediate profits, the demand of shareholders of immediate dividends, and the ease with which men can desert a business and leave it to others to stand the coming losses, all tend to encourage ultimately wasteful and uneconomic activity. Possibly the best illustration of this is child labor, which by lowering wages increases immediate profits, but in the end is really wasteful of the most precious wealth of the country, its future manhood and womanhood. Surveying our arguments thus far: We have seen the roots of property in custom and in the need for economic productivity, in individual needs of privacy and in the need for social utility. But we have also noted that property, being only one among other human interests, cannot be pursued absolutely without detriment to human life. Hence we can no longer maintain Montesquieu’s view that private property is sacrosanct and that the general government must in no way interfere with or retrench its domain. The issue before thoughtful people is therefore not the maintenance or abolition of private property, but the determina-tion of the precise lines along which private enterprise must be given free scope and where it must be restricted in the interests of the common good. … [1.85]

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Property and Sovereignty cont. III Political vs economic sovereignty If the discussion of property by those interested in private law has suffered from a lack of realism and from too great a reliance on vague a priori plausibilities, much the same can be said about political discussion as to the proper limits of state action in regard to property and economic enterprise. Utterly unreal is all talk of men being robbed of their power of initiative because the state undertakes some service, for example to build a bridge across a river. Men are not deprived of opportunities for real self reliance by having their streets lighted at night, by filling up holes in the pavements, by removing other dangers to life and limb and by providing opportunities for education to all. The conditions of modern life are complex and distracting enough so that if we can ease the strain by simplifying some things through state action we are all the gainers by it. Certain things have to be done in a community and the question whether they should be left to private enterprise dominated by the profit motive or to the government dominated by political considerations, is not a question of man versus the state, but simply a question of which organization and motive can best do the work. Both private and government enterprise are initiated and carried through by individual human beings. A realistic attitude would not begin with the assumption that all men in the government service are less or more intelligent or efficient than all those in private business. It would rather inquire what sort of people are drawn into government service and what attitudes their organization develops in contrast with that of private business. This is a matter for specific factual inquiry, unfortunately most sadly neglected. In the absence of such definite knowledge I can only venture a few guesses. Government officials seem likely to be chosen more for their oratorical ability, popularly likeable manners, and political availability, and less for their competence and knowledge of the problems with which they have to deal. The inheritance of wealth, however, may bring incompetent people for a while into control of private business. More serious is the fact that political leaders in touch with public sentiment are apt to be too conservative and prefer to avoid trouble by letting things alone. Their bureaucratic underlings, on whom they are more dependent than business executives on theirs, are apt to overemphasize the value of red tape, ie to care more for uniformity of governmental procedure than for the diverse special needs to which they ought to minister. All business administration, however, also loses in efficiency as its volume increases. On the other hand, experience has shown all civilised peoples the indispensable need for communal control to prevent the abuse of private enterprise. Only a political or general government is competent to deal with a problem like city congestion, because only the general government can coordinate a number of activities some of which have no financial motive. Private business may be more efficient in saving money. It does so largely by paying smaller wages to the many and higher remuneration to those on top. From a social point of view this is not necessarily a good in itself. It is well to note that men of great ability and devotion frequently prefer to work for the government at a lower pay than they can obtain in private employment. There is something more than money in daily employment. Humanity prefers – not altogether unwisely – to follow the lead of those who are sensitive rather than those who are efficient. Business efficiency mars the beauty of our countryside with hideous advertising signs and would, if allowed, ruin the scenic grandeur of Niagara. The subordination of everything to the single aim of monetary profit leads industrial government to take the form of absolute monarchy. Monarchy has a certain simplicity and convenience; but in the long run it is seldom the best for all concerned. Sooner or later it leads to insurrections. It is short-sighted to assume that an employer cannot possibly run his business without the absolute right to hire and fire his employees whenever he feels like. It is interesting to note that even a modern army is run without giving the general the absolute right to hire and fire. In this connection, I recall a conversation between a British Ambassador, Sir John Malcolm, and the Shah of Persia. The latter was surprised when he learned that the king of England could not at his pleasure behead any of his courtiers. How can one be king under such conditions? However, when he learned that the king of 52 [1.85]

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Property and Sovereignty cont. England did not have to fear so much for his own life the Shah began to see some advantage in limiting the absolute power of the monarch. May not democratic or limited constitutional government in industry have some human advantages over unlimited monarchy? The main difficulty, however, with industrial and financial government is that the governors are released from all responsibility for the actual human effects of their policies. Formerly, the employer could observe and had an interest in the health and morals of his apprentice. Now, the owners or stockholders have lost all personal touch with all but few of those who work for them. The human element is thus completely subordinated to the profit motive. In some cases this even makes for industrial inefficiency as when railroads or other businesses are run by financiers in the interest of stock manipulation. Very often our captains of finance exercise power by controlling other people’s funds. This was strikingly shown when several millions of dollars were paid for some shares of little inherent value but which enabled the purchaser to control the assets of a great life insurance company. Professor Ripley has recently thrown Wall Street into a turmoil by pointing out the extent to which promoters and financiers may with little investments of their own control great industrial undertakings. Let me conclude. There can be no doubt that our property laws do confer sovereign power on our captains of industry and even more so on our captains of finance. Now it would be unworthy of a philosopher to shy at government by captains of industry and finance. Humanity has been ruled by priests, soldiers, hereditary landlords, and even antiquarian scholars. The results are not such as to make us view with alarm a new type of ruler. But if we are entering a new era involving a new set of rulers, it is well to recognise it and reflect on what is involved. For the first time in the history of mankind the producer of things is in the saddle, not of course the actual physical producer, but the master mind that directs the currents of production. If this is contrary to the tradition of philosophy from Plato down, we may well be told that our philosophy needs revision. Great captains of industry and finance like the late James J Hill deal with problems in many respects bigger than those that faced Caesar and Augustus in building the Roman Empire. Still the fear may well be expressed that as modern life is becoming more and more complex it is dangerous to give too much sovereignty to those who are after all dealing with the rather simpler aspects of life involved in economic relations. It may, of course, rightly be contended that the modern captain of industry is not merely concerned with the creation of things, that his success is largely determined by his judgment and ability to manage large numbers of human beings that form part of his organization. Against this, however, there is the obvious retort that the only ability taken account of in the industrial and financial world, the ability to make money, is a very specialised one; and when business men get into public office they are notably successful. Too often they forget that while saving the money of the taxpayer may be an admirable incident, it is not the sole or even the principal end of communal life and government. The wise expenditure of money is a more complicated problem than the mere saving it, and a no less indispensable task to those who face the question of how to promote a better communal life. To do this effectively we need a certain liberal insight into the more intangible desires of the human heart. Preoccupation with the management of property has not in fact advanced this kind of insight. Many things are produced to the great detriment of the health and morals of the consumers as well as the producers. This refers not only to things that are inherently deleterious or enervating to those who create them and those who use them. It includes also many of the things of which people buy more than they need and more than is consistent with peace and leisure of mind which is the essence of culture. It is certainly a shallow philosophy which would make human welfare synonomous with the indiscriminate production and consumption of material goods. If there is one iota of wisdom in all the religions or philosophies which have supported the human race in the past it is that man cannot live by [1.85]

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Property and Sovereignty cont. economic goods alone but needs vision and wisdom to determine what things are worth while and what things it would be better to do without. This profound human need of controlling and moderating our consumptive demands cannot be left to those whose dominant interest is to stimulate such demands. It is characteristic of the low state of our philosophy that the merits of capitalism have been argued by both individualists and socialists exclusively from the point of view of the production and distribution of goods. To the profounder question as to what goods are ultimately worthwhile producing from the point of view of the social effects on the producers and consumers almost no attention is paid. Yet surely this is a matter which requires the guidance of collective wisdom, not to be left to chance or anarchy.

[1.90]

Notes

1. The place of private property in any society seems more firmly established today than at any other time in recent history. The recognition of private property is associated with a global market economy, individual freedom and political systems describing themselves as liberal democracies. Widespread private property is seen as leading to a social commitment and thus a more stable society. Private property also gives its holder something capable of providing security for the loan of money for productive purposes. Microfinancing theories allege that even small loans allow an entrepreneurial beginning. In developing countries small loans have been made without security; repayment has been a matter of social responsibility and default rates have been low. 2. The most evident challenge to universal acceptance of this philosophical approach has been from those opposing what is seen as the primacy of commercial values and individual rather than social interests. These challenges have been given expression in protests against the instrumentalities supporting this economic direction, such as the demonstrations against the World Trade Organisation. These protests have been based in part on the impact of the capitalist system on the disadvantaged. 3. Participation in the political processes of the western democracies has shown a marked decline in recent years; membership of major political parties has slumped significantly, and where voting at elections is optional voting rates have declined. Private property does reward individual endeavour and its dominance may be associated with a decline in concern for the welfare of others. 4. The increasing categories of intellectual property have conferred private ownership of the structure of life forms, such as plant varieties, with the aim of encouraging private research, as opposed to public knowledge based on research by government instrumentalities such as the CSIRO. But private property is the exclusion of others and has led to the prevention of the manufacture by copiers of life saving drugs such as AIDS inhibitors whose composition is owned by a large corporation.

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PROTECTION FOR PROPERTY Plenty v Dillon [1.95] Plenty v Dillon (1991) 171 CLR 635 High Court of Australia MASON CJ, BRENNAN AND TOOHEY JJ: Mr Plenty is the owner and occupier of a small farm at Napperby near Port Pirie, South Australia. He and Mrs Plenty are the parents of a girl who, at the time of the events giving rise to the present litigation, was aged 14 years. An allegation was made in July 1978 that the child had committed an offence and, pursuant to ss 8 and 15 of the Juvenile Courts Act 1921-1975 (SA), a complaint was laid against the child alleging that she was in need of care and control. That is the procedure which the Juvenile Courts Act prescribes for dealing with a child against whom an allegation of an offence is made. When such a complaint is laid a justice is authorised to issue a summons to the child to appear before a Juvenile Court: s 61. A justice issued a summons to the child to appear. The service of that summons was governed by s 27 of the Justices Act 1921-1975 (SA). Section 27 (as it then stood) provided: Subject to the provisions of this or any other enactment specially applicable to the particular case, any summons or notice required or authorised by this Act to be served upon any person may be served upon such person by – (a) delivering the same to him personally; or (b) leaving the same for him at his last or most usual place of abode or of business with some other person, apparently an inmate thereof or employed thereat, and apparently not less than sixteen years of age: Provided that any court or justice before whom the matter comes may refuse to act upon any non-personal service as aforesaid, and may require the summons or notice to be re-served, if it or he is of opinion that there is a reasonable probability – I. that the summons or notice has not come to the knowledge of the person so served; and II. that such person would have complied with or acted upon such summons or notice if it had come to his knowledge. On 6 and 31 October 1978 the police attempted to serve the summons on the child. On the latter occasion the police effected non-personal service of the summons by leaving it with her father. The child did not appear. Instead of ordering reservice of the summons, the magistrate ordered that a fresh summons be issued. In addition, notices were issued to Mr and Mrs Plenty, pursuant to s 29 of the Juvenile Courts Act, ordering them to attend at the hearing of the complaint against their child. Constable Dillon, accompanied by Constable Will, went to Mr Plenty’s farm in order to serve the fresh summons either personally on the child or, by non-personal service, on the father. Their entry onto the farm for this purpose was the occasion of an alleged trespass for which Mr Plenty brought the present action. He joined as defendants Constables Dillon and Will, their senior officer and the State of South Australia. It is unnecessary to trace the full history of the matter except to say that, in the view taken of the facts by a majority of the Full Court of the Supreme Court of South Australia, Mr Plenty had expressly revoked any implied consent given to any police constable to enter upon his farm in order to serve the summons or any other document relating to the matter concerning his child. The appeal to the Full Court proceeded on that footing and the defendants were content to argue the present appeal on the same footing. Thus the issue for determination is simply whether a police officer who is charged with the duty of serving a summons is authorised, without the consent of the person in possession or entitled to possession of land and without any implied leave or licence, to go upon the land in order to serve the summons. The starting point is the judgment of Lord Camden LCJ in Entick v Carrington (1765) 19 St Tr 1029 at 1066: By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my licence, but he is liable to an action, though the damage be nothing … If he admits the fact, he is bound to shew by way of justification, that some positive law has empowered or excused him. [1.95]

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Plenty v Dillon cont. And see Great Central Railway Co v Bates [1921] 3 KB 578 at 582; Morris v Beardmore [1981] AC 446 at 464. The principle applies to entry by persons purporting to act with the authority of the Crown as well as to entry by other persons. As Lord Denning MR said in Southam v Smout [1964] 1 QB 308 at 320, adopting a quotation from the Earl of Chatham: “The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail – its roof may shake – the wind may blow through it – the storm may enter – the rain may enter – but the King of England cannot enter – all his force dares not cross the threshold of the ruined tenement.” So be it – unless he has justification by law. And in Halliday v Nevill (1984) 155 CLR 1, Brennan J said (at 10): The principle applies alike to officers of government and to private persons. A police officer who enters or remains on private property without the leave and licence of the person in possession or entitled to possession commits a trespass and acts outside the course of his duty unless his entering or remaining on the premises is authorised or excused by law. The proposition that any person who “set(s) his foot upon my ground without my licence … is liable to an action” in trespass is qualified by exceptions both at common law and by statute. The first ground relied on to authorise or excuse the entry of Constables Dillon and Will on Mr Plenty’s farm on the occasion of the attempted service of the fresh summons was the common law rule known as the third rule in Semayne’s Case (1604) 5 Co Rep 91a at 91b (77 ER 194 at 195) which reads: In all cases when the King is party, the sheriff (if the doors be not open) may break the party’s house, either to arrest him, or to do other execution of the (King)’s process, if otherwise he cannot enter. But before he breaks it, he ought to signify the cause of his coming, and to make request to open doors. … The present case is not concerned with the application of the third rule in Semayne’s Case to an arrest without warrant on a criminal charge (a problem addressed in Lippl v Haines (1989) 18 NSWLR 620; and see Dinan v Brereton [1960] SASR 101 at 105), nor with its application to the execution of a justice’s warrant authorizing either arrest or search and seizure (a problem addressed in Launock v Brown (1819) 2 B and Ald 592 (106 ER 482)), nor with its application to the carrying into effect of a court’s judgment, order or warrant. It is concerned only with the application of the third rule in Semayne’s Case to the service of a summons. It would be surprising to find that the third rule does apply to the service of a summons, for that would mean that the defendants in this case were authorised not only to go onto Mr Plenty’s farm but, if need be, after demand for entry, to break down the door of his home to effect service on his daughter. We do not think that so invasive an operation can be attributed to the third rule. We take the third rule’s reference to execution of process to relate to the enforcement of process which is coercive in nature, that is, to the execution of process against person or property. That is how the rule was understood in Tomlins’ Law-Dictionary: “to do execution, either on the party’s goods, or take his body, as the case shall be”. The service of a summons is not an execution of process of that nature. … Common law authority tends against the proposition that the third rule in Semayne’s Case applies to service of a summons on premises entry onto which has been forbidden by the person in possession and entitled to possession thereof. It follows that the common law gave no authority to Constables Dillon and Will to go onto Mr Plenty’s farm in an attempt to serve the fresh summons on Mr Plenty’s daughter. Next, it is submitted that the statutory power to serve a summons, either personally or non-personally, carries with it the right to make such entry on land as is necessary to effect service. This argument, which had the support of the courts below, would construe the statute as conferring a right to enter private premises without consent even though the person in possession has no connection 56 [1.95]

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Plenty v Dillon cont. with the matter to which the summons relates. Some statutes which confer a power to arrest have not been construed as carrying a right to enter on private property (see per Lord Keith of Kinkel in Clowser v Chaplin [1981] 1 WLR 837 at 842; [1981] 2 All ER 267 at 270) although, in other cases, a statutory power of arrest has been held to carry a qualified right to enter: see Eccles v Bourque (1975) 2 SCR 739; (1974) 50 DLR (3d) 753; Halliday v Nevill, at 15-16. But a statute which confers a power to arrest is of a different order from a statute which prescribes the manner of service of a summons and which confers no power on a person to do a thing that that person is not free to do at common law. Section 27 of the Justices Act is merely facultative, giving to the process-server an option as to the manner of service. It confers no relevant power. The option of personal or non-personal service for which s 27 provides relates simply to the sufficiency of the giving of notice to a defendant after which the justices may proceed to hear and determine the matter in the exercise of their jurisdiction. In truth, the provisions of s 27 do nothing to create an implication that a process-server availing himself of either of the options acquires a power to enter upon private land without the leave or licence of the person in possession or entitled to possession thereof. The grounds advanced by the defendants to justify their entry fail. Their entry was wrongful, and the plaintiff is entitled to judgment and an award of some damages. The vicarious liability of the third and fourth defendants was not argued and that question may require further consideration. At first instance, Mohr J said that, even if a trespass had occurred, the trespass was “of such a trifling nature as not to found (sic) in damages”. But this is an action in trespass not in case and the plaintiff is entitled to some damages in vindication of his right to exclude the defendants from his farm. … GAUDRON AND MCHUGH JJ: The question in this appeal is whether a police officer has the right under the law of South Australia to enter private property for the purpose of serving a summons after the occupier of the property has notified the officer that he or she has no permission to enter the land. … The common law right of entry The policy of the law is to protect the possession of property and the privacy and security of its occupier: Semayne’s Case (1604) 5 Co Rep 91a at 91b (77 ER 194 at 195); Entick v Carrington (1765) 2 Wils KB 275 at 291 (95 ER 807 at 817); Southam v Smout [1964] 1 QB 308 at 320; Eccles v Bourque (1975) 2 SCR 739 at 742-743; (1974) 50 DLR (3d) 753 at 755; Morris v Beardmore [1981] AC 446 at 464. A person who enters the property of another must justify that entry by showing that he or she either entered with the consent of the occupier or otherwise had lawful authority to enter the premises: Entick, at 291 (817 of ER); Morris v Beardmore, at 464; Southam v Smout, at 320; Halliday v Nevill (1984) 155 CLR 1 at 10. Except in the cases provided for by the common law and by statute, constables of police and those acting under the Crown have no special rights to enter land: Halliday, at 10. Consent to an entry is implied if the person enters for a lawful purpose. In Robson v Hallett [1967] 2 QB 939, Lord Parker CJ said (at 951): the occupier of any dwelling-house gives implied licence to any member of the public coming on his lawful business to come through the gate, up the steps, and knock on the door of the house. This implied licence extends to the driveway of a dwelling-house: Halliday. However, the licence may be withdrawn by giving notice of its withdrawal. A person who enters or remains on property after the withdrawal of the licence is a trespasser. In Davis v Lisle [1936] 2 KB 434, police officers who had lawfully entered a garage for the purpose of making enquiries were held to have become trespassers by remaining in the garage after they were told by the proprietor to “get outside”. The common law has a number of exceptions to the general rule that a person is a trespasser unless that person enters premises with the consent, express or implied, of the occupier. Thus, a constable or [1.95]

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Plenty v Dillon cont. citizen can enter premises for the purpose of making an arrest if a felony has been committed and the felon has been followed to the premises. A constable or citizen can also enter premises to prevent the commission of a felony, and a constable can enter premises to arrest an offender running away from an affray. Moreover, a constable or citizen can enter premises to prevent a murder occurring. In these cases there is power not only to enter premises but, where necessary, to break into the premises. However, it is a condition of any lawful breaking of premises that the person seeking entry has demanded and been refused entry by the occupier. See Swales v Cox [1981] QB 849 at 853. Furthermore, a constable, holding a warrant to arrest, may enter premises forcibly, if necessary, for the purpose of executing the warrant provided that the constable has first signified “the cause of his coming, and … (made) request to open doors”: Semayne’s Case, at 91b (195 of ER); Burdett v Abbot (1811) 14 East 1, at 158, 162-163 (104 ER 501 at 561, 563); Lippl v Haines (1989) 18 NSWLR 620 at 631. But no public official, police constable or citizen has any right at common law to enter a dwelling-house merely because he or she suspects that something is wrong: Great Central Railway Co v Bates [1921] 3 KB 578 at 581-582. Nor, except in the instances to which we have referred, can any person enter premises, without a warrant, to apprehend a fugitive who may be on the premises: Lippl v Haines, at 636. Another exception to the general rule that a person who enters premises without the express or implied consent of the occupier is a trespasser is the rule that the sheriff can enter premises, by force if necessary, for the purpose of executing process in cases where the Sovereign is a party to the action: see the third resolution in Semayne’s Case, at p 91b (p 195 of ER). Moreover, if the door of premises is open the sheriff may enter “and do execut(ion) at the suit of any subject, either of the body, or of the goods” (at 92a (197 of ER)). But the right to execute at the suit of a subject does not extend to breaking open the outer doors of a dwelling-house: Semayne’s Case, at 92a, 92b (197, 198 of ER); Burdett v Abbot, at 154-155 (560 of ER); Southam v Smout, at 322-323, 326, 329; Tomlins’ Law-Dictionary, 4th ed (1835), vol 1, tit Execution, III 3. It has been held, however, that, for the purpose of executing process at the suit of any subject, the sheriff may break open a barn or outhouse which is not part of a dwelling-house: Penton v Brown (1664) 1 Keb 698 (83 ER 1193). … Thus, the object of serving a summons is different from the object of an arrest or an execution against the goods or body of a person. There is no logical basis for extending a rule whose object is to ensure the satisfaction of a judgment or obligation or the attendance of a person before a court to the case of the service of a document whose object is the provision of information. The very limited nature of a constable’s right to enter private property for the purpose of arrest is by itself a compelling argument for holding that, without making major changes to the law, the common law cannot logically recognise the service of a summons as a ground for entering premises against the will of the occupier. It would be incongruous for the common law to permit entry for the purpose of arrest in a few cases only but to permit entry for the purpose of serving a summons in every case whatsoever. Furthermore, nothing in the policy which underpins the third resolution in Semayne’s Case suggests that the achievement of its goal will be facilitated or promoted by extending the third resolution to cover the case of the service of a summons. The policy behind the third resolution is that the public interest in securing the Crown revenues and apprehending alleged offenders is greater than any consequential interference to the private rights of the occupiers of property. Serving a summons does not facilitate or promote this policy. The object of the service is not to bring the defendant before the court or to secure the revenues of the Crown but to apprise the defendant of the nature of the case which is alleged against him or her. Whether or not the defendant appears in answer to the summons is a matter entirely for that person. Failure to make an arrest or issue execution may frustrate the administration of justice. But failure to serve a summons does not mean that the administration of justice is frustrated. When the defendant deliberately refuses to accept or evades service of the summons, judgment against him or her may still 58 [1.95]

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Plenty v Dillon cont. be entered. The defendant cannot complain in those circumstances that the rules of procedural fairness have been breached. Nor can he or she complain if execution subsequently issues. Of course, in most cases, a justice prefers to have a defendant, who evades service, apprehended and brought before the court by warrant. He or she will prefer to do so not merely for the purpose of ensuring that the defendant does not evade the penalties imposed by law but because of the deep reluctance of those trained in the common law system to permit a charge to be heard against a person in his or her absence. Nevertheless, in such cases it is the warrant and not the summons which secures the defendant’s presence. At this late stage in the development of the common law, it seems impossible to declare that, for the purpose of serving a summons, a constable has a common law right of entry upon private property without the consent of the occupier. The general policy of the law is against government officials having rights of entry on private property without the permission of the occupier, and nothing concerned with the service of a summons gives any ground for creating a new exception to the general rule that entry on property without the express or implied consent of the occupier is a trespass. The contention that the respondents are not liable for trespass to the appellant’s land because of the third resolution in Semayne’s Case must be rejected.

[1.105]

Notes

1. In Kuru v New South Wales (2008) 236 CLR 1 the High Court considered possible defences to an action in trespass. Police had arrived at Mr Kuru’s flat to attend a suspected domestic violence incident allegedly involving Mr Kuru and his then fiancée (and later wife). By the time the police arrived, the woman had left the flat. Mr Kuru initially gave the police permission to look around, but subsequently told them to leave. They didn’t, and a violent struggle resulted, which led to the arrest of Mr Kuru. In the action for trespass against it, the State of New South Wales argued that there were both statutory and common law justifications for the police remaining in Mr Kuru’s flat after he had told them to leave. The State argued (at 14) that the common law justification was that “where police ‘apprehend on reasonable grounds that a breach of the peace has occurred and unless they involve themselves may recur, or alternatively that a breach of the peace is imminent, they may enter private dwelling premises for preventative and investigative purposes …’.” A majority of the High Court found that neither the statutory nor the common law justification had been made out. 2. Attitudes towards protection for property have changed considerably over time. In recent years the community has become less tolerant towards intruders. Certainly greater fear exists because of a perceived increase in violence. In several recent instances killers of intruders onto land have not been prosecuted for any offence. Legislative changes have been in the direction of providing a defence for any occupier of residential premises who makes an honest attempt to defend against an intruder; see, for example, s 15A of the Criminal Law Consolidation Act 1935 (SA). Similarly penalties applying to intruders have increased significantly; see, for example, R v Delphin (2001) 79 SASR 429 and R v Cattell [2010] SASCFC 18. South Australia has also introduced legislation to clarify and strengthen the rights of landholders and police in respect of persons who trespass at private parties: Summary Offences (Gatecrashers at Parties) Amendment Act 2007. [1.105]

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3. Whilst much discussion has taken place with respect to defence of the person and the home, the position with respect to goods has not received the same attention. Some persons have considerable attachments to their motor vehicles. Some rights to protect that vehicle clearly exist. If there is no threat to my own safety, how far can I go to prevent someone taking my motor vehicle? See R v Turner [1962] VR 30.

PROPERTY AND GENDER ISSUES Women, Property and Family Relations [1.110] Scutt J, Women, Property and Family Relations (1990), pp 204-207. 2. Marriage, divorce and property Marriage became important in England because property was important. Marriage was used to consolidate or to gain fortunes. As a means of consolidating or gaining fortunes it was vital to the aristocracy and later to the middle-class in its striving to gain a foothold on the ladder of social, economic and political power. Marriage “rules” then became “fashionable” amongst the lower socio-economic classes, and were universalised through Lord Hardwicke’s Marriage Act 1753. Once marriage was established by secular as well as ecclesiastical law, the question of rights to separate and remarry became pressing. The ecclesiastical courts allowed divorce e mensa et toro: formal separation without any right to marry again. Legal divorce with rights to remarry was obtainable only through Parliament. A special Act of Parliament had to be passed stating that the marriage was at an end. A costly procedure and dependent upon political “pull” (one had to have a Member of Parliament ready to put the Bill forward, or be a member and introduce it as a private member’s Bill), such divorces were rare and isolated amongst the rich and powerful. English marriage laws were transported to Australia with the convicts and soldiers. Divorce laws developed in the colonies along lines similar to those in Britain, similar debates taking place in Parliament. The laws were discriminatory against women. To obtain a divorce for adultery a woman had to show her husband engaged not only in sexual intercourse with another woman, but the sexual activity was incestuous, or he engaged in cruelty toward his wife as well. A single act of sexual intercourse by his wife with another man could secure divorce for a husband. The differentiation between a wife and husband continued in Victoria until 1959 when the Matrimonial Causes Act provided 14 grounds for divorce, all equally applicable in their explicit terms to women and men. (The other States reformed their divorce laws in a more egalitarian way than Victoria in earlier decades.) The Matrimonial Causes Act 1959 (Cth) made divorce subject to federal law, as provided by the Constitution. State Supreme Courts continued to grant divorces and deal with custody, maintenance and property in relation thereto, but under the federal law only. The Marriage Act 1961 (Cth) also took marriage out of State jurisdiction. But differentiations between young women and men continued: a woman of 16 years is legally able to marry, whereas the legal age for a man to marry is 18 years. Below those ages, special permission to marry has to be sought and gained. Grounds of divorce under the Matrimonial Causes Act included adultery, cruelty, attempted murder, various other crimes such as rape, or repeated offences, drunkenness, desertion and committal to a hospital for the insane. These were “fault” grounds, because the party seeking divorce had to prove the other party was insane, cruel, an alcoholic or exhibited some designated characteristic or habit. Separation was a ground for divorce if parties had been living separately and apart for five years. This was the only “no fault” ground, because so long as the parties had not been living together for five years, there was no requirement to prove any bad behaviour by a spouse. This differed from the ground of desertion, where the party seeking divorce had to bring evidence that the other party had deserted her or him, leaving her without support, or him without “cohabitation rights”, for three years 60 [1.110]

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Women, Property and Family Relations cont. or more. “Constructive desertion” was pleaded by women seeking divorce where they had been forced by the unbearable behaviour of the husband to leave the matrimonial home. Under the Matrimonial Causes Act, as under State legislation preceding it, the good conduct of the parties was important: if a woman was divorced for, say, adultery, she was left with no right to maintenance by the former husband. If she was able to divorce him for “constructive desertion”, she retained a right to ask the court to grant her maintenance. A divorce for adultery placed a woman’s application for custody of the children of the marriage in jeopardy, for the view was that a woman engaging in adultery was a “bad” mother. This criterion was not used to deprive fathers of custodial rights, should they seek child custody. In 1975 the Family Law Act abolished all grounds for divorce apart from one: irretrievable breakdown of marriage. All applications for divorce, and property and maintenance in relation thereto, are heard in the Family Court, a federal court (or in Western Australia the Family Court of Western Australia which combines federal jurisdiction with certain State jurisdictions). The applicant now has no need to prove bad conduct of any sort on the part of the other, and indeed no such conduct can be raised in a divorce case. Once the parties have been living separately and apart for the 12 month minimum period required under the Act, either party is entitled to apply for and obtain divorce, so long as there is proof of marriage breakdown and the parties have been living separately and apart for the requisite period. Both parties can apply. Parties can be held to be “living separately and apart” although they continue to dwell under the same roof. The Family Court looks at the activities of the woman and man: does she continue to cook for him? do they go out together as a couple? do the neighbours, their friends and family continue to regard them as married? do they continue to combine their incomes? does the couple have joint bank accounts? property owned jointly? If a general picture is built up of the couple continuing to live as if they were married, and holding themselves out to be married, then the court will be reluctant to accept that the marriage has “irretrievably broken down” and that the parties are living “separately and apart”. Although “fault” is removed from divorce proceedings, it remains where the law is interpreted in property, maintenance and custody matters. It is questionable whether this was the intention of the drafters of the legislation, and of Parliament in passing it. Some people believe that retaining “fault” in property and maintenance matters is “fairer”, and specific provisions for “fault” should be reincorporated into the law. Yet this is highly questionable. 3. Property ownership and division (a) Historical origins At common law, upon marriage a woman lost any right to own property. She had no right to retain any income she might earn. Property and income belonged solely to her husband. To protect family fortunes from profligate husbands, those in the upper echelons were able to use the courts of equity, by trusts, to ensure that property going into a marriage with a daughter could not be used by the husband; it was kept intact to be passed down to grandsons. The Married Women’s Property Acts, lobbied for strenuously by women in Britain, Australia, New Zealand, Canada and the United States throughout the mid to late 19th century, sought to keep for a woman any property she owned prior to marriage, and any earnings she might make during marriage. The first Married Women’s Property Act in Australia was passed in 1879 in New South Wales. It was a copy of English legislation (the Married Women’s Property Acts of 1870 and 1874) and brought to fruition some of the demands made even earlier. In 1857 when the Divorce and Matrimonial Causes Act passed the British Parliament, Lord Brougham had unsuccessfully supported a Bill for marital property reform, saying in the debate on 13 February 1857: All [a wife’s property and income] in reality belong by our law’s decrees to the husband, all are vested in him by right, and he may at his own good pleasure vest them also in possession; nay [1.110]

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Women, Property and Family Relations cont. never having in the least degree helped their production, he may without the delay, the respite of an instant, or one word of notice or warning, or even demand, seize upon the whole, sweep all away, and leave her who created the whole stript of them to the very last farthing. He may squander them upon his pleasures, lavish them on his paramour, employ them to support his spurious progeny, and there exists not the possibility of his being in the very least degree either controlled or even called to account for the heartless cruelty of his robbery, or his profiigate use of its fruits. Such is the law of England, and of this law we complain … It is not upon the families of those whom I now address, or of persons generally in the upper ranks of society, but upon the middle classes and the humbler order of our fellow citizens that the evil falls, to crush their most deserving members, while it protects and even encourages the worst in their idleness and their profligacy … An instance or two may suffice and I select the least painful of purpose … It was that of an industrious and honest woman who had married a good-for-nothing husband; he deserted her and went to live with another. The wife took to the occupation of a ladies shoemaker and earned a pittance for her own support: when the husband found that she was thriving by her successful labour he returned to her, but for the moment only; he seized the little fund she had scraped together, collected the money due from the customers, sold her furniture, and went back to his paramour, leaving her as helpless as before, except for the resources of her own industry. On 3 November 1878 the Sydney Morning Herald carried a report of the debate on the New South Wales Bill, making clear the exaggerated and misogynist fears of some Members that granting women modest property rights would upset the rightful order of things. J Leary MLA considered the legislation “might have the effect in a large number of instances, of severing the ties of affection between husband and wife by giving to the wife a position of independence apart from her husband”. M Fitzpatrick MLA continued even more stridently in the same vein, saying that to remedy “exceptional cases” the Parliament was “unhinging the great framework of society, the greatest institution of civilisation, the sanctity of married life”. On 6 February 1879 WJ Foster in the Legislative Council embellished the theme, saying: Suppose some drudge in a government office, or a merchant’s office got married to some young lady, and she suddenly came into say 50,000 pounds, and that she thought fit to allow her husband to continue to go about his drudgery, while she went and spent the money. The children were hers as much as the husband’s, and she had a right to contribute to support them. The clause would introduce a complete revolution in social affairs. [I do] not think that this power should be given to ladies, who [are] not generally educated in the manner of the control of money as men [are].

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Notes

1. The aspect of property law in which gender issues are most clearly evident is that where a security interest is provided for a guarantee of the debts of another. Whilst in some cases the guarantee is provided by both parents, that guarantee tends to be in favour of a son, and in many cases the guarantee is provided by a woman in favour of a husband, a male partner, or a male friend and earns the description of sexually transmitted debt. Commonly the security provided is the family home, and private assets are thus supporting business activities; see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at [10.90]. 62 [1.115]

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2. Controversy has attached to what has been called the rule in Yerkey v Jones (1939) 63 CLR 649 whereby special protection is given to a married woman who provides financial support for her husband. The rule was upheld by the High Court in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 (set out at [10.110]) even though the woman was described as “a capable and presentable professional”. 3. The gender dimension in the guarantee cases is reasonably evident but property transactions generally have a more subtle gender element. Real property transactions are based on a formal record of ownership and those records may reflect a family division of financial and non-financial contributions to the relationship. In cases where such a division is made the financial contribution is more commonly made by the male partner and any person lending money (a mortgagee) will be concerned more with this person and may seek to have only this person recorded on the title. In the past 20 years, Australian courts have developed proprietary interests to recognise the non-financial contributions (such as the constructive trust), but these interests are at the outset informal. Consequently persons proposing to deal with the land in respect of which such an interest exists will look to the formal record and discover only the interest of the male member of the household. To facilitate the process of land transfer persons seeking to acquire an interest are allowed to restrict their inquiries into the title to the formal record (the concept of indefeasibility in relation to the Torrens System) A conflict, therefore, arises between the principle facilitating land dealings and that protecting the person making non-financial contributions to a relationship, a person who is more likely to be the female partner. 4. The practices of lending institutions illustrated in Mercantile Mutual Life Assurance Co v Gosper (1991) 25 NSWLR 32 are a stark reminder of attitudes which would have been assumed to have belonged to another era. 5. Much of the common law’s approach to the ownership of land can be characterised as stemming from the view that land should be owned by a male. This view is part of a feudal outlook with land holding linked to military service. Until the Statute of Wills 1540 freehold interests in land could not be left by will and such interests passed to the heir. In determining who was the heir males of equal rank counted in preference to females and amongst males the elder or eldest prevailed over his brother or brothers. 6. Even after 1540, preference for males in relation to the passing of land continued in cases of intestacy. On intestacy freehold interests in land continued to pass to the heir. This rule was not abolished until the 19th century and reform commenced in New South Wales in 1862 (“Langs Act”). By this time, Australian jurisdictions were moving independently of English reform: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [1.65]. 7. An analysis of these issues in neighbouring legal systems is contained in Farrer, “Land Rights and Gender Equality in the Pacific Region” (2005) 11 APLJ 131.

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BOUNDARY BETWEEN PROPERTY AND CONTRACT Cowell v Rosehill Racecourse Co Ltd [1.120] Cowell v Rosehill Racecourse Co Ltd (1936) 56 CLR 605 High Court of Australia [The plaintiff paid the entrance price and entered the Rosehill Racecourse. Subsequently officials asked him to leave (presumably because they suspected that he was engaged in illegal betting activities, but no issue of justification was raised in the proceedings).The plaintiff refused to go and was forcibly ejected.] LATHAM CJ: The plaintiff appellant sued the defendant respondent for damages for assault. The defence was that the plaintiff was trespassing on the defendant’s land and that the defendant’s servants and agents requested him to leave the land, which he refused to do, and the defendant’s servants and agents thereupon removed him, using no more force than was necessary for that purpose, and that the said removal of the plaintiff was the alleged assault. The plaintiff, for reply on equitable grounds, said that the defendant was conducting a race meeting on the said land and that in consideration of the plaintiff paying four shillings the defendant promised to allow him to remain on the racecourse and view the races, gave him leave and licence to enter and remain on the racecourse for that purpose and promised not to revoke the licence: that the plaintiff paid four shillings, but the defendant, in breach of the promise alleged, revoked the leave and licence and assaulted the plaintiff in ejecting him from the racecourse. The defendant demurred to this pleading and the Full Court of the Supreme Court of New South Wales upheld the demurrer, following Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281; 52 WN (NSW) 82, and ordered that judgment be entered for the defendant. The plaintiff has appealed to this court. The question which arises in the appeal is whether this court should follow the decision in Hurst v Picture Theatres Ltd [1915] 1 KB 1. The Full Court of the Supreme Court of New South Wales in Naylor’s Case (1935) 35 SR (NSW) 281; 52 WN (NSW) 82 refused to apply Hurst’s Case [1915] 1 KB 1 in New South Wales. The facts pleaded in this case are indistinguishable from those in Hurst’s Case. In Hurst’s Case it was held that Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351, even if originally rightly decided, was no longer good law. In Wood v Leadbitter it was decided that a mere licence, that is, a permission to do something which without permission would be unlawful, was revocable, whether it was under seal or not, but that a licence coupled with an interest was not revocable. Kerrison v Smith [1897] 2 QB 445 shows that where a licence is revoked the actual revocation may (if there be a contract) be a breach of contract for which damages are recoverable. Thus a person ejected from a place of entertainment could in such a case at least get back the price of admission which he had paid. It was not suggested in Wood v Leadbitter that the existence of a contract not to revoke the licence made the licence irrevocable in the sense that it could not be effectually (though possibly wrongfully) revoked. The doctrine of Wood v Leadbitter is clear and coherent. If a man creates a proprietary right in another and gives him a licence to go upon certain land in order that he may use or enjoy that right, the grantor cannot divest the grantee of his proprietary right and revest it in the grantor, or simply determine it, by breaking the agreement under which the licence was given. The grantee owns the property to which the licence is incident, and this ownership, with its incidental licence, is unaffected by what purports to be a revocation of the licence. The revocation of the licence is ineffectual. Easements and profits â prendre supply examples of interests to which licences to enter and remain upon land may be incidental. The majority judgment in Hurst’s Case modified, if it did not reject, the law of Wood v Leadbitter by holding that a “right to see” a spectacle was an interest which could be granted so that a licence to go 64 [1.120]

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Cowell v Rosehill Racecourse Co Ltd cont. into a theatre or a racecourse to see a play or to witness races was, when given for value, irrevocable because it was a licence coupled with an interest. Further, the majority judgment held that, in so far as Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351 rested upon the rule that no incorporeal hereditament affecting land can be created or transferred otherwise than by deed, the Judicature Act had radically changed the position. The court was now bound to give effect to equitable doctrines and would therefore ignore the absence of a seal and would (as in Frogley v Earl of Lovelace (1859) Johns, 333; 70 ER 450 grant an injunction to protect the right granted. The first ground of the decision, in my opinion, ignores the distinction between a proprietary right and a contractual right. In Wood v Leadbitter there was obviously a contractual “interest”. The plaintiff had bought and paid for a contractual right to go upon land for the purpose of witnessing a spectacle. But this fact, which was treated as irrelevant in Wood v Leadbitter, is made the foundation of the first ground of the judgment in Hurst’s Case (1915) 1 KB 1. In that case Buckley LJ (191) 1 KB, at pp 5-9 interpreted “interest” in a sense quite different from that in which the word was used in Wood v Leadbitter. The learned judge said that there was a grant of a right to come to see a spectacle. The licence is described as “only something granted to him for the purpose of enabling him to have that which had been granted to him, namely, the right to see”. The “right to see” is treated as the “interest” which has been “granted”. It is clear that the learned judge used the words “grant” in a sense very different from that in which it was used in Wood v Leadbitter. It was there used in relation to interests in land which were, if they existed at all, clearly proprietary interests. The right to see a spectacle cannot, in the ordinary sense of legal language, be regarded as a proprietary interest. Fifty thousand people who pay to see a football match do not obtain fifty thousand interests in the football ground. A contrary view produces results which may fairly be described as remarkable. The Statute of Frauds would be applicable. A person who bought a reserved seat might be held to have what could be called “a term of hours” in the seat. The “interest” of persons without reserved seats would, if regarded as proprietary interests, be more than difficult to describe. If the interests were held to be incorporeal hereditaments they would be quite new to the law notwithstanding the strongly established principle of Keppell v Bailey (1).The feat would have been achieved of creating an easement in gross-an easement with a servient tenement, but without any dominant tenement. There is nothing in the majority judgments in Hurst’s Case (1915) 1 KB 1 to show that these consequences were appreciated when the case was decided. For the reasons mentioned, I cannot regard the transaction of buying a ticket for an entertainment as creating anything more than a contractual right in the buyer against the seller-a right to have the contract performed. For the breach of such a right there is a remedy in damages, but the remedies applicable to the protection of proprietary rights are not legally (or equitably) appropriate in such a case. There is, strictly, no grant of any interest. What is created is something quite different, namely, contractual rights and obligations. In Wells v Kingston-upon-Hull (1875) LR 10 CP 402 Lord Coleridge CJ pointed out the difference between the creation of a proprietary interest in land by a contract relating to the possession or enjoyment of land and the creation of a contractual right to use land under conditions, the owner of land retaining possession and all rights over it. In that case a dock was “let” to a ship-owner for the purpose of repairing a ship, but it was held that no interest in land was created (See also Frank Warr & Co Ltd v London County Council (1904) 1 KB 713; JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; Commissioner of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235 – cases of rights to sell refreshments in a theatre or on a racecourse). In my opinion, the first ground upon which Hurst’s Case was decided (that there was in that case a licence coupled with an interest) cannot be supported. The second ground of the decision in Hurst’s Case is based upon the opinion that the plaintiff in Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351 failed because he did not have a grant under seal of the right which he claimed. It is true that the absence of a seal was a complete reply, in an action at [1.120]

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Cowell v Rosehill Racecourse Co Ltd cont. law, to the contention of the plaintiff that he had an interest in the land upon which a race meeting was being held. But in fact the presence of a seal would not have assisted the plaintiff to establish the impossible proposition that he had an easement in gross. It is true that, as the majority judgments in Hurst’s Case (1915) 1 KB 1 state, a grant of an interest in land need not, in order to be effective in a court of equity, be made by deed, and that, since the Judicature Act, this rule is enforced in all divisions of the High Court in England (Walsh v Lonsdale (1882) 21 Ch D 9). But this proposition does not justify the assertion that interests in land can, since the Judicature Act, be created by simple contract even though, before that Act, they were of such a character that they could not be created by deed as interests in land. … If however, the legal position is as stated in Hurst’s Case (1915) 1 KB 1, it is impossible for anyone (except possibly a constable) to remove any of the persons, either for the safety of the audience as a whole or in order to secure the observance of the law, without subjecting himself to the possibility of numerous actions for assault. It is doubtful whether such consequences were realised in Hurst’s Case. On the other hand it might be said that there is an implied condition that the licence to each member of the audience might be revoked in the interests of the safety of the audience or in order to secure the due observance of the law or for some other lawful reason. Such a view really constructs or invents a complicated contract between the parties and it would raise new and rather difficult questions. Why, for example, should A be asked to leave the building rather than B? Would it be left to the judgment of the controller of the building to determine how many persons should be asked to leave? In other cases it might be sought to avoid what would be described as an unreasonable extension of Hurst’s Case by saying that the facts show that the parties intended that the licence should be revocable in certain conditions. I refer again to the case of a dismissed servant. Here, it appears to me, it is difficult to suggest in explicit terms an appropriate condition. It would be necessary to attach to the contract an implied condition that the employer might revoke the implied licence to come upon his premises if at any time he should determine the contract of employment even though he did so wrongfully. Such a view appears to me to be an unreal method of dealing with the position. A much more realistic approach is provided by the application of the simple principle of Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351, namely, that no “grant” of any proprietary right, that is, of any jus in rem, has been made to the plaintiff. He has simply obtained a contractual right which is enforceable in personam by an action for damages. The denial of this principle will create more difficulties than are thought to be involved in its continued assertion. … DIXON J: A licence which is not coupled with or granted in aid of an interest is revocable at law. It operates as a bare permission to do what would otherwise be an invasion of the licensor’s rights. If the permission is terminated, further continuance of the acts it authorised becomes wrongful. A licensee does not become a trespasser until he has received notice that the licence is countermanded and until a reasonable time has elapsed in which he may withdraw from the land and remove whatever property he has brought in pursuance of the licence (Cornish v Stubbs (1870) LR 5 CP 334). But, if he then refuse to leave the premises, he cannot complain of his forcible removal. “A licence under seal (provided it be a mere licence) is as revocable as a licence by parol” (per Alderson B, Wood v Leadbitter (1845) 13 M & W at p 845; 153 ER, at p 354). Further, a licence is revocable at law notwithstanding an express contract not to revoke it. By revoking it, the licensor commits a breach of contract exposing him to an action of damages ex contractu. But the licensee cannot further avail himself of the licence and the licensor is not precluded in an action of tort from relying upon the termination of the licence (Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351; 66 [1.120]

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Cowell v Rosehill Racecourse Co Ltd cont. Taplin v Florence (1851) 10 CB 744; 138 ER 294). This is in accordance with the general rule of the common law that a landowner’s possessory rights cannot be renounced or altered by mere contract. The rights continue to subsist notwithstanding the contract, which operates only to impose obligations and not otherwise to prevent the exercise of rights arising from property. … The opportunity of witnessing a performance is not an interest in property; it is not a tangible thing to be taken away from the land or out of the soil. It is no more than a personal advantage arising from presence at the place where the licence, while unrevoked, authorised the plaintiff to go and remain. There can, I think, be no doubt that at law the plaintiff could not recover in tort in respect of his forcible expulsion. His remedy in contract does not include damages for the assault. As it was the plaintiff’s legal duty to leave the premises after notice that his licence to remain was withdrawn, and as the assault was the lawful consequence of his failure to do so, the assault could hardly be considered a reasonable and probable consequence of the defendant’s breach of contract in withdrawing the licence. Perhaps it does not follow that in no circumstances can anything beyond repayment of the price of admission be recovered ex contractu. But if there be any cause for dissatisfaction with the common law rule, it arises less from the substance of the rule than from the measure of damages allowed in an action of contract (See Addis v Gramophone Co Ltd (1909) AC 488). For the assault, the defendant is under no liability at common law. … I am unable to believe that any equity exists as a result of which the plaintiff could meet the defendant’s justification. This opinion I base upon the substantial ground that a patron of a public amusement who pays for admission obtains by the contract so formed and by acting on the licence it imports no equity against the subsequent revocation of the licence and the exercise by the proprietor of his common law right of expelling the patron. The rights conferred upon the plaintiff by the contract possess none of the characteristics which bring legal rights within the protection of equitable remedies, and the position of the plaintiff at law gives him no title under any recognizable equitable principle to relief against the exercise by the defendant of his legal rights. No right of a proprietary nature is given. The contract is not of a kind which courts of equity have ever enforced specifically. It is not an attempt to confer a right by parol agreement which at law might have been effectually granted by a deed. There is no clear negative stipulation the breach of which would be restrained by injunction. On the other hand, there is a fugitive or ephemeral purpose of pleasure, mutual undertakings, mostly implied, affecting the behaviour of the parties, and a complete absence of material interest. The purpose is not to enjoy the amenities forming part of the land, but to witness the races and, perhaps, to use the facilities provided for adding to the pleasure and excitement of the spectacle. Without entering upon an examination of the legal relations to their patrons of the proprietors of a racecourse, it may be assumed that the charge for admission involves some obligations on their part. The racegoer, on his side, is subject to an implied condition that he will behave in an orderly manner and do nothing to hinder or obstruct the proceedings. The implication that the licence to remain upon the course will not be revoked is subject to many conditions. If it is found necessary to suspend the proceeding owing to weather, to the disorderly conduct of a crowd, to some sudden public emergency, or to some other unforeseen event, the contractual right to remain upon the course will be brought to a premature end. If the individual racegoer behaves in a disorderly, insulting, or objectionable manner, he may be expelled notwithstanding that he has paid for his admission. The nature of such a contract takes it outside the scope of the equitable doctrines regulating the application of the remedies of specific performance or injunction. … [1.120]

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Cowell v Rosehill Racecourse Co Ltd cont. EVATT J: But the question remains, was Hurst’s Case (1915) 1 KB 1 correctly decided? There are several aspects from which the decision may be regarded. First, it is critical of the strictly legal position laid down in Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351. And certainly the judgment of Dodderidge J in Webb v Paternoster (1619) 2 Rolle 143 at 152; 81 ER 713 at 719 (quoted Holdsworth’s History of English Law, vol vii, p 328) contains a far more valuable analysis of licences than was given in Wood v Leadbitter. The Court of Appeal in 1915 thought it somewhat extraordinary that the rights and liabilities created by a contract to admit to an entertainment conducted publicly and for the profit of the entrepreneur, and perhaps the education or pleasure of the patron, could be treated, even by a court of law, as assimilable to a mere dispensation to the theatre patron to commit what otherwise would be a trespass on land. In actual fact, the rights and liabilities are not so assimilable and, in its modern developments, even the common law has recognised the inadequacy of the “bare licence” theory as a description of the relationship between the parties (Cox v Coulson (1916) 2 KB 177). The main part of the reasoning in Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351, was based on the well-known judgment of Vaughan CJ in Thomas v Sorrell (1674) Vaughan 330, at p 351, distinguishing there between licences or “dispensations” (eg, to come into a man’s house), and licences coupled with a grant of property (eg, a licence to hunt and carry away the deer). It must be conceded that the “grants” intended to be referred to in Wood v Leadbitter (a licence “coupled with a grant”) was a grant of some ascertainable property which is capable of being granted (Holdsworth’s History of English Law, vol VII., p 328). It may therefore be admitted that Lord Wrenbury went too far in assimilating the right to view an entertainment with the grant of a proprietary right in or over land or chattels. But, in my opinion, as an application of equitable principles to the complex relationship between entrepreneur and patron, Hurst’s Case (1915) 1 KB 1 is a convincing decision. As early as 1901, Cozens Hardy MR suggested that Wood v Leadbitter might be of “very doubtful” validity if equitable principles were to be applied to its facts (Lowe v Adams (1901) 2 Ch, at p 600). From the point of view of equitable principles, the essence of the judgment of Buckley LJ is to be found in his references to Lord Parker’s judgment in James Jones & Sons Ltd v Tankerville (Earl) (1909) 2 Ch 440, and to the passage on page 10 commencing: “There is another way in which the matter may be put”. Buckley LJ’s view was (a) that a contract giving a licence to enter and remain on land solely for the propose of viewing an entertainment should be regarded by a court of equity as not subject to arbitrary revocation during the entertainment by a party to the contract in his capacity as occupier of the land, and (b) that a court of equity should give efficacy to a contract not to exercise the legal right of revocation of the licence, by restraining the occupier, either from exercising such legal right, or, at any rate, from subsequently setting up to his own advantage his own breach of contract and his own attempted revocation of the licence. It is true that the observations of Lord Parker quoted by Buckley LJ were not made in a case precisely analogous to that of Hurst’s Case (1915) 1 KB 1, because a recognised proprietary right, ie, a “grant” was under consideration in James Jones & Sons Ltd v Tankerville (Earl) (1909) 2 Ch 440. But Buckley LJ clearly thought that a court of equity should intervene in a case like Hurst’s Case by restraining the revocation of a licence in breach of a contract. No doubt, Buckley LJ dwelt upon that part of the judgment in Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351 which emphasised the absence of an instrument under seal; and he indicated that pending the bringing into existence of the necessary deed a court of equity would make short work of such an objection. But, in so doing, Buckley LJ was answering the reasoning of Alderson B so far as it asserted or assumed that the plaintiff in Wood v Leadbitter would have succeeded if he had possessed an instrument under seal giving him the right to view the race. It is a fair comment that the critics of Hurst’s Case can hardly be allowed to set up as against Buckley LJ any error of pure law to be discovered in Wood v Leadbitter. 68

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Cowell v Rosehill Racecourse Co Ltd cont. But a broad and just principle of equity appears from the judgments of Buckley LJ and Kennedy LJ to the effect that, although a court of law will still treat the transaction between entertainment proprietor and patron as creating only a revocable licence, a court of equity should regard the licence as irrevocable in all proceedings in which equitable principles have to be recognised. A consequential rule is that a defence to an action of assault that the licence had been duly revoked by the proprietor, though good at law, would be contrary to the equitable principle of irrevocability of licence and the equitable principle should prevail so as to avoid the defence. It was the contrary view which, according to Kennedy LJ, led to “an astonishing conclusion” (at 12). He also regarded the contract as creating “an irrevocable right to remain until the conclusion of the performance” (at 13). I hope it is superfluous to add that neither Buckley LJ, nor Kennedy LJ, was unaware of the fact that the right to see a theatrical performance was not a proprietary right in the nature of an easement. Indeed, Kennedy LJ said that the plaintiff’s “interest”, “whether you call it an easement or not, is an interest which I can now acquire in equity by parol” (at 14). And he referred to an important passage in Pollock on Torts (9th ed, 1912), at p 390, which I mention below. Further, the dissenting judgment of Phillimore LJ is of great significance, for he is not unwilling to concede (at 18) that equity would give specific performance of the contract to see the entertainment. The main difficulty of Phillimore LJ was that, assuming that equity would intervene, the plaintiff in equity could not necessarily be regarded as having already occupied the legal position which springs into existence only after he obtains specific performance. In other words, although the licence would be regarded in equity as irrevocable, still, until a court of equity actually pronounced its order, the existing legal relationship between the parties should be deemed to continue. In support of this view Phillimore LJ adopted Pollock’s suggestion in the passage mentioned above, that the plaintiff might have obtained an injunction, and so have been restored to the enjoyment of his licence, but that, in the meantime, he should be deemed a trespasser. With respect, it is difficult to appreciate the force of the difficulty which alone seemed to prevent Phillimore LJ from concurring. The plaintiff in Hurst’s Case (1915) 1 KB 1 did not need to invoke the principle of Walsh v Lonsdale (1882) 21 Ch D 9, for the assumption of Hurst’s Case was that no estate or interest in land was intended to be created by the contract. But equity’s intervention in order to prevent a party from exercising his legal rights in breach of a contractual obligation is based on broader grounds than the principle of Walsh v Lonsdale (1882) 21 Ch D 9. If, as Phillimore LJ was prepared to admit, a court of equity would have restrained the revocation of Hurst’s licence, it could hardly treat the defendant as having improved his position at law solely because, in the nature of things, Hurst was unable to approach a court of equity before his forcible removal from the theatre. In other words, if a court of equity regarded the licence as irrevocable, why should it allow the wrongdoer, by subsequently saying “I revoked it,” to obtain an advantage at law. This view subsequently seemed to commend itself to Sir F Pollock, who said: And is it now possible for a court having equitable as well as legal jurisdiction to treat as rightful in any sense an expulsion which a court of equity would have restrained if a motion could have been made in time? (Law Quarterly Review, vol 31, p 9; cf p 221.) I think the fallacy in the criticism of Hurst’s Case (1915) 1 KB 1 lies in the continuous insistence upon discovering a proprietary right as a condition of equitable intervention. Sir JC Miles, whose criticisms of the decision in Hurst’s Case have been little more than re-echoed by the later commentators, seemed mainly concerned with “the purely legal grounds of the decision” (Law Quarterly Review (1915), vol 31, pp 219-221), and was not so ready to deny its validity as an extension of equitable principles; nor did he seem to consider the equitable question as affected in any way by the supposed difficulty upon which Phillimore LJ really based his dissent. As a Canadian commentator has recently said, in relation to the theory that a strict “property” interest must be the foundation of the intervention of equitable jurisdiction: [1.120]

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Cowell v Rosehill Racecourse Co Ltd cont. the danger in the application of the limitation lies in the circumstance that unenlightened courts are apt to apply it as a limitation of their jurisdiction, except in orthodox property interest cases, even though the situation is one to which the injunctive method is peculiarly appropriate (Canadian Bar Review, vol 10, p 175). In my opinion, the appeal should be allowed, and judgment entered for the plaintiff on the demurrer. Starke and McTiernan agreed with Latham CJ and Dixon J.

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Notes

1. The judgments in this case correctly point out that much unnecessary muddying of the waters has occurred because of reference to the impact of the Judicature Acts. The significance of the bringing together of legal and equitable rules is that the formal requirements for the creation of a legal proprietary interest (in general terms the execution of a deed) did not apply to the creation of an equitable proprietary interest (writing would suffice and the doctrine of part performance might overcome the absence of any writing). But the formality rules only applied to the creation of proprietary interests. 2. Evatt J rightly moves the focus of the decision to an analysis of the remedies of the plaintiff for breach of contract and particularly the application of equitable remedies. Today there is little doubt that equitable remedies for breach of contract are not confined to contracts for the sale of land. More contentious is the treatment of the wronged party prior to adjudication. Early contract theory, particularly in the writings of Oliver Wendell Holmes, asserted that a contacting party had the option of performing or paying damages; see Gilmore, The Death of Contract (1974). 3. Some reference is made to conditions applicable to the permission to be on the land. For instance, it would be difficult to argue that the owners of the race course do not have the right to eject everyone in the event of a bomb scare. Similarly a racegoer who was abusive to others should be subject to removal. However could not such conditions be implied as limitations on the permission rather than as an indication that the owners have a general discretion to remove anyone?

Heidke v Sydney City Council [1.130] Heidke v Sydney City Council (1952) 52 SR (NSW) 143 Supreme Court of New South Wales HARDIE AJ: Counsel for the defendant has also submitted that there was no contract in fact made in this case. The argument in effect means this, that the granting of licences or permits by councils are in essence administrative acts creating no contractual rights or obligations. I think, having regard to the correspondence between the parties that preceded the payment to the council of the moneys for the hire of the Jubilee Oval and the other three ovals, that the parties intended to enter into a contract and that they did so. Counsel for the defendant also claimed that, if a contract was made, it was subject to the implied term that the council could at any time cancel or revoke the licence created and, in particular, that it could cancel or revoke it at any time prior to the date on which the oval was to be available for use by the association. 70 [1.125]

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Heidke v Sydney City Council cont. I think that, in the present case, the contract was not subject to any such terms. I am satisfied that, when the council wrote to the Sports Organiser of the Youth Carnival for Peace and Friendship on 17th January, 1952, it was careful to specify any condition which it was desirous of incorporating into the contract which it was apparent the association was contemplating making with the council. In this connection, I would observe that, when the association wrote to the council on 7th December, 1951, it asked the council not only what grounds under its control would be available during the period 15th to 23rd March, but also enquired as to the cost of hiring the grounds, and any regulations governing their use. When the council replied, it specified the grounds and dates available, the charges that the council would make for the use of the grounds, and went on to state that those charges were payable in advance but were “refundable if the oval is unfit for play”. No other conditions were stated in that letter. That means, in my view, that, if the oval was unfit for play, the money would be refundable and the association would not be entitled to the use of the oval. In that event, of course, the licence would be revocable. That letter is, to my way of thinking, inconsistent with the incorporation into this contract of any such condition as counsel for the defendant has relied upon. Counsel for the defendant has pressed upon me a very powerful argument based upon a number of decisions to which he has referred me, that I have no jurisdiction to grant any injunction to protect or safeguard the rights of the association under the contracts, which I have held were made, and which I have held the council had power to make. I do not propose to refer to the cases on the point in detail; he relied particularly upon two decisions of the High Court, JC Williamson Ltd v Lukey (1931) 45 CLR 282; 4 Austin Digest 554; and Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605; 27 Austin Digest 417. He also placed consider-able reliance upon passages in the judgment of Goddard LJ in Thompson v Park (1944) KB 408 at 410, 412. One branch of this argument was that in no case can equitable relief be granted in aid of a bare licence to go upon or use or enjoy land, ie, where the licence is not coupled with some grant. I concede that some of the dicta in the cases might tend to support that broad proposition, but any such dicta are obiter only; so far as I am aware, there are no decisions of the courts which would constrain me to hold that under no circumstances can a personal licence to go upon land be enforced by a court of equity, either by injunction or by specific performance. There is no doubt that in many cases, where a licence to go upon land is granted, equitable remedies are not available. In such cases, the licence is part and parcel of an agreement which courts of equity will not enforce directly or indirectly – agreements under which employees have rights to use and occupy premises of the employer; agreements under which building contractors have a right to go on land and build; agreements under which share-farmers have a right to use the land of the owner; and agreements under which boarders are entitled to use premises of the owner of the boarding establishment. In those cases, equitable remedies are not available, mainly for the reason that they are contracts which involve a substantial element of personal service and thus are not susceptible of direct or indirect enforcement by a court of equity. I am of the opinion that a licence such as I am satisfied was granted by the council to the association in respect of Jubilee Oval is one that a court of equity has jurisdiction to enforce. In my view, the first question one has to ask oneself is whether the damage suffered by the association as a result of the repudiation by the council of the contract which created the licence could be adequately compensated by damages. On the uncontradicted evidence in this case the association would suffer substantial damage, for which pecuniary or monetary compensation would not be an adequate remedy. That, of course, does not necessarily mean that an injunction should be granted. There is the further question then as to whether the granting of an injunction would be tantamount to ordering specific performance of an agreement which a court of equity could not effectively and with justice to the parties enforce. Here, as I view this matter, the obligation of the hirer of this oval was to pay a sum [1.130]

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Heidke v Sydney City Council cont. of money. That obligation has been discharged. The consideration on that side is executed, and I know of no principle of law which denies the equitable remedy of injunction in a case such as the present. I do not propose to refer to all the authorities on the point, but I will merely quote from the judgment of Lord Uthwatt in Wintergarden Theatre (London) Ltd v Millennium Productions Ltd (1948) AC 173 at 202 an extract on which Mr St John relied. Lord Uthwatt at that page said, and I think this is very applicable in this case: The settled practice of the courts of equity is to do what they can by an injunction to preserve the sanctity of a bargain. To my mind, as at present advised, a licensee who has refused to accept the wrongful repudiation of the bargain which is involved in an unauthorised revocation of the licence is as much entitled to the protection of an injunction as a licensee who has not received any notice of revocation. And he concluded that paragraph by saying: “In a court of equity, wrongful acts are no passport to favour”. I think that is very appropriate to the present case. I am of the opinion that this is a case where an equity court has jurisdiction to grant injunctions and, although, as Mr Myers has put to me, it is a discretionary remedy, I think I should exercise my discretion in favour of the plaintiff.

Forbes v New South Wales Trotting Club Ltd [1.135] Forbes v New South Wales Trotting Club Ltd (1979) 25 ALR 1 High Court of Australia GIBBS J: Alternatively, it was argued on behalf of the appellant that a contract came into being when the appellant obtained admission to Harold Park on 15th January 1976. By r 5 of the Rules of Trotting the rules are stated to be binding on, inter alios-“(j) All persons who shall apply for admission to or attend any course on which any race meeting is held”. When the appellant paid his money and was allowed to enter the course no doubt a contract was made between himself and the respondent. Since the appellant had been given notice by letter that the grant of a licence to enter the course would be on condition that he agreed to be bound by the Rules of Trotting, I think it may be concluded that the contract that arose when the appellant paid the price of admission and was admitted to the racecourse at Harold Park did include as some of its terms such of the provisions of the Rules of Trotting as were applicable to the situation. It is a short step to hold that the contract properly understood contained an implied stipulation by the respondent not to revoke the appellant’s licence except in accordance with the Rules of Trotting. Whether such a negative stipulation would be enforceable by injunction notwithstanding Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 is a question which need not be considered. However, it is difficult to regard the contract which came into existence in those circumstances as one which contained an implied term that the appellant would be granted admission on any future occasion on which he might seek it unless he was properly excluded under the rules. I am therefore not persuaded that the appellant, by attending the course in the past, acquired any contractual right as against the respondent to enforce the Rules of Trotting in future. I do not consider what the situation would be if the appellant applied

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Forbes v New South Wales Trotting Club Ltd cont. for admission to a course and was refused. Whether any contract would then come into existence which would include a term that the appellant should be admitted to the course unless he was properly excluded under the rules is a question which might depend on the exact circumstances and should not be answered hypothetically. [Barwick CJ, Stephen, Murphy and Aicken JJ also touched on the issue inconclusively.]

Ashburn Anstald v Arnold [1.140] Ashburn Anstald v Arnold [1988] 2 WLR 706 English Court of Appeal FOX, NEILL AND BINGHAM LJJ: … If, as we have concluded, Arnold & Co is a tenant, it follows that the plaintiff holds the land subject to the tenancy. That is sufficient to dispose of the claim, as the action is for possession. Since, however, we have heard full argument on the case, we will consider the position on the basis that we are wrong, and no tenancy was created. It is Arnold & Co’s case that even if the 1973 agreement created no tenancy after 28 February 1973, so that its occupancy thereafter is that of a contractual licensee only, its rights are nevertheless binding upon a purchaser for value with notice of the licence. Lord Templeman in Street v Mountford [1985] AC 809, 814 said: “A licence in connection with land while entitling the licensee to use the land for the purposes authorised by the licence does not create an estate in the land”. That was not challenged on behalf of Arnold & Co, but it was said that a contractual licence does give rise to an interest (as opposed to an estate) in the land; we must assume for this purpose that the rights are of sufficiently certain duration to be capable of subsisting as an interest in land. If they are not, the point does not arise. The question then is whether Arnold & Co’s proposition is correct in law. Until comparatively recently it would, we think have been rejected. As long ago as 1674, in Thomas v Sorrell (1674) Vaug 330, 351, Vaughan CJ said: “A dispensation or licence properly passeth no interest, nor alters or transfers property in any thing, but only makes an action lawful, which without it had been unlawful”. A number of cases in this century support that view. Daly v Edwardes (1900) 83 LT 548 was concerned with “front of house” rights in a theatre. In 1894 Edwardes granted to Daly a licence of two theatres for a term of years. The lease contained a covenant by the lessee not, inter alia, to part with any estate or interest in the premises. Daly granted to Warr: “the free and exclusive licence or right to the use of the refreshment rooms and bars in the theatre together with the free right of access thereto”. The lessor claimed that this was a breach of the covenant against disposing of any estate or interest in the premises. That claim failed. Rigby LJ said, at 551: On the whole, I think that the proper conclusion is that Frank Warr and Co took no estate or interest in land, but that they were entitled for all reasonable purposes, to consider themselves as having an exclusive licence to provide refreshments and all that follows from that privilege, and nothing else. Vaughan Williams LJ said, at 551, that the agreement was “really a grant of a privilege and licence merely masquerading as a lease”. The case went to the House of Lords as Edwardes v Barrington (1901) 85 LT 650, and the decision of the Court of Appeal was affirmed. In Frank Warr & Co Ltd v London County Council [1904] 1 KB 713, the London County Council compulsorily acquired the Globe Theatre. At the time of the acquisition Warr had front of house rights [1.140]

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Ashburn Anstald v Arnold cont. at the theatre under a subsisting agreement with the lessee. Compensa-tion was only payable to persons having an interest in the land acquired. The claim failed. Collins MR said, at 722: Do those parts of the agreement amount merely to a licence properly so called, or to a grant of an interest in, or something arising out of, the land? To my mind it is clear that they create nothing more than a licence properly so called. These cases, it seems to us, clearly proceed on the basis that a contractual licence creates no interest in land. The next case is King v David Allen and Sons (Billposting) Ltd [1916] 2 AC 54. King owned premises in Dublin. David Allen had for many years under an agreement between the predecessors of King and David Allen, enjoyed the right to exhibit posters on the wall of the premises. King wished to let the premises to a third party. David Allen had no objection provided its rights were preserved. In July 1913 King and David Allen agreed that David Allen should have exclusive permission to fix posters to the flank wall of a cinema which it was proposed to build on the site. In August 1913 King agreed with F, a trustee for a company to be formed, that a lease should be granted to the company. King was to assign to F, as a trustee for the company, his interest in the 1913 agreement, and F agreed that the company would accept the lease and ratify the 1913 agreement. The company, when formed, duly did so. The cinema was built. The July agreement was not referred to in the lease and King did not assign his interest under that agreement to the company. David Allen attempted to post advertisements on the flank wall but the company, despite opposition from King (a director), prevented it. David Allen then sued King alleging that he was in breach of the July agreement by putting it out of his power to perform it. The claim succeeded. The company was not a party to the action but the effect of the licence vis-a-vis the company was in issue because King would not have been liable to David Allen in damages had the licence which he agreed to grant been binding on the company, which had notice of it. The House of Lords regarded the contract as creating nothing but a personal obligation. Earl Loreburn said, at 62: Well, if the agreement of 1 July, which purports to be on the face of it a licence, was equivalent to creating an incorporeal hereditament or a sufficient interest in land, Mr King did not break his contract in making the lease, and would not be responsible for any trespasses that were committed by his licensees. But we must look at the document itself, and it seems to me that it does not create any interest in the land at all; it merely amounts to a promise on the part of Mr King that he would allow the other party to the contract to use the wall for advertising purposes, and there was an implied undertaking that he would not disable himself from carrying out his contract. Lord Buckmaster LC said, at 59-60: There are two circumstances to which attention has been quite properly called by the appellant’s counsel, which are no doubt important in considering what the agreement effected. The first is the fact of the rent reserved, and the next that there is a term of years granted and that arrangements are introduced into the agreement to prevent other people having competing rights with Messrs David Allen and Sons upon this wall. Those considerations do not, in my opinion, necessarily conflict with the view that this is nothing but a licence-a licence for a fixed term of years, but a licence which creates no estate or interest in the land …. We are unable to reconcile the approach of the House of Lords in King v David Allen with the submission, on behalf of Arnold & Co, that a mere contractual licence is an interest in land binding on a purchaser with notice. The two front of house rights cases to which we have referred are to the same effect. The next case of consequence is Clore v Theatrical Properties Ltd [1936] 3 All ER 483, which was again concerned with front of house rights. The agreement provided: 74

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Ashburn Anstald v Arnold cont. the lessor does hereby demise and grant unto the lessee the free and exclusive use of all the refreshment rooms … of the theatre … for the purpose only of the supply to and accommodation of the visitors to the theatre and for no other purpose …. The definition clause provided that the terms “lessor” and “lessee” should include their executors, administrators and assigns. The assignee of the lessor sought to prevent an assignee of the lessee from exercising any of the rights under the agreement. It was held that the agreement was not a lease but a licence, and was not binding upon a third party. The court, as we read the judgments, regarded the case as falling within the examples of Daly v Edwards, 83 LT 548 and Frank Warr & Co Ltd v London County Council [1904] 1 KB 713. The licensee had sought to rely upon De Mattos v Gibson (1858) 4 De G & J 276 and Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108. That was not accepted. Lord Wright MR regarded these authorities as confined to charter parties and said, at p 491: “I do not think that a personal covenant as in the present case can be binding on a third party with notice …”. Down to this point we do not think that there is any serious doubt as to the law. A mere contractual licence to occupy land is not binding on a purchaser of the land even though he has notice of the licence. We come now to a case which is of central importance on the present issue. That is Errington v Errington and Woods [1952] 1 KB 290. A father, wishing to provide a home for his son who had recently married, bought a house with the help of a building society mortgage. He paid a lump sum towards the purchase price, the remainder of which was provided by the building society’s loan. The loan was repayable by instalments. He retained the conveyance in his own name and paid the rates, but he promised that if the son and daughter-in-law continued in occupation and duly paid all the instalments, he would then transfer the property to them. The father died and by his will left the house to his widow. Up to that time the son and his wife had lived in the house and paid the instalments. The son then separated from his wife and left the house. The daughter-in-law continued to pay the mortgage instalments. The widow then sought possession of the house from the daughter-in-law. The county court judge dismissed the action. He held that the daughter-in-law was a tenant at will and that the claim against her was statute-barred. That reasoning was rejected by the Court of Appeal, though the actual decision of the judge was upheld. Denning LJ, whose reasons for dismissing the appeal were concurred in by Somervell LJ, said, at 298-299: it seems to me that, although the couple had exclusive possession of the house, there was clearly no relationship of landlord and tenant. They were not tenants at will but licensees. They had a mere personal privilege to remain there, with no right to assign or sub-let. They were, however, not bare licensees. They were licensees with a contractual right to remain. As such they have no right at law to remain, but only in equity, and equitable rights now prevail. I confess, however, that it has taken the courts some time to reach this position. At common law a licence was always revocable at will, notwith-standing a contract to the contrary: Wood v Leadbitter (1845) 13 M & W 838. The remedy for a breach of the contract was only in damages. That was the view generally held until a few years ago: see, for instance, what was said in Booker v Palmer [1942] 2 All ER 674 at 677 and Thompson v Park [1944] KB 408 at 410. The rule has, however, been altered owing to the interposition of equity. Law and equity have been fused for nearly 80 years, and since 1948 it has been clear that, as a result of the fusion, a licensor will not be permitted to eject a licensee in breach of a contract to allow him to remain: see Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1946] 1 All ER 678 at 680, per Lord Greene, and in the House of Lords per Lord Simon; nor in breach of a promise on which the licensee has acted, even though he gave no value for it: see Foster v Robinson [1951] 1 KB 149 at 156, where Sir Raymond Evershed MR said that as a result of the oral arrangement to let the man stay, he was entitled as licensee to occupy the premises without any payment of rent for the rest of his days. This infusion of equity means that contractual licences now have a force and validity of their own and cannot be revoked in [1.140]

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Ashburn Anstald v Arnold cont. breach of the contract. Neither the licensor nor anyone who claims through him can disregard the contract except a purchaser for value without notice. It is not in doubt that the actual decision was correct. It could be justified on one of three grounds. (i) There was a contract to convey the house on completion of the payments giving rise to an equitable interest in the form of an estate contract which would be binding on the widow: see Megarry & Wade, The Law of Real Property, 5th ed (1984), p 806. The widow was not a purchaser for value. (ii) The daughter-in-law had changed her position in reliance upon a representation binding on the widow as a privy of the representor: see Spencer Bower and Turner, Estoppel by Representation, 3rd ed (1977), p 123. (iii) The payment of the instalments by the son or the daughter-in-law gave rise to direct proprietary interests by way of constructive trust, though it is true that, until Gissing v Gissing [1971] AC 886, the law relating to constructive trusts in this field was not much considered. Accordingly, it does not appear to have been necessary, in order to produce a just result, to have accepted the broad principle stated, at 299, in the passage which we have quoted, that “Neither the licensor nor anyone who claims through him can disregard the contract except a purchaser for value without notice”. That statement itself is not supported by any citation of authority, and indeed we do not think it could have been supported on the authorities. None of the cases prior to Errington v Errington and Woods to which we have referred, except Thomas v Sorrell, Vaugh 330, is mentioned in the judgments and it does not appear that any was cited. The decision of the House of Lords in Winter Gardens Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 does not advance the matter. It was the first occasion on which a licensee was held entitled to an injunction restraining the licensor from revoking a licence in breach of contract. The case was concerned with contract only. In our view it is not an authority for the proposition that a contractual licence creates an interest in land capable of binding third parties. National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] AC 1175 was the case in which the House of Lords, reversing the majority decision of the Court of Appeal [1964] Ch 665, rejected the deserted wife’s equity. Russell LJ, who dissented in the Court of Appeal, stated, at 696-697: It is therefore necessary to consider what is the law in connection with title to unregistered land relating to rights such as those now in question. For this purpose, I consider that the deserted wife’s right cannot be greater than that of a person in occupation under a contractual licence from the owner to occupy, which licence is by its terms not revocable for a period, and breach of which would be restrained by injunction against the licensor. What is the position of such a licensee in the case of unregistered land? Has he a right capable of enforcement not only against the licensor but also against a purchaser or mortgagee from the licensor? On authority it seems to me that the answer is that he has not such a right against a purchaser for value even with actual notice of the licence. I do not propose to discuss the question exhaustively. I am content to refer generally to the article on this question on Licences and Third Parties by Professor HWR Wade (68 LQR 337), and the cases there discussed of King v David Allen and Sons (Billposting) Ltd [1916] 2 AC 54 in the House of Lords, and Clore v Theatrical Properties Ltd [1936] 3 All ER 483 in the Court of Appeal, and to add some comments. When the case reached the House of Lords the observations of Russell LJ were not expressly accepted, but nor were they rejected. These cases were the subject of consideration by Goff J in In re Solomon, A Bankrupt, Ex parte Trustees of the Property of the Bankrupt v Solomon [1967] Ch 573. Goff J concluded that the wife in that case was not a contractual licensee, and accordingly he did not have to decide which authority he should follow. But he expressed a preference for the reasoning of Russell LJ in the Hastings Car Mart case [1964] Ch 665 and was hesitant to recognise the existence of a new species of equitable right. 76 [1.140]

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Ashburn Anstald v Arnold cont. It is convenient to pause at this point because, although there are later cases in what may be regarded as this series, there is none in which a contractual licence is held to bind a third party in the absence of a finding that the third party took the land as a constructive trustee. It is therefore appropriate to review how the law stands, or ought to stand, in the absence of such a finding. Young v Bristol Aeroplane Co Ltd [1944] KB 718 establishes the familiar rule that this court is bound to follow its own decisions save that (relevantly to this case) it is entitled and bound to decide which of two conflicting decisions of its own it will follow, and it is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot in its opinion stand with a decision of the House of Lords. It must, we think, be very doubtful whether this court’s decision in Errington v Errington and Woods [1952] 1 KB 290 is consistent with its earlier decisions in Daly v Edwardes, 83 LT 548; Frank Warr & Co v London County Council [1904] 1 KB 713 and Clore v Theatrical Properties Ltd [1936] 3 All ER 483. That decision cannot be said to be in conflict with any later decision of the House of Lords, because the House expressly left the effect of a contractual licence open in the Hastings Car Mart case. But there must be very real doubts whether Errington can be reconciled with the earlier decisions of the House of Lords in Edwardes v Barrington, 85 LT 650, and King v David Allen and Sons (Billposting) Ltd [1916] 2 AC 54. It would seem that we must follow those cases or choose between the two lines of authority. It is not, however, necessary to consider those alternative courses in detail, since in our judgment the House of Lords cases, whether or not as a matter of strict precedent they conclude this question, state the correct principle which we should follow. Our reasons for reaching this conclusion are based upon essentially the same reasons as those given by Russell LJ in the Hastings Car Mart case [1964] Ch 665 at 697 and by Professor Wade in the article, “Licences and Third Parties” (1952) 68 LQR 337, to which Russell LJ refers. Before Errington the law appears to have been clear and well understood. It rested on an important and intelligible distinction between contractual obligations which gave rise to no estate or interest in the land and proprietary rights which, by definition, did. The far-reaching statement of principle in Errington was not supported by authority, not necessary for the decision of the case and per incuriam in the sense that it was made without reference to authorities which, if they would not have compelled, would surely have persuaded the court to adopt a different ratio. Of course, the law must be free to develop. But as a response to problems which had arisen, the Errington rule (without more) was neither practically necessary nor theoretically convincing. By contrast, the finding on appropriate facts of a constructive trust may well be regarded as a beneficial adaptation of old rules to new situations.

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Notes

1. Most of the controversial authorities reviewed in this decision are English. Generally Australian courts have not wavered to the same extent from what might be regarded as the orthodox position that a contractual licence does not create any proprietary interest. The cases with respect to the interest of a deserted wife were similarly not followed in Australia. Australian courts also remained firm in the position that the elements that define a lease and mark out the boundary between a lease and a licence are exclusive possession and duration for a fixed period of time; they have rejected any additional element of an intention to create a lease. They have held that if the parties intend to create what amounts to a lease, it does not matter that they call it something else or seek to deny that it is a lease and a proprietary interest. The English courts used the element of a separate intent as a means to avoid the application of legislative protections for tenants, [1.145]

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such as rent controls, in cases where the courts took it upon themselves to conclude that protection was unwarranted. In turn Australian legislators have avoided the concept of “lease” as, for example, the basis of the application of protection for residential occupants. 2. The consequence of the above decisions is that there is but a limited range of interests in land regarded as proprietary. Those interests are the freehold estates (fee simple, fee tail, life estate), leasehold estates, mortgages and charges, easements, profits a prendre, rentcharges, and (in equity) restrictive covenants. As a result of statute, community and strata titles and the interest of a resident in a retirement village are proprietary in nature. Other rights may be contractual or a permission to be on land (licence) may be conferred without consideration.

REMEDIES Jaggard v Sawyer [1.150] Jaggard v Sawyer [1995] 1 WLR 269 English Court of Appeal SIR THOMAS BINGHAM MR: On 26 January 1993 Judge Jack QC, sitting in the Weymouth County Court, refused the plaintiff, Mrs Jaggard, injunctions to restrain continuing acts of trespass and breaches of covenant and awarded her damages in lieu. The plaintiff says the judge should have granted injunctions. This appeal requires the court to consider the principles on which judges should act when deciding whether to grant injunctions or to award damages in lieu. The judge found the facts very fully in his judgment, which is reported in [1993] 1 EGLR 197, so no more than a brief summary of the facts is called for. In Maiden Newton, in Dorset, there is a road, Bull Lane, which runs very roughly in an east-west direction. Off it to the north is a cul-de-sac known as Ashleigh Avenue. This is about 50 yards long and the roadway (excluding the pathway, where there is one) is about 15 feet wide. The cul-de-sac was developed in about 1959. There were ten houses. Numbers 1 to 4 lined the western side of the close (on the left as viewed from Bull Lane). Numbers 7 to 10 lined the eastern (right-hand) side. At the far (or northern) end of the cul-de-sac were a semi-detached pair of houses numbered 5 and 6. When Ashleigh Avenue was being developed and plots sold, covenants were given and taken in the same terms in each case, so as to bind and confer benefits on all the original owners and their successors against and in favour of each other. The Avenue was a private road, and there was conveyed to each of the original owners not only the numbered plot on which his house was or was to be built but also the area of roadway immediately in front of that plot, up to the centre of the roadway. Two of these standard mutual covenants are in issue in this case, and I quote them: (c) No house or building to be erected on any part of the said land shall be used as or for a hotel tavern clubhouse or for the sale of wines spirits ale or beer (for consumption either on or off the premises) or as a hospital or as a place of amusement or resort or as a caravan site or in any manner calculated or likely to be a nuisance or cause annoyance to the Vendors or adjoining owners or residents of the neighbourhood or in any manner otherwise than as a private residence only and no part of the said land which is unbuilt upon shall be used otherwise than as a private garden.

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Jaggard v Sawyer cont. (d) The Vendors having constructed the said roadway known as Ashleigh Avenue and having laid the sewer therein as aforesaid the Purchasers and their successors in title shall keep the said roadway in good repair to the half width thereof abutting on the property hereby conveyed and consisting of the portion of the said roadway coloured blue on the said plan. In 1980 the plaintiff and her husband (who has since died) bought and moved into 1 Ashleigh Avenue. In May 1987 the defendants, Mr and Mrs Sawyer, bought and moved into No 5, the house at the north-western end of the Avenue. They were a young married couple. Their first child was born in August 1987. Their house had only two bedrooms and they wanted more room. Their first idea was to build on. Then they thought of building a separate house in the garden of No 5. They applied for planning permission in April 1988. But the plaintiff organised a petition to oppose the grant of planning permission, and all but one of the other residents in the Avenue supported her. The petition referred to the fact that the Avenue was a private road for the use of residents of the ten existing houses. Planning permission was refused, apparently because there was not enough room to accommodate a second house on the plot of No 5. The defendants had to think again. An alternative solution presented itself. Immediately to the west of Ashleigh Avenue was 13 Bull Lane. This was a property fronting on Bull Lane. Its garden ran northwards, parallel with Ashleigh Avenue, contiguous with the gardens of 1, 2, 3, 4 and 5 Ashleigh Avenue. The owner of No 13 Bull Lane was willing to sell a plot of land at the far northern end of the garden, abutting on 5 Ashleigh Avenue. The defendants were willing to buy, subject to obtaining planning permission. Their plan was to build a new house, No 5A Ashleigh Avenue, on this plot. They proposed that a strip of land, part of the garden of No 5 Ashleigh Avenue adjoining its boundary with number 4, should be used as a driveway into No 5A, giving it access to Ashleigh Avenue. The defendants applied for planning permission to develop No 5A in this way and it was granted. But not without opposition. The plaintiff and others made clear their objection to the development, based both on the restrictive covenants and the fact that Ashleigh Avenue was a private roadway. These objections did not prevail. The plot of No 5A was duly conveyed to the defendants. Building work began on 14 June 1989. The judge made a number of relevant findings on the period between the grant of planning permission and the completion of the building work. (1)

The defendants made no secret of their intentions. In May 1989 Mr Sawyer visited the plaintiff and told her that he was going ahead and would start building soon.

(2)

On a number of occasions between February and May 1989 Dorset County Council expressed the opinion that Ashleigh Avenue was a public, not a private, road. Not until July 1990 did the county council change their view. But change it they did, and before the judge it was common ground that the road was private, as the plaintiff and other residents had all along contended.

(3)

The defendants were advised that there might be a problem about access. The judge found ([1993] 1 EGLR 197 at 198): Mr Sawyer was aware of the covenants regarding the No 5 land and that he could not build on that land. He does not seem to have appreciated that there might be a problem in using part of the No 5 land as a driveway for No 5A.

And Mr Sawyer was no doubt encouraged by the county council’s view that Ashleigh Avenue was not a private road. (4)

The plaintiff persisted in her view, shared by other residents, that the proposed development of No 5A would be a breach of covenant, entitle the occupier to no right of way over Ashleigh Avenue and involve acts of trespass if the occupier used the Avenue for access. On 13 June [1.150]

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Jaggard v Sawyer cont. 1989 (the day before work began) solicitors instructed by the plaintiff and others made these points to Mr Sawyer at No 5 Ashleigh Avenue and wrote: We must therefore ask you to discontinue forthwith any development or proposed development on you[r] land failing which we will be asked to take proceedings in the appropriate court for an injunction to restrain you from developing the land. On 21 June the same solicitors, acting on behalf of the plaintiff and two other named residents, wrote again, this time to the defendants’ solicitors, emphatically stating that access to No 5A via Ashleigh Avenue would be a trespass and further stating that an interlocutory injunction would be sought if work were not stopped pending application to the court for a declaration. On 4 July 1989 the plaintiff’s solicitors wrote to the defendants’ solicitors again. In this letter reference was made to Bracewell v Appleby [1975] 1 All ER 993, [1975] Ch 408, a case (discussed below) in which damages were awarded in lieu of an injunction, and the letter continued: We are giving further consideration to the possibility of seeking an injunction and will be taking our clients’ instructions as to that, but we do anticipate that in any event we shall be instructed to seek the alternative remedy that we have advised our clients is available to them. This point was repeated in much the same terms in another letter a week later. (5)

No application for interlocutory relief was made to the court by the plaintiff or anyone else. The plaintiff says that she instructed her solicitors to apply for an interlocutory injunction and they did not do so. But it is not suggested that the defendants knew of these instructions.

(6)

To mitigate the nuisance which builders’ traffic would otherwise have caused to the residents of Ashleigh Avenue, the defendants negotiated a temporary arrangement with the owner of an industrial estate lying to the north of the Avenue and adjoining No 5A. This arrangement gave the builders access to the building site without using Ashleigh Avenue. There was some discussion between Mr Sawyer and the owner of the industrial estate about permanent access, but the negotiation was not pursued. Nor, at the trial, was it contended that there was any access to No 5A otherwise than via Ashleigh Avenue, and the judge proceeded on the basis that the only access was via Ashleigh Avenue (see [1993] 1 EGLR 197 at 199).

(7)

In July 1989 a further child was born to the defendants. Living in No 5, they were somewhat cramped.

(8)

Proceedings were issued on 10 August 1989. By then the walls and roof of the new house at No 5A were well advanced.

(9)

The differences between the plaintiff and those who shared her view and the defendants gave rise to much ill feeling.

The building of No 5A was completed in December 1989 at a total cost to the defendants (including the purchase of the land) of just under £76,000. Two months later the defendants sold No 5, reserving access to No 5A, and moved into No 5A. But the atmosphere locally was so bad that in December 1991 they moved out of No 5A and into another house elsewhere. They let No 5A. The action came on for hearing before Judge Jack on 21 May 1992, and he viewed the site before the hearing began. The hearing continued on 22 May and 24 July. On 30 July the judge sent his written judgment to the parties, but he did not formally give judgment until 26 January 1993. The judgment The judge held (and it is no longer in dispute): (1) that Ashleigh Avenue is a private road; (2) that use of the Avenue for access to No 5A involved trespass on land owned by the plaintiff, unless confined to the half of the roadway outside her house which she did not own, and necessarily involved trespass on land owned by other residents of the Avenue who had not chosen to sue; (3) that use of part of the land originally forming part of the garden of No 5 as a driveway giving access to No 5A involved a 80 [1.150]

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Jaggard v Sawyer cont. breach of covenant (c) quoted above; (4) that the court may refuse to grant an injunction sought to restrain continuing trespass and breaches of covenant and may in such cases award damages in lieu under s 50 of the Supreme Court Act 1981. The major question before the judge was whether he should, on the facts and on the authorities, exercise his discretion to grant injunctions or whether he should award damages in lieu. He made findings relevant to his decision, which I should quote ([1993] 1 EGLR 197 at 198-199): It was urged on me that Mr and Mrs Sawyer developed No 5A with the idea of making a quick profit and moving on. I do not accept that. They badly needed a bigger home, Maiden Newton was genuinely convenient for them. No doubt in the atmosphere of the property market of 1988 and 1989 they also hoped that they would do well financially out of the exercise, and it may be that they talked unwisely to some of the residents about that. Mr Sawyer told me that it was still his desire to live in No 5A. In view of what has happened I am more doubtful of that. I reject that allegation that Mr Sawyer simply intended to go ahead regardless of the legal position. I find that he believed that the road was public in reliance on the county surveyor’s firm view. I do not think that he appreciated the problem of the covenant and the driveway through the No 5 land. I think that he might have shown more care in the investigation of his position. I put that down to his inexperience in a complicated situation. At the important stage in 1989 he was receiving legal advice and it was not suggested, let alone established, that the advice was that he had no right to do what he intended. Mrs Jaggard was asked her reasons for bringing the action and for now pressing the case for an injunction. She answered that she felt that Mr Sawyer was proceeding in defiance of the law and she wanted the law upheld. She was concerned about the additional traffic which No 5A brought to Ashleigh Avenue. I note here that there was no evidence suggesting that it was any more than the light traffic one would [expect] from the addition of an 11th house. Mrs Jaggard was concerned also that Mr Sawyer would not be contributing to the maintenance of the road. He has always been willing to do so. I find that the reason which weighs with Mrs Jaggard is that Mr Sawyer should not be permitted to behave as she thinks that he has. In declining to grant injunctions the judge was particularly influenced by: the conduct of the plaintiff and of the defendants and their reasons for acting as they have, the failure of the plaintiff to apply for interlocutory relief, the particular nature of the trespass and of the relevant land, and the fact that if an injunction is granted No 5A will have no access. (See ([1993] 1 EGLR 197 at 202.) Instead of injunctions, he awarded the plaintiff damages. He asked himself what the defendants might reasonably have paid for a right of way and the release of the covenant (see [1993] 1 EGLR 197 at 202-203). He held that the defendants should have been prepared to pay not less that £6,250. Split among the nine residents (excluding those in No 5), that total yielded £694.44 per resident. That is the sum (with interest) which he awarded the plaintiff. The plaintiff challenges the judge’s decision, contending that the judge was wrong in effect to license a continuing invasion of her property rights. She had made her legal position (now held to be the correct legal position) plain from the outset. It was for the defendants to resolve any doubt about the legal position by seeking declaratory relief and the plaintiff should not be penalised for having failed to seek interlocutory relief. The defendants took a chance, and having been held to be in the wrong had no claim on the court’s indulgence. Access to No 5A was, anyway, possible without trespassing on the plaintiff’s land if traffic were confined to the half of the roadway outside the plaintiff’s house which was more distant from it. Properly calculated, the damages in this case were nominal, and that was an additional reason on the authorities for granting injunctions. The defendants support the decision of the judge, essentially for the reasons which he gave. [1.150]

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Jaggard v Sawyer cont. In choosing between these submissions, we have derived the greatest help from the able argument of Mr Drabble, instructed by the Attorney General as an amicus at a time when it was thought the plaintiff would not be represented. The law In considering the legal issues in this case, I should acknowledge at the outset my debt to an illuminating article by Professor Jolowicz “Damages in Equity – A Study of Lord Cairns’ Act” [1975] CLJ 224. Historically, the remedy given by courts of common law was damages. These afforded retrospective compensation for past wrongs. If the wrongs were repeated or continued, a fresh action was needed. Courts of equity, in contrast, were able to give prospective relief by way of injunction or specific performance. A mandatory injunction would require the defendant to observe a legal obligation or undo the effects of a past breach of legal obligation. A negative injunction would restrain a defendant from committing breaches of legal obligation in future. But these courts could not award damages. This anomaly was mitigated by the Common Law Procedure Act 1854, which gave courts of common law a limited power to grant equitable relief as well as damages. It was further mitigated by the Chancery Amendment Act 1858 (Lord Cairns’ Act), which gave the Court of Chancery the power to award damages. Section 2 of Lord Cairns’ Act provided: In all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract, or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same Court, if it shall think fit, to award damages to the party injured, either in addition to or in substitution for such injunction or specific performance; and such damages may be assessed in such manner as the Court shall direct. This enabled the Chancery Court on appropriate facts to award damages for unlawful conduct in the past as well as an injunction to restrain unlawful conduct in the future. It also enabled the Chancery Court to award damages instead of granting an injunction to restrain unlawful conduct in the future. Such damages can only have been intended to compensate the plaintiff for future unlawful conduct, the commission of which, in the absence of any injunction, the court must have contemplated as likely to occur. Despite the repeal of Lord Cairns’ Act, it has never been doubted that the jurisdiction thereby conferred on the Court of Chancery is exercisable by the High Court and by county courts. The authorities show that there were, not surprisingly, differing approaches to the exercise of this new jurisdiction. In the leading case of Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, [1891-4] All ER Rep 838 the operations of the defendant electricity company caused structural damage to a house and nuisance to its occupier. The owner and occupier sought relief by way of injunction. The trial judge refused injunctive relief and awarded damages. His decision was reversed by the Court of Appeal, which roundly rejected the view that wrongs should be permitted to continue simply because the wrongdoer was able and willing to pay damages. But the authority is chiefly notable for the guidance given by A L Smith LJ. on the circumstances in which damages may properly be awarded in lieu of an injunction. The following passage in his judgment has been cited very frequently, but must be cited again ([1895] 1 Ch 287 at 322-323, [1891-4] All ER Rep 838 at 847-848): Many Judges have stated, and I emphatically agree with them, that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour’s rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his 82

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Jaggard v Sawyer cont. lights dimmed, as the case may be. In such cases the well-known rule is not to accede to the application, but to grant the injunction sought, for the plaintiff’s legal right has been invaded, and he is prima facie entitled to an injunction. There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorised by this section. In any instance in which a case for an injunction has been made out, if the plaintiff by his acts or laches has disentitled himself to an injunction the Court may award damages in its place. So again, whether the case be for a mandatory injunction or to restrain a continuing nuisance, the appropriate remedy may be damages in lieu of an injunction, assuming a case for an injunction to be made out. In my opinion, it may be stated as a good working rule that – (1) If the injury to the plaintiff’s legal rights is small, (2) And is one which is capable of being estimated in money, (3) And is one which can be adequately compensated by a small money payment, (4) And the case is one in which it would be oppressive to the defendant to grant an injunction:-then damages in substitution for an injunction may be given. There may also be cases in which, though the four above-mentioned requirements exist, the defendant by his conduct, as, for instance, hurrying up his buildings so as if possible to avoid an injunction, or otherwise acting with reckless disregard to the plaintiff’s rights, has disentitled himself from asking that damages may be assessed in substitution for an injunction. It is impossible to lay down any rule as to what, under the differing circumstances of each case, constitutes either a small injury, or one that can be estimated in money, or what is a small money payment, or an adequate compensation, or what would be oppressive to the defendant. This must be left to the good sense of the tribunal which deals with each case as it comes up for adjudication. For instance, an injury to the plaintiff’s legal right to light to a window in a cottage represented by L15 might well be held to be not small but considerable; whereas a similar injury to a warehouse or other large building represented by ten times that amount might be held to be inconsiderable. Each case must be decided upon its own facts; but to escape the rule it must be brought within the exception. In the present case it appears to me that the injury to the Plaintiff is certainly not small, nor is it in my judgment capable of being estimated in money, or of being adequately compensated by a small money payment. … The present case The judge recognised that a plaintiff who can show that his legal right will be violated by the defendant’s conduct is prima facie entitled to the grant of an injunction. He accepted that the court will only rarely and reluctantly permit such violation to occur or continue. But he held that this case fulfilled the four tests laid down by A L Smith LJ in Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, [1891-4] All ER Rep 838 to bring this case within the exception. The real question in this appeal is whether that judgment is sustainable. (1)

He regarded the injury to the plaintiff’s right as small. This is in my view so. It is not suggested that the increase in traffic attributable to the existence of No 5A will be other than minimal, or that the cost of keeping up the road will be significantly increased. The defendants have, in any event, offered throughout to contribute to the cost of upkeep and are willing, if a draft is tendered to them, to execute a deed binding themselves by the same covenants as other residents of the Avenue. It is not suggested that the driveway to No 5A impairs the visual amenity of the plaintiff’s house or affects its value. There is of course a violation of the plaintiff’s strict legal right, but that will be so in any case of this kind.

(2)

The judge considered the value of the injury to the plaintiff’s right as capable of being estimated in money. He based himself on the Wrotham Park approach. In my view he was justified. He valued the right at what a reasonable seller would sell it for. In situations of this kind a plaintiff should not be treated as eager to sell, which he very probably is not. But the [1.150]

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Jaggard v Sawyer cont. court will not value the right at the ransom price which a very reluctant plaintiff might put on it. I see no error in the judge’s approach to this aspect. (3)

The judge held that the injury to the plaintiff’s legal right was one which could be adequately compensated by a small money payment. I agree, and I do not think this conclusion can be faulted.

(4)

The judge concluded that in all the circumstances it would be oppressive to the defendants to grant the injunctions sought. Most of the argument turned on this condition, and in particular on the significance which the judge attached to the plaintiff’s failure to seek interlocutory relief.

It is important to bear in mind that the test is one of oppression, and the court should not slide into application of a general balance of convenience test. But oppression must be judged as at the date the court is asked to grant an injunction, and (as Brightman J recognised in Wrotham Park) the court cannot ignore the reality with which it is then confronted. It is relevant that the plaintiff could at an early stage have sought interlocutory relief, which she would seem very likely to have obtained; but it is also relevant that the defendants could have sought a declaration of right. These considerations are not decisive. It would weigh against a finding of oppression if the defendants had acted in blatant and calculated disregard of the plaintiff’s rights, of which they were aware, but the judge held that this was not so, and the plaintiff’s solicitors may be thought to have indicated that damages would be an acceptable remedy. It was suggested that an injunction restraining trespass on the plaintiff’s roadway would not be oppressive since the occupiers of No 5A could use the other half of the roadway outside the plaintiff’s house, but this would seem to me unworkable in practice, a recipe for endless dispute and a remedy which would yield nothing of value to the plaintiff. It was suggested that the occupiers of No 5A could be restrained from using the driveway over the land formerly part of No 5 for vehicular access, while access on foot would be permitted. But this, as it seems to me, would impose inconvenience and loss on the occupier and owner of No 5A without upholding the plaintiff’s right or yielding any practical benefit to her. As s 84 of the Law of Property Act 1925 makes clear, restrictive covenants cannot be regarded as absolute and inviolable for all time. The judge was, in my view, entitled to hold on all the facts before the court at trial that the grant of an injunction would be oppressive to the defendants, and I share that view. The only argument pressed on damages was that the only damages properly awardable on compensatory principles would have been nominal and that therefore an injunction should have been granted. As already indicated, I think that the Wrotham Park approach was appropriate even on pure compensatory principles and the judge followed it correctly. One cannot but regret that this dispute among neighbours should have escalated as it has. Having heard the argument in full it would be futile to deny the plaintiff the leave to appeal and the extension of time which she seeks. But I am of the clear opinion that the appeal must be dismissed. KENNEDY LJ: I agree. MILLETT LJ: This appeal raises yet again the questions: what approach should the court adopt when invited to exercise its statutory jurisdiction to award damages instead of granting an injunction to restrain a threatened or continuing trespass or breach of a restrictive covenant? And if the court accedes to the invitation, on what basis should damages be assessed? Before considering these questions, it is desirable to state some general propositions which are established by the authorities and which are, or at least ought to be, uncontroversial. (1)

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Jaggard v Sawyer cont. (2)

The principal object of Lord Cairns’ Act is well known. It was described by Turner LJ in Ferguson v Wilson (1866) LR 2 Ch App 77 at 88. It was to enable the Court of Chancery, when declining to grant equitable relief and leaving the plaintiff to his remedy at law, to award the plaintiff damages itself instead of sending him to the common law courts to obtain them. From the very first, however, it was recognised that the Act did more than this. The jurisdiction of the Court of Chancery was wider than that of the common law courts, for it could give relief where there was no cause of action at law. As early as 1863, Turner LJ himself had recognised the potential effect of Lord Cairns’ Act. In Eastwood v Lever (1863) 4 De GJ & S 114 at 128, 46 ER 859 at 865 he pointed out that the Act had empowered the courts of equity to award damages in cases where the common law courts could not. The Act, he said, was not “confined to cases in which the Plaintiffs could recover damages at law”. Damages at common law are recoverable only in respect of causes of action which are complete at the date of the writ; damages for future or repeated wrongs must be made the subject of fresh proceedings. Damages in substitution for an injunction, however, relate to the future, not the past. They inevitably extend beyond the damages to which the plaintiff may be entitled at law. In Leeds Industrial Co-op Society Ltd v Slack [1924] AC 851, [1924] All ER Rep 259 the House of Lords confirmed the jurisdiction of the courts to award damages under the Act in respect of an injury which was threatened but had not yet occurred. No such damages could have been awarded at common law.

(3)

The nature of the cause of action is immaterial; it may be in contract or tort. Lord Cairns’ Act referred in terms to “a breach of any covenant, contract, or agreement, or against the commission or continuance of any wrongful act”. The jurisdiction to award damages in substitution for an injunction has most commonly been exercised in cases where the defendant’s building has infringed the plaintiff’s right to light or where it has been erected in breach of a restrictive covenant. Despite dicta to the contrary in Woollerton & Wilson Ltd v Richard Costain Ltd [1970] 1 All ER 483, [1970] 1 WLR 411 there is, in my opinion, no justification for excluding cases of threatened or continuing trespass on the ground that trespass is actionable at law without proof of actual damage. Equitable relief, whether by way of injunction or damages under Lord Cairns’ Act, is available because the common law remedy is inadequate; but the common law remedy of damages in cases of continuing trespass is inadequate not because the damages are likely to be small or nominal but because they cover the past only and not the future.

(4)

The power to award damages under Lord Cairns’ Act arises whenever the court “has jurisdiction to entertain an application” for an injunction or specific performance. This question must be determined as at the date of the writ. If the court would then have had jurisdiction to grant an injunction, it has jurisdiction to award damages instead. When the court comes to consider whether to grant an injunction or award damages instead, of course, it must do so by reference to the circumstances as they exist at the date of the hearing.

(5)

The former question is effectively one of jurisdiction. The question is whether, at the date of the writ, the court could have granted an injunction, not whether it would have done (see City of London Brewery Co v Tennant (1873) LR 9 Ch App 212). Russell LJ put it neatly in Hooper v Rogers [1974] 3 All ER 417 at 419, [1975] Ch 43 at 48, when he said that the question was “whether … the judge could have (however unwisely …) made a mandatory order”. There have been numerous cases where damages under Lord Cairns’ Act were refused because at the date of the writ it was impossible to grant an injunction or specific performance: for one well-known example, see Lavery v Pursell (1888) 39 Ch D 508. The recent case of Surrey CC v Bredero Homes Ltd [1993] 3 All ER 705, [1993] 1 WLR 1361 appears to have been a case of this character. [1.150]

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Jaggard v Sawyer cont. (6)

It is not necessary for the plaintiff to include a claim for damages in his writ. As long ago as 1868 Lord Chelmsford LC held that damages may be awarded under Lord Cairns’ Act: though not specifically prayed for by the bill, the statute having vested a discretion in the Judge, which he may exercise when he thinks the case fitting without the prayer of the party (see Betts v Neilson (1868) LR 3 Ch App 429 at 441).

It would be absurd as well as misleading to insist on the plaintiff including a claim for damages in his writ when he is insisting on his right to an injunction and opposing the defendant’s claim that he should be content to receive damages instead. By a parity of reasoning it is not in my opinion necessary for a plaintiff to include a claim for an injunction in order to found a claim for damages under the Act. It would be absurd to require him to include a claim for an injunction if he is sufficiently realistic to recognise that in the circum-stances he is unlikely to obtain one and intends from the first to ask the court for damages instead. But he ought to make it clear whether he is claiming damages for past injury at common law or under the Act in substitution for an injunction. (7)

In Archer Brewhouse Developments Ltd v Berkley House (Docklands Developments) Ltd (1987) 38 BLR 82 Scott J granted an injunction to restrain a continuing trespass. In the course of his judgment, however, he cast doubt on the power of the court to award damages for future trespasses by means of what he described as a “once and for all payment”. This was because, as he put it, the court could not by an award of damages put the defendant in the position of a person entitled to an easement: whether or not an injunction were granted, the defendant’s conduct would still constitute a trespass, and a succession of further actions for damages could accordingly still be brought. This reasoning strikes at the very heart of the statutory jurisdiction; it is in marked contrast to the attitude of the many judges who from the very first have recognised that, while the Act does not enable the court to license future wrongs, this may be the practical result of withholding injunctive relief, and it is inconsistent with the existence of the jurisdiction, confirmed in Leeds Industrial Co-op Society Ltd v Slack [1924] AC 851, [1924] All ER Rep 259 to award damages under the Act in a quia timet action. It is in my view fallacious because it is not the award of damages which has the practical effect of licensing the defendant to commit the wrong, but the refusal of injunctive relief. Thereafter the defendant may have no right to act in the manner complained of, but he cannot be prevented from doing so. The court can in my judgment properly award damages “once and for all” in respect of future wrongs because it awards them in substitution for an injunction and to compensate for those future wrongs which an injunction would have prevented. The doctrine of res judicata operates to prevent the plaintiff and his successors in title from bringing proceedings thereafter to recover even nominal damages in respect of further wrongs for which the plaintiff has been fully compensated.

It has always been recognised that the practical consequence of withholding injunctive relief is to authorise the continuance of an unlawful state of affairs. If, for example, the defendant threatens to build in such a way that the plaintiff’s light will be obstructed and he is not restrained, then the plaintiff will inevitably be deprived of his legal right. This was the very basis upon which before 1858 the Court of Chancery had made the remedy of injunction available in such cases. After the passing of Lord Cairns’ Act many of the judges warned that the jurisdiction to award damages instead of an injunction should not be exercised as a matter of course so as to legalise the commission of a tort by any defendant who was willing and able to pay compensation. … The plaintiff is, therefore, in good company when she says in her skeleton argument (prepared when she was acting in person): 86

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Jaggard v Sawyer cont. What Judge Jack has in effect done in his judgment is to grant Mr and Mrs Sawyer a right of way in perpetuity over my land for a once and for all payment. I do not understand how the Court can have power to produce such a result as it effectively expropriates my property … Ashleigh Avenue is a private roadway and Judge Jack has turned it into a public highway. Surely he does not have the jurisdiction to do this? It will be of small comfort to her to be told that the jurisdiction is undoubted, though it is to be exercised with caution. What does need to be stressed, however, is that the consequences to which the plaintiff refers do not result from the judge’s exercise of the statutory jurisdiction to award damages instead of an injunction, but from his refusal to grant an injunction. Lord Cairns’ Act did not worsen the plaintiff’s position but improved it. Thenceforth, if injunctive relief was withheld, the plaintiff was not compelled to wait until further wrongs were committed and then bring successive actions for damages: he could be compensated by a once and for all payment to cover future as well as past wrongs. Of course, the ability to do “complete justice” in this way made it easier for the courts to withhold the remedy of an injunction, and it was therefore necessary for the judges to remind themselves from time to time that the discretion to withhold it, which had existed as well before 1858 as after it, was to be exercised in accordance with settled principles; that a plaintiff who had established both a legal right and a threat to infringe it was prima facie entitled to an injunction to protect it; and that special circumstances were needed to justify withholding the injunction. Nevertheless, references to the “expropriation” of the plaintiff’s property are somewhat overdone, not because that is not the practical effect of withholding an injunction, but because the grant of an injunction, like all equitable remedies, is discretionary. Many proprietary rights cannot be protected at all by the common law. The owner must submit to unlawful interference with his rights and be content with damages. If he wants to be protected he must seek equitable relief, and he has no absolute right to that. In many cases, it is true, an injunction will be granted almost as of course, but this is not always the case, and it will never be granted if this would cause injustice to the defendant. Citation of passages in the cases warning of the danger of “expropriating” the plaintiff’s property needs to be balanced by reference to statements like that of Lord Westbury LC in Isenberg v East India House Estate Co Ltd (1863) 3 De GJ & S 263 at 273, 46 ER 637, at 641, where he held that it was the duty of the court not: “by granting a mandatory injunction, to deliver over the Defendants to the Plaintiff bound hand and foot, in order to be made subject to any extortionate demand that he may by possibility make, but to substitute for such mandatory injunction an inquiry before itself, in order to ascertain the measure of damage that has been actually sustained”. [Millett J reached the same result as the other members of the court.]

[1.155]

Notes

1. In what sense can I be truly regarded as owning a thing, if when that thing is taken from me, I have no right to recover the thing itself but have only a claim for damages for compensation for the loss of the thing? 2. The case draws a general distinction between the common law remedy of damages and equitable specific relief by way of specific performance or mandatory or negative injunctions. (The case has been applied in Australia, in the context of an action for specific performance: Georges v Davies [2007] NSWSC 1284.) But the whole point of the common law classification of freehold interests in land as real property was that a holder of such an interest could be restored to possession of the land. At common law the original actions for the recovery of land were by means of the writs of right, novel disseisin and [1.155]

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entry. In the 15th century the action of ejectment was developed to enable the holder of a leasehold interest to recover possession. By means of fictions this action was extended to allow recovery of land by holders of freehold interests. By the nineteenth century ejectment became the sole action for the recovery of possession of land and remains the basis of modern actions, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.50], [2.55].

88 [1.155]

TITLE TO GOODS AND LAND

PART2

CHAPTER 2 Foundational Concepts of Land Ownership: Tenures, Estates, Trusts and Priorities [2.10]

THE DOCTRINE OF TENURE ................................................................................... 92 [2.15] [2.20] [2.30]

[2.40]

DOCTRINE OF ESTATES ......................................................................................... 109 [2.40] [2.45]

[2.55]

Zapletal v Wright .................................................................. 116

EQUITABLE INTERESTS – THE DEVELOPMENT OF THE TRUST ......................... 120 [2.75]

The trust ............................................................................................... 121 [2.80]

[2.90]

Western Australia v Ward ....................................................... 109 Tenure and Estates in Land .................................................... 112

Determinable and conditional interests ............................................ 116 [2.60]

[2.70]

Mabo v Queensland (No 2) ..................................................... 92 Tenure, Allodialism and Indigenous Rights at Common Law ....................................................................................... 97 Wik Peoples v Queensland ..................................................... 101

DKLR Holdings Co (No 2) v Commissioner of Stamp Duties .................................................................................. 121

PRIORITIES UNDER THE GENERAL LAW LAND SYSTEM ..................................... 126 [2.95]

Prior equitable interest against subsequent legal interest .............. 126 [2.95] [2.105]

[2.115]

Prior legal interest against subsequent equitable interest .............. 135 [2.115] [2.125]

[2.135]

Northern Countries Fire Insurance Co v Whip .......................... 135 Walker v Linom ..................................................................... 139

Prior equitable interest against subsequent equitable interest ....... 140 [2.135]

[2.145]

Pilcher v Rawlins ................................................................... 126 Smith v Jones ........................................................................ 130

AG(CQ) Pty Ltd v A&T Promotions Pty Ltd .............................. 140

The effect of the deeds registration system on general law land priority disputes ................................................................................... 146

[2.05] In this chapter it is intended to trace the Anglo-Australian historical bases of ownership

of, or title to, land. It describes in outline the way in which title to land was and is acquired at common law and in equity, and introduces the principles by which priority between competing legal and equitable interests in land is determined. The specifics of a number of matters relevant to these issues are not examined here but are dealt with in succeeding chapters. • the detail of the Torrens system of land registration is described and explained in Chapters 5 and 6. • the formalities for the consensual creation of legal and equitable interests in land are discussed in Chapter 9. • equitable interests in land arise in a variety of ways apart from the express creation of a trust: this chapter contains a brief introduction to implied trusts, but the detailed principles relating to the implication of trusts are dealt with in Chapter 10. [2.05]

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• although the parts of the High Court decisions in Mabo v Queensland (No 2) (1992) 175 CLR 1 and Wik Peoples v Queensland (1996) 187 CLR 1 relevant to the doctrine of tenure are extracted in this chapter, a more detailed treatment of native title is contained in Chapter 7. • the detailed principles relating to leases and licences of Crown land are not dealt with in this Chapter. In Australia, much rural land was leased or licensed by the Crown. Often this was done on the basis that the holder had to comply with a variety of conditions and obligations. The system gave rise to different and novel forms of landholding, many of which still exist. Some of these forms of landholding are discussed in Chapter 7. See also Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), Ch 6, Pts II and III.

THE DOCTRINE OF TENURE [2.10] After the Norman Conquest, William 1 as sovereign asserted the power to grant land

holdings to any person as he wished. When making grants, the King did not transfer absolute ownership but instead granted rights over the land subject to the grantee fulfilling particular duties and conditions, such as the rendering of services or payment of money. The person who held land directly of the King was the tenant-in-chief. The tenant-in-chief then granted part of the land to another, again in return for the performance of certain duties. The process could be repeated many times with respect to the same piece of land and thus complicated feudal ties were set up. This was called subinfeudination and gave rise to the notion of a feudal pyramid with the King at the top. As time went by the system became extremely complicated. Enforcement of services became a major problem. An attempt to simplify the system of tenure was made in 1290 in the Statute of Quia Emptores 1290 but it was not until 1660 that the Statute of Tenures 1660 abolished most of the incidents of tenure.

Mabo v Queensland (No 2) [2.15] Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia [The case involved the land rights of the Meriam people: see [7.25]. In its decision, the High Court considered the doctrine of tenure.] BRENNAN J: … A basic doctrine of the land law is the doctrine of tenure, to which Stephen CJ referred in Attorney-General (NSW) v Brown, and it is a doctrine which could not be overturned without fracturing the skeleton which gives our land law its shape and consistency. It is derived from feudal origins. The feudal basis of the proposition of absolute Crown ownership The land law of England is based on the doctrine of tenure. In English legal theory, every parcel of land in England is held either mediately or immediately of the King who is the Lord Paramount; the term “tenure” is used to signify the relationship between tenant and lord (Attorney-General of Ontario v Mercer (1883) LR 8 App Cas 767, 771-772), not the relationship between tenant and land. The characteristic of feudalism “is not tenere terram, but tenere terram de X” (Pollock and Maitland, The History of English Law (2nd ed, 1898, reprinted 1952), Vol 1, p 234n). It is implicit in the relationship of tenure that both lord and tenant have an interest in the land: “The King had ‘dominium directum’, the subject ‘dominium utile’” (Pollock and Maitland, p 773; Co Litt 16). Absent a “dominium directum” in the Crown, there would be no foundation for a tenure arising on the making of a grant of land. When the Crown acquired territory outside England which was to be subject to the common law, there was 92

[2.10]

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CHAPTER 2

Mabo v Queensland (No 2) cont. a natural assumption that the doctrine of tenure should be the basis of the land law. Perhaps the assumption did not have to be made. After all, as Holdsworth observed (Vol 2, p 199), the universal application of the doctrine of tenure is a purely English phenomenon. And Pollock and Maitland may be correct in saying (Vol 2, p 236; accord: Holdsworth, Vol 2 (1923) p 75, n 8) that the notion of universal tenure “perhaps was possible only in a conquered country”. In Scotland, the King was not Paramount Lord of all land: some allodial lands remained in the Orkney and Shetland Islands, though most land that had been held allodially became subject to feudal tenure: Bell, Lectures on Conveyancing (Edinburgh, 1867), Vol 1, Ch I, pp 531-532; Stair, The Institutions of the Law of Scotland (4th ed, 1826), pp 219, 222; Craigie, Scottish Law of Conveyancing (Edinburgh, 1899), pp 27-28; Lord Advocate v Balfour (1907) SC 1360, 1368-1369). However, the English view favoured a universal application of the doctrine of tenure (Pollock and Maitland, op cit, pp 232-233): Every acre of English soil and every proprietary right therein have been brought within the compass of a single formula, which may be expressed thus:- Z tenet terram illam de … domino Rege. The king himself holds land which is in every sense his own; no one else has any proprietary right in it; but if we leave out of account this royal demesne, then every acre of land is “held of” the king. The person whom we may call its owner, the person who has the right to use and abuse the land, to cultivate it or leave it uncultivated, to keep all others off it, holds the land of the king either immediately or mediately. It is arguable that universality of tenure is a rule depending on English history and that the rule is not reasonably applicable to the Australian colonies. The origin of the rule is to be found in a traditional belief that, at some time after the Norman Conquest, the King either owned beneficially and granted, or otherwise became the Paramount Lord of, all land in the Kingdom (Bacon’s Abridgement (6th ed, 1807), Vol V, “Prerogative”, B,1). According to Digby’s History of the Law of Real Property (1897, p 34) William I succeeded to all rights over land held by the Anglo-Saxon kings; he acquired by operation of law the land of those who had resisted his conquest and a vast quantity of land was deemed to have been forfeited or surrendered to William and regranted by him. He may have become the proprietor of all land in England so that no allodial land remained. Or it may be, as Blackstone asserts, that in England, as in France, the allodial estates were surrendered into the king’s hands and were granted back as feuds, the only difference being that in France the change “was effected gradually, by the consent of private persons; (the change) was done at once, all over England, by the common consent of the nation” (Commentaries, Bk II, Ch 4, pp 50–51). But, whatever the fact, it is the fiction of royal grants that underlies the English rule. Blackstone says that: it became a fundamental maxim, and necessary principle (though in reality a mere fiction) of our English tenures, “that the king is the universal lord and original proprietor of all the lands in his kingdom; and that no man doth or can possess any part of it, but what has, mediately or immediately, been derived ‘as a gift from him, to be held upon feodal services’.” For this being the real case in pure, original, proper feuds, other nations who adopted this system were obliged to act upon the same supposition, as a substruction and foundation of their new polity, though the fact was indeed far otherwise. It is not surprising that the fiction that land granted by the Crown had been beneficially owned by the Crown was translated to the colonies and that Crown grants should be seen as the foundation of the doctrine of tenure which is an essential principle of our land law. It is far too late in the day to contemplate an allodial or other system of land ownership. Land in Australia which has been granted by the Crown is held on a tenure of some kind and the titles acquired under the accepted land law cannot be disturbed. Accepting the doctrine of tenure, it was an essential postulate that the Crown have such a title to land as would invest the Sovereign with the character of Paramount Lord in respect of a tenure created by grant and would attract the incidents appropriate to the tenure, especially the Crown’s right to escheat. (Wright, Introduction to the Law of Tenures (4th ed, 1792), p 5.) The Crown was invested with [2.15]

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Mabo v Queensland (No 2) cont. the character of Paramount Lord in the colonies by attributing to the Crown a title, adapted from feudal theory, that was called a radical, ultimate or final title: see, for example, Amodu Tijani v Secretary, Southern Nigeria (1921) 2 AC 399, 403, 404, 407; Nireaha Tamaki v Baker [1901] AC 561, 580; cf. Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353, 396-397. The Crown was treated as having the radical title to all the land in the territory over which the Crown acquired sovereignty. The radical title is a postulate of the doctrine of tenure and a concomitant of sovereignty. As a sovereign enjoys supreme legal authority in and over a territory, the sovereign has power to prescribe what parcels of land and what interests in those parcels should be enjoyed by others and what parcels of land should be kept as the sovereign’s beneficial demesne. By attributing to the Crown a radical title to all land within a territory over which the Crown has assumed sovereignty, the common law enabled the Crown, in exercise of its sovereign power, to grant an interest in land to be held of the Crown or to acquire land for the Crown’s demesne. The notion of radical title enabled the Crown to become Paramount Lord of all who hold a tenure granted by the Crown and to become absolute beneficial owner of unalienated land required for the Crown’s purposes. But it is not a corollary of the Crown’s acquisition of a radical title to land in an occupied territory that the Crown acquired absolute beneficial ownership of that land to the exclusion of the indigenous inhabitants. If the land were desert and uninhabited, truly a terra nullius, the Crown would take an absolute beneficial title (an allodial title) to the land for the reason given by Stephen CJ in Attorney-General (NSW) v Brown (1847) 1 Legge, 317-318: there would be no other proprietor. But if the land were occupied by the indigenous inhabitants and their rights and interests in the land are recognised by the common law, the radical title which is acquired with the acquisition of sovereignty cannot itself be taken to confer an absolute beneficial title to the occupied land. Nor is it necessary to the structure of our legal system to refuse recognition to the rights and interests in land of the indigenous inhabitants. The doctrine of tenure applies to every Crown grant of an interest in land, but not to rights and interests which do not owe their existence to a Crown grant. The English legal system accommodated the recognition of rights and interests derived from occupation of land in a territory over which sovereignty was acquired by conquest without the necessity of a Crown grant. After the conquest of Ireland, it was held in Case of Tanistry (1608) Davis 28 (80 ER 516); 4th Dublin (1762) English translation 78, 110-111 that the Crown was not in actual possession of the land by virtue of the conquest and that: a royal monarch (who) hath made a new conquest of a realm, although in fact he hath the lordship paramount of all the lands within such realm, so that these are all held of him, mediate vel immediate, and he hath also the possession of all the lands which he willeth actually to seise and retain in his own hands for his profit or pleasure, and may also by his grants distribute such portions as he pleaseth … yet … if such conqueror receiveth any of the natives or antient inhabitants into his protection and avoweth them for his subjects, and permitteth them to continue their possessions and to remain in his peace and allegiance, their heirs shall be adjudged in by good title without grant or confirmation of the conqueror, and shall enjoy their lands according to the rules of the law which the conqueror hath allowed or established, if they will submit themselves to it, and hold their lands according to the rules of it, and not otherwise. Similarly, after the conquest of Wales, in Witrong and Blany (1674) 3 Keb 401, 402 (84 ER 789, 789) and see McNeil, Common Law Aboriginal Title, p 174 it was held that the inhabitants who had been left in possession of land needed no new grant to support their possession under the common law and they held their interests of the King without a new conveyance. In these cases, the courts were speaking of converting the surviving interests into an estate of a kind familiar to the common law, but there is no reason why the common law should not recognise novel interests in land which, not 94 [2.15]

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Mabo v Queensland (No 2) cont. depending on Crown grant, are different from common law tenures. In Amodu Tijani [1921] 2 AC, 403 Viscount Haldane, speaking for the Privy Council, referred to the variable nature of native title to land capable of recognition by the common law: There is a tendency, operating at times unconsciously, to render (native) title conceptually in terms which are appropriate only to systems which have grown up under English law. But this tendency has to be held in check closely. As a rule, in the various systems of native jurisprudence throughout the Empire, there is no such full division between property and possession as English lawyers are familiar with. A very usual form of native title is that of a usufructuary right, which is a mere qualification of or burden on the radical or final title of the Sovereign where that exists. In such cases the title of the Sovereign is a pure legal estate, to which beneficial rights may or may not be attached. But this estate is qualified by a right of beneficial user which may not assume definite forms analogous to estates, or may, where it has assumed these, have derived them from the intrusion of the mere analogy of English jurisprudence. And, in Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR, 397 Barwick CJ was able to say that the indigenous people of Papua New Guinea “were secure in their usufructuary title to land, [but] the land came from the inception of the colony into the dominion of Her Majesty. That is to say, the ultimate title subject to the usufructuary title was vested in the Crown. Alienation of that usufructuary title to the Crown completed the absolute fee simple in the Crown”. In Amodu Tijani, the Privy Council admitted the possibility of recognition not only of usufructuary rights but also of interests in land vested not in an individual or a number of identified individuals but in a community. Viscount Haldane observed [1921] 2 AC, 403-404: The title, such as it is, may not be that of the individual, as in this country it nearly always is in some form, but may be that of a community. Such a community may have the possessory title to the common enjoyment of a usufruct, with customs under which its individual members are admitted to enjoyment, and even to a right of transmitting the individual enjoyment as members by assignment inter vivos or by succession. To ascertain how far this latter development of right has progressed involves the study of the history of the particular community and its usages in each case. Abstract principles fashioned a priori are of but little assistance, and are as often as not misleading. Recognition of the radical title of the Crown is quite consistent with recognition of native title to land, for the radical title, without more, is merely a logical postulate required to support the doctrine of tenure (when the Crown has exercised its sovereign power to grant an interest in land) and to support the plenary title of the Crown (when the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown’s territory). Unless the sovereign power is exercised in one or other of those ways, there is no reason why land within the Crown’s territory should not continue to be subject to native title. It is only the fallacy of equating sovereignty and beneficial ownership of land that gives rise to the notion that native title is extinguished by the acquisition of sovereignty. If it be necessary to categorise an interest in land as proprietary in order that it survive a change in sovereignty, the interest possessed by a community that is in exclusive possession of land falls into that category. Whether or not land is owned by individual members of a community, a community which asserts and asserts effectively that none but its members has any right to occupy or use the land has an interest in the land that must be proprietary in nature: there is no other proprietor. It would be wrong, in my opinion, to point to the inalienability of land by that community and, by importing definitions of “property” which require alienability under the municipal laws of our society (see, for example, National Provincial Bank Ltd v Ainsworth [1965] AC 1175, 1247-1248), to deny that the indigenous people owned their land. The ownership of land within a territory in the exclusive occupation of a people must be vested in that people: land is susceptible of ownership, and there are no other owners. [2.15]

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Mabo v Queensland (No 2) cont. True it is that land in exclusive possession of an indigenous people is not, in any private law sense, alienable property for the laws and customs of an indigenous people do not generally contemplate the alienation of the people’s traditional land. But the common law has asserted that, if the Crown should acquire sovereignty over that land, the new sovereign may extinguish the indigenous people’s interest in the land and create proprietary rights in its place and it would be curious if, in place of interests that were classified as non-proprietary, proprietary rights could be created. Where a proprietary title capable of recognition by the common law is found to have been possessed by a community in occupation of a territory, there is no reason why that title should not be recognised as a burden on the Crown’s radical title when the Crown acquires sovereignty over that territory. The fact that individual members of the community, like the individual plaintiff Aborigines in Milirrpum (1971) 17 FLR, 272, enjoy only usufructuary rights that are not proprietary in nature is no impediment to the recognition of a proprietary community title. Indeed, it is not possible to admit traditional usufructuary rights without admitting a traditional proprietary community title. There may be difficulties of proof of boundaries or of membership of the community or of representatives of the community which was in exclusive possession, but those difficulties afford no reason for denying the existence of a proprietary community title capable of recognition by the common law. That being so, there is no impediment to the recognition of individual non-proprietary rights that are derived from the community’s laws and customs and are dependent on the community title. A fortiori, there can be no impediment to the recognition of individual proprietary rights. Once it is accepted that indigenous inhabitants in occupation of a territory when sovereignty is acquired by the Crown are capable of enjoying – whether in community, as a group or as individuals – proprietary interests in land, the rights and interests in the land which they had theretofore enjoyed under the customs of their community are seen to be a burden on the radical title which the Crown acquires. The notion that feudal principle dictates that the land in a settled colony be taken to be a royal demesne upon the Crown’s acquisition of sovereignty is mistaken. However, that was not the only basis advanced to establish the proposition of absolute Crown ownership and the alternative bases must next be considered. … DEANE and GAUDRON JJ: … The English common law principles relating to real property developed as the product of concepts shaped by the feudal system of medieval times. The basic tenet was that, consequent upon the Norman Conquest, the Crown was the owner of all land in the kingdom. A subject could hold land only as a tenant, directly or indirectly, of the Crown. By 1788, the combined effect of the Statute Quia Emptores 1290 and the Tenures Abolition Act 1660 had been largely to abolish the “pyramid of free tenants” (Gray, Elements of Land Law (1987), p 57) which had emerged under the feudal system of tenure and to confine the practical significance of the basic tenet that all land was owned by the Crown to matters such as escheat and foreshore rights. The “estate” which a subject held in land as tenant was itself property which was the subject of “ownership” both in law and in equity. The primary estate of a subject, the estate in fee simple, became, for almost all practical purposes, equivalent to full ownership of the land itself. Nonetheless, the underlying thesis of the English law of real property remained that the radical title to (or ultimate ownership of) all land was in the Crown and that the maximum interest which a subject could have in the land was ownership not of the land itself but of an estate in fee in it. The legal ownership of an estate in land was in the person or persons in whom the legal title to it was vested. Under the rules of equity, that legal estate could be held upon trust for some other person or persons or for some purpose. If the slate were clean, there would be something to be said for the view that the English system of land law was not, in 1788, appropriate for application to the circumstances of a British penal colony. (See, for example, Roberts-Wray, Commonwealth and Colonial Law (1966), p 626.) It has, however, long been accepted as incontrovertible that the provisions of the common law which became 96 [2.15]

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Mabo v Queensland (No 2) cont. applicable upon the establishment by settlement of the Colony of New South Wales included that general system of land law. (See, for example, Delohery v Permanent Trustee of NSW (1904) 1 CLR 283, 299-300; Williams v Attorney-General for New South Wales (1913) 16 CLR 404.) It follows that, upon the establishment of the Colony, the radical title to all land vested in the Crown. Subject to some minor and presently irrelevant matters, the practical effect of the vesting of radical title in the Crown was merely to enable the English system of private ownership of estates held of the Crown to be observed in the Colony. In particular, the mere fact that the radical title to all the lands of the Colony was vested in the British Crown did not preclude the preservation and protection, by the domestic law of the new Colony, of any traditional native interests in land which had existed under native law or custom at the time the Colony was established. Whether, and to what extent, such pre-existing native claims to land survived annexation and were translated into or recognised as estates, rights or other interests must be determined by reference to that domestic law. …

Tenure, Allodialism and Indigenous Rights at Common Law [2.20] Edgeworth B, “Tenure, Allodialism and Indigenous Rights at Common Law: England, United States and Australian Land Law Compared after Mabo v Queensland” (1994) 23 Anglo American Bar Review 397 at pp 403-406, 415-422 (footnotes omitted) The early years of settlement of Australia bear a remarkable similarity to those of North America, at least from the perspective of land law. Disregarding for the moment Aboriginal native title, all other interests likewise originated in Crown grants. Frequently these required payment of quit rents, and contained conditions and reservations to the Crown of rights over minerals, water and rights of way. The quit rents were modelled on the English practice whereby socage tenures – originally requiring some form of agricultural service on the part of the tenant – were progressively commuted for money payments which allowed tenants to go “quit”, or free, from their services. As was the case in colonial America, this was the only form of tenure that had ever existed in Australia. In this respect at the very least, local land law had departed much further from its feudal origins than English land law had at that time, despite the fact that the feudal system in Britain in 1788 had been significantly eroded by a wide range of legal, social and economic reforms. Thus various incidents of the different tenures continued to exist and defy the march of modernity in England at that time and these survived until the enactment of the reforms of 1925.While they had rather limited practical effect, they did nonetheless clearly demonstrate the presently visible imprint of a feudal past and, with the (arguable) exception of escheat and quit rents, continued to determine English land law in ways that were as different from the position in Australia at the time of settlement as they were in the United States. Furthermore, a closer examination of the substantive features of these quit rents and how they functioned in the early years of the colony reveals dramatic divergences from the system in place in the mother country. For instance, by 1809 it was the policy of the fledgling colonial administration to grant land to emancipated convicts in blocks of 30 acres if single, 50 acres if married, free of quit rent for 10 years. Free settlers were granted 100 acre blocks on similar terms. Generally, these grants contained prohibitions on alienation for a fixed period, usually seven years, as well as obligations to clear and cultivate a set proportion of the land. A period of considerable uncertainty followed in the 1820s and 30s due in large measure to attempts to put the land market on a more commercial footing. So, in 1825, a scheme was introduced whereby land could be bought outright at auction though it would still be subject to a nominal quit rent. However, land passed in could be granted without purchase, but after a grace period of seven years was subject to a quit rent of five per cent of the market value, [2.20]

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Tenure, Allodialism and Indigenous Rights at Common Law cont. redeemable at 20 years. No further obligation to pay quit rents of any form arose once 20 payments had been duly made. Clearly, nothing like this arrangement was possible under the English system of tenure. In this instance they were not in any meaningful sense rents but, rather, purchases by instalments. This process was extended in 1826 to allow immigrants to buy all land in this fashion. Over the next few years the administrative and political problems of collecting these rents magnified greatly and if anything were exacerbated by the enactment by the United Kingdom Parliament of the Australian Land Sales Act 1842 which pegged the sale price of land to a minimum of 20s per acre. The response in the colonies was swift and decisive. In 1844 the Lieutenant-Governor of Van Diemen’s Land remitted by proclamation all arrears of quit rent. At this stage, the estimated value of these was £30,000 sterling. The difference in the two “tenurial” models became even more pronounced after the notification of regulations announced by the new Governor in the Government Gazette of October 9, 1846 which provided that all lands for which 20 years’ rent had been paid would be absolved from any further payments, and any persons who had paid more than 20 years’ rent would have the balance refunded to them. The effect of these new regulations was nothing more than to transform all quit rents into purchase annuities. These would entitle purchasers to hold absolutely on payment of the twentieth instalment, thus aligning the rights of all landholders with those who had purchased passed-in land at auctions under the regulations introduced in 1823. By the middle of the nineteenth century, therefore, the situation advocated in the United States by the republican Thomas Jefferson, and analysed there as the modern point of departure from the doctrine of tenure, had been attained in Australia by local legislative act. Moreover, quit rents operated very differently in England at this time where, consistent with their feudal origins, they were payments representing the value of the relevant feudal services at the time of commutation. In Australia, by contrast, as was the case in the American colonies, the quit rent was, to begin with, in the nature of a rack rent or land tax. Later, by virtue of the above regulations, they took on the character of purchase annuities. Insofar as these payments entitled the “purchaser” to a fee simple estate enforceable against the world (including the Crown) it came to resemble more and more the allodium of the civil jurisdictions in the same manner as its American counterpart. One right of apparent feudal origin did remain, however, namely escheat, the right of the Crown to the property of a deceased intestate person without heirs. Certain arguments advanced in Mabo (infra) suggest a rather different basis on which the Crown came to acquire rights over land without heirs. In any event, escheat was finally eradicated by the enactment of Lang’s Act in 1863. While these various statutory features of landholding therefore point distinctly to the gradual appearance of allodialism, early case law said otherwise. … It would appear from [the judgments in Mabo] that there are three relevant legal concepts at work here: sovereignty, radical title and absolute beneficial, or since the reference is to the Crown, allodial, title. In the Australian context the High Court [in Mabo] held that the Crown acquired sovereignty and radical title but not absolute beneficial or allodial title to lands occupied by Aborigines. Unoccupied lands, by contrast, were automatically reduced to beneficial Crown ownership at that time. These legal consequences demonstrate how radical title operates as a linking concept between the constitutional or public law notion of sovereignty on the one hand, and the private law of proprietary rights on the other. Thus, Brennan J concluded that “radical title, without more, is merely a logical postulate required to support the doctrine of tenure (when the Crown has exercised its sovereign power to grant an interest in land) and to support the plenary title of the Crown (when the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown’s territory)”. In other words, it is a feature or consequence of sovereignty, not tenure, whereby the sovereign on the one hand automatically acquires absolute property rights (which may be granted to citizens) in the subject territory only in respect of those parcels of land which are not affected by native title, and on 98 [2.20]

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Tenure, Allodialism and Indigenous Rights at Common Law cont. the other, it has the power to compulsorily acquire parcels in the possession, ownership or control of the indigenous population either for its own purposes or for the purposes of distribution to subjects. Clearly, the doctrine of tenure in this formulation is very different from the doctrine of English land law where sovereignty, radical title and absolute beneficial (allodial) title are coextensive. This point was also made by Deane and Gaudron JJ who concluded that “if there were lands within a settled colony in relation to which there was some pre-existing native interest, the effect of an applicable assumption that that interest was respected and protected under the domestic law of the colony would not be to preclude the vesting of radical title in the Crown. It would be to reduce …, qualify … or burden … the proprietary estate in land which would otherwise have vested in the Crown, to the extent which was necessary to recognize and protect the pre-existing native interest.” Furthermore, no possible Lord Paramount/tenant relationship subsisted between the indigenous landholders and the Crown in these circumstances. They continued to hold their interests in the exactly same way after settlement as they had done before: that is, free from any incidents or services. Indeed, though the plaintiffs in this case had not conclusively established that “there were parcels of land in the Murray Islands owned allodial1y by individuals or groups”, Brennan J specifically acknowledged that as a general principle it was possible to find the existence of allodial native ownership pursuant to local custom. As we have seen, by contrast, according to the theory of English law the very act of conquest of Britain in 1066 entailed the extinguishment of all indigenous rights. Property rights arose later, in theory at least, only on the grant of estates subject to feudal obligations by the Crown to tenants-in-chief, and subsequently by the latter to other tenants and so on. Of course, native title in Australian colonies could be ultimately extinguished by the Crown, but this fact is merely more evidence of the divergences between the two systems of land law: extinguishment in the latter occurred incrementally rather than in a once-and-for-all fashion. Equally significantly, it was pursuant to principles of public law (sovereignty and its postulate, radical title) rather than tenure that this process occurred. … Predictably, the significance of these various differences led the majority of the court to query whether the doctrine of tenure was to a meaningful degree appropriate to Australian land law at any stage from the time of settlement onwards. After all, once these differences are catalogued the local animal begins to look very unlike its Imperial progenitor. Yet despite overruling the cluster of cases which extended the terra nullius doctrine to the Australian colonies, their Honours refused to go one step further and unequivocally reject the doctrine of tenure. Brennan J, however, went some way towards this conclusion. As if donning the mantle of Ronald Dworkin’s Hercules he was concerned, as noted above, that to reject tenure outright would fracture “the skeleton which gives our land its shape and consistency”. Nonetheless he admitted the plausibility of the suggestion that the doctrine was inappropriate to the Australian colonies: “Perhaps the assumption [that the doctrine of tenure formed the basis of land law] did not have to be made”. Later in his judgment he went further, concluding that, “It is arguable that universality of tenure is a rule depending on English history and that the rule is not reasonably applicable to the Australian colonies”, citing both Holdsworth and Pollock and Maitland as authority. The former author had explicitly opined that the universality of tenure was applicable only to England while the latter concluded that it was relevant only to conquered colonies. Once that doctrine was extended to Australia by case law, Brennan J concluded that it operated to lend support to the dispossession of the indigenous occupants. Despite his doubts on its relevance, however, he accepted that there was no choice but to accept the tenurial basis of Australian property law: “It is far too late in the day to contemplate an allodial or other system of land ownership. Land in Australia which has been granted by the Crown is held on a tenure of some kind and the titles acquired under the accepted land law cannot be disturbed.” [2.20]

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Tenure, Allodialism and Indigenous Rights at Common Law cont. This may seem to be conclusive proof that the local land law bore the impress of the feudal meaning of tenure from the very beginning of European settlement. However, by his endorsement of a theory of sovereignty which confers merely a radical title on the Crown (entitling it to certain rights of pre-emption, absolute beneficial title to waste and power to extinguish native title) his Honour has at least implied that the meaning ascribed to tenure in English land law is rather different to what it is in Australia. Put another way, it is one thing to suggest that the doctrine of tenure must be retained for the purpose of validating grants of land made by the Crown since settlement; it is something else to say that the English feudal doctrine of tenure necessarily applies in Australia. While the former is a necessary adjunct to the Crown’s sovereign power, the latter is not. The implicit conclusion in Brennan J’s argument here is that the doctrine of tenure denotes little more than the legal capacity of the Crown to confer valid title to land on citizens, or, more simply, radical title-a public rather than private law concept. If this reconceptualization is considered alongside those unique features of Crown grants outlined in the first part of this section, it can be seen to have more in common with allodial systems where citizens, in Megarry and Wade’s terms, receive out-and-out transfers of land. Also, given that only so much of the common law as was “reasonably applicable to the circumstances of the colony” was introduced on settlement, it is not implausible to presume that those distinctly feudal dimensions of the doctrine of tenure should not have been “reasonably applicable” to those early manor-less Australians. Deane and Gaudron, JJ reasoned similarly. In agreement with Brennan, J they suggest that from the general principles of English land law “It follows that, upon the establishment of the colony the radical title to all land vested to the Crown”. As we have seen above, this falls far short of the terra nullius doctrine. … In conclusion, it can be seen that the concept of tenure held to underpin Australian land law in Mabo is radically different from its counterpart in English law. The judgments of the majority, while not openly addressing the empirical peculiarities which were argued earlier in this article to distinguish the position in the colony from English common law, are quite consistent with them in so far as they cast doubt on the appropriateness of all the features of the traditional doctrine of tenure (including the fictions) for the Australian colonies generally.

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Notes and Questions

1. An analysis of the history and development of the doctrine of tenure and of the classification of tenures is set out in many texts. See for example Harpum, Bridge and Dixon, Megarry and Wade: The Law of Real Property (8th ed, Sweet and Maxwell, London, 2012, Ch 2; Burn and Cartwright, Cheshire and Burn’s Modern Law of Real Property (18th ed, OUP, Oxford, 2011), pp 29-47, 110-114; Hargreaves and Helmore, Introduction to the Principles of Land Law (New South Wales) (1963), pp 8-18 and pp 30-36; Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.10] – [2.20]. 2. Does Brennan J accept the applicability of the doctrine of tenure to Australia? If so, in what ways does Brennan J redefine the notion of the doctrine of tenure? See Edgeworth, “Tenure, Allodialism and Indigenous Rights at Common Law: England, United States and Australian Land Law Compared after Mabo v Queensland” (1994) 23 Anglo American Bar Review 397 extracted at [2.20].

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3. A number of other legal scholars have argued that the doctrine of tenure was totally inappropriate to describe the way in which land was held in Australia. One of the earliest proponents of the view that the doctrine of tenure was inappropriate to Australian conditions was Windeyer, counsel for the defence, in Attorney-General (NSW) v Brown (1847) 2 Legge 312. He argued (unsuccessfully) that after the Statute of Tenures 1660 in 1660, land was effectively held allodially (that is, not held of any lord or superior and in which, therefore, the owner had an absolute property) and that this was the mode of holding in the colony. See Buck, “Attorney-General v Brown and the Development of Property Law in Australia” (1994) 2 APLJ 128, 133-135. See also Edgeworth, “Tenure, Allodialism and Indigenous Rights at Common Law: England, United States and Australian Land Law Compared after Mabo v Queensland” (1994) 23 Anglo American Bar Review 397; Millard and Millard, The Law of Real Property in New South Wales (1905); Devereux and Dorsett, “Towards a Reconsideration of the Doctrine of Estates and Tenure” (1996) 4 APLJ 30; Secher, Aboriginal Customary Law: A Source of Common Law Title to Land (Hart Publishing, Oxford, 2014), Ch 3. On the other hand, it can be argued that the Crown’s position as ultimate “owner” has more meaning in the Australian context than it has had in England for hundreds of years. The minerals regime in Australia (see [16.65]) flows very much from the fact that in many Crown grants, minerals were reserved to the Crown, and further, many forms of tenure created by statute in the 19th and 20th centuries ensured that the Crown retained some controls over the land granted.

Wik Peoples v Queensland [2.30] Wik Peoples v Queensland (1996) 187 CLR 1 High Court of Australia [The High Court considered the issue of extinguishment of native title by the grant of pastoral leases under the Land Act 1910 (Qld) and the Land Act 1962 (Qld). The majority of the High Court in separate judgments (Toohey, Gaudron, Gummow and Kirby JJ) held that the grant of the pastoral leases would not automatically extinguish native title. It was argued that by creating the pastoral leases the Crown reserved an interest to itself at the end of the lease (a full beneficial reversion expectant) and such a beneficial interest was itself inconsistent with continuing native title rights.] GUMMOW J: English land law Traditional concepts of English land law, although radically affected in their country of origin by the Law of Property Act 1925 (UK), may still exert in this country a fascination beyond their utility in instruction for the task at hand. So much became apparent as submissions were developed on the hearing of these appeals. The task at hand involves an appreciation of the significance of the unique developments, not only in the common law, but also in statute, which mark the law of real property in Australia, with particular reference to Queensland. I have referred above to some of these developments. There also is the need to adjust ingrained habits of thought and understanding to what, since 1992, must be accepted as the common law of Australia. Further, those habits of thought and understanding may have lacked a broad appreciation of English common law itself. For example, there is no particular reason to be drawn from English land law which renders it anomalous to accommodate in Australian land law notions of communal title which confer usufructuary rights. There are recognised in England rights of common which depend for their establishment upon prescription and custom. An example is the common of pasture in gross enforceable by action by one commoner on behalf of that commoner and the other commoners. (Halsbury’s Laws of England, 1st ed, vol 4, “Commons and Rights of Common”, par 1104. See also Halsbury’s Laws of England, 4th ed, vol 6 Reissue, “Commons”, par 564; Holmes, Notes to Kent’s Commentaries, reprinted in Novick, The Collected Works of Justice Holmes (1995), vol 2, pp 410-415; [2.30]

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Wik Peoples v Queensland cont. Simpson, A History of the Land Law, 2nd ed (1986), pp 107-108.) Moreover, the extinguishment of the rights of commoners may be effected by statute. In the century before the enactment in England of the Inclosure Act 1845 (UK), (8 & 9 Vict c 118. See Simpson, A History of the Land Law, 2nd ed (1986), pp 261-262; Cornish and Clark, Law and Society in England 1750-1950 (1989), pp 137-141) nearly 4,000 private inclosure Acts had been passed. (Halsbury’s Laws of England, 1st ed, vol 4, “Common and Rights of Common”, par 1146.) Nor, in a system where, subject to statute, land ownership depends upon principles derived from the English common law is there any necessary conceptual difficulty in accommodating allodial to tenurial titles. The point was made as follows by Brennan J in Mabo [No 2] ((1992) 175 CLR 1 at 48-49): Nor is it necessary to the structure of our legal system to refuse recognition to the rights and interests in land of the indigenous inhabitants. The doctrine of tenure applies to every Crown grant of an interest in land, but not to rights and interests which do not owe their existence to a Crown grant. The English legal system accommodated the recognition of rights and interests derived from occupation of land in a territory over which sovereignty was acquired by conquest without the necessity of a Crown grant. Blackstone contrasted as follows the term “allodial” with the term “fee” (Blackstone, Commentaries on the Laws of England, 17th ed, (1830), vol 2, p 104): The true meaning of the word fee (feodum) is the same with that of feud or fief, and in its original sense it is taken in contradistinction to allodium; which latter the writers on this subject define to be every man’s own land, which he possesseth merely in his own right, without owing any rent or service to any superior. This is property in its highest degree; and the owner thereof hath absolutum et directum dominium, and therefore is said to be seised thereof absolutely in dominico suo, in his own demesne. But feodum, or fee, is that which is held of some superior, on condition of rendering him service; in which superior the ultimate property of the land resides. In Blackstone’s time, it was accepted that allodial titles preceded the development of the feudal system after the Norman Conquest. In the same period in which the existence of allodial title was denied to the colony of New South Wales by the decision in Brown, it was re-emerging elsewhere in the common law world. Quite apart from the treatment in the United States of native title, the American Revolution was followed in several of the States by legislative repudiation of the tenurial system as the ultimate root of real property title. For example, in New York the legislature abolished all feudal tenures of every description, with all their incidents, and declared that all lands within that State were allodial (Kavanaugh v Cohoes Power & Light Corporation (1921) 187 NYS 216 at 236-237; Gray, The Rule Against Perpetuities, 4th ed (1942), §23). Of the developments in the United States, Chancellor Kent wrote in 1828 (Kent, Commentaries on American Law (1828), vol 3, p 412. For the views of Jefferson and John Adams and their influence upon constitutional theory in the United States, see Edgeworth, “Tenure, Allodialism and Indigenous Rights at Common Law: English, United States and Australian Land Law Compared after Mabo v Queensland”, Anglo-American Law Review, vol 23 (1994) 397, at pp 399-403): Thus, by one of those singular revolutions incident to human affairs, allodial estates, once universal in Europe, and then almost universally exchanged for feudal tenures, have now, after the lapse of many centuries, regained their primitive estimation in the minds of freemen. … The authorisation by the 1910 Act and the 1962 Act of activities amounting to physical inconsistency (in the sense indicated above) with the continued exercise of what now are accepted as existing rights of native title would manifest, as a matter of necessary implication, the legislative intention to impair or extinguish those rights. I have referred to legislative intention with the particular meaning of “intention” indicated in the Native Title Act Case ((1995) 183 CLR 373 at 423) and 102 [2.30]

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Wik Peoples v Queensland cont. discussed earlier in these reasons. Impairment or extinguishment would also follow if the 1910 Act or the 1962 Act prohibited acts which would be committed in the exercise of what now would be accepted to be native title. I approach the analysis of the 1910 Act and the 1962 Act upon that footing and what follows should be read accordingly. Expansion of radical title Radical title is that acquired upon the assumption of sovereignty (as understood in the law of nations) or, rather, upon settlement (Mabo [No 2] (1992) 175 CLR 1 at 86-87) (as understood in that part of British constitutional law concerned with Imperial expansion). Radical title links international and constitutional law notions with those which support the private law of proprietary rights and interests in land. Thus, radical title was “a postulate to support the exercise of sovereign power within the familiar feudal framework of the common law” (Mabo [No 2] (1992) 175 CLR 1 at 54). The framework included the doctrine of tenures. Absolute and beneficial Crown ownership, a plenum dominium, was established not by the acquisition of radical title but by subsequent exercise of the authority of the Crown. The mediaeval notion of tenure was expressed by the proposition that all land was held directly or indirectly of the Crown. This involved relationships of reciprocal obligation between the respective parties at each level of the feudal structure, at the peak of which stood the sovereign. In an understanding of these relationships, including those between intermediate or mesne lord and tenant, “proprietary language is out of place” and the dominium of any particular dominus “was always a relative thing” (Milsom, The Legal Framework of English Feudalism (1976), p 39). The concept of ownership by the Crown of all land is a modern one, and its adoption in legal theory may have been related to Imperial expansion in the seventeenth and eighteenth centuries, well after the decline of feudalism (Simpson, A History of the Land Law, 2nd ed (1986), pp 1, 47-48; Edgeworth, “Tenure, Allodialism and Indigenous Rights at Common Law: English, United States and Australian Land Law Compared after Mabo v Queensland”, Anglo-American Law Review, vol 23 (1994) 397, at pp 428-432). Writing in 1896, Professor Jenks said (Jenks, A History of the Australasian Colonies (1896), p 59): [T]he theory had almost died a natural death when it sprang to life again in the most unexpected manner with the acquisition of the great English colonies. For if, as was the case, no subject could show a recognised title to any of the countless acres of America and Australia, at a time when those countries were first opened up by white men, it followed that, according to this relic of feudal theory, these acres belonged to the Crown. It may seem almost incredible that a question of such magnitude should be settled by the revival of a purely technical and antiquarian fiction. In the law, fictions usually are acknowledged or created for some special purpose, and that purpose should be taken to mark their extent (Mabo [No 2] (1992) 175 CLR 1 at 212; Morris v Pugh (1761) 3 Burr 1241 at 1243 [97 ER 811 at 811]; Fuller, Legal Fictions (1967), pp 56-71). The State of Queensland relies strongly upon a passage in the judgment of Brennan J in Mabo [No 2]. In the course of discussing the extinguishment of native title upon the vesting by Crown grant of an interest in land inconsistent with continued enjoyment of a native title in respect to the same land, his Honour said (Mabo [No 2] (1992) 175 CLR 1 at 68): If a lease be granted, the lessee acquires possession and the Crown acquires the reversion expectant on the expiry of the term. The Crown’s title is thus expanded from the mere radical title and, on the expiry of the term, becomes a plenum dominium. Queensland submits that the grant by the Crown of a lease necessarily involves the acquisition by the Crown of the reversion which is expectant upon the expiry of the term. Accordingly, in granting the lease, the Crown exercises sovereign power in such a fashion as to assert absolute and beneficial ownership out of which the lease is carved. That absolute and beneficial ownership is, as a matter of law, inconsistent with the continued right to enjoy native title in respect of the same land. [2.30]

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Wik Peoples v Queensland cont. It is necessary for the State to make good these propositions by their adaptation to the statutory systems for the disposition of Crown lands established by the 1910 Act and the 1962 Act. It is here, in my view, that the case for the State breaks down. I have referred to the significant constitutional developments embodied in mid-nineteenth century legislation, culminating in Queensland with the 1867 Act, whereby settlement was achieved, in favour of the colonial legislatures, of the conflicting fiscal and political interests of the Imperial and local authorities and of the executive and the colonial legislatures in the disposition of the waste lands of the Crown. That settlement, embodied in ss 30 and 40 of the 1867 Act, was implemented in successive statutes. These provisions include sub-ss (1) and (2) of s 6 of the 1910 Act, which state (section 8 of the Crown Lands Act 1884 (Q), s 12 of the Land Act 1897 (Q) and s 6(1) and (2) of the 1962 Act were all in similar terms): (1) Subject to this Act, the Governor in Council may, in the name of His Majesty, grant in fee-simple, or demise for a term of years, any Crown land within Queensland. (2) The grant or lease shall be made subject to such reservations and conditions as are authorised or prescribed by this Act or any other Act, and shall be made in the prescribed form, and being so made shall be valid and effectual to convey to and vest in the person therein named the land therein described for the estate or interest therein stated. Section 209(1)(ii) of the 1910 Act empowers the Governor in Council to make regulations which prescribe forms and “the conditions, stipulations, reservations, and exceptions that shall be inserted … in grants, leases, licenses, and other instruments”. The term “Crown Land” was defined in s 4 as follows (section 4 of the 1910 Act followed, in this respect, the terms of earlier legislation including the Pastoral Leases Act 1869 (Q) (s 3), the Crown Lands Act 1884 (Q) (s 4) and the Land Act 1897 (Q) (s 4) and the pattern is continued in the definition of “Crown Land” in s 5 of the 1962 Act): All land in Queensland, except land which is, for the time being – (a) Lawfully granted or contracted to be granted in fee-simple by the Crown; or (b) Reserved for or dedicated to public purposes; or (c) Subject to any lease or license lawfully granted by the Crown: Provided that land held under an occupation license shall be deemed to be Crown land. The phrase “[a]ll land in Queensland” was apt to include land in respect of which the Crown held radical title. By that radical title, as a postulate of the doctrine of tenures and a concomitant of sovereignty, the common law enabled the Crown to grant interests in land to be held of the Crown and to become absolute beneficial owner of unalienated land required for the purposes of the Crown (Mabo [No 2] (1992) 175 CLR 1 at 48). However, by the constitutional settlement of the mid-nineteenth century, these prerogatives of the Crown, part of the common law, were displaced. Thereafter, all land in Queensland was to be dealt with pursuant to statute. It was by legislation that interests in the land were to be granted by the Crown and land was to be reserved or dedicated to “public purposes” (the term “Public Purposes”, as it appeared in the definition of “Crown Land” in the 1910 Act, itself was defined in s 4 by reference to a lengthy list of objects or purposes, including “Aboriginal reserves”). Section 6(1) of the 1910 Act conferred upon the Governor in Council power to grant in fee simple or as a demise for a term of years any land in Queensland, save that land for the time being in fee simple, reserved for or dedicated to public purposes or subject to lease or licence lawfully granted by the Crown. (The effect of the proviso to par (c) of the definition of “Crown Land” was to classify as Crown land susceptible of grant or demise under s 6 land held merely under an occupation licence issued under Pt III (ss 40-47) of the 1910 Act.) The statute maintained a legal regime where, in respect of 104 [2.30]

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Wik Peoples v Queensland cont. what it identified as leases, there was no need for the creation in the Crown of a reversionary estate out of which lesser estates might then be granted. Rather, land which for the time being had been subject to any such “lease” lawfully granted under s 6, was, upon ceasing to be so and, by reason of it now answering the definition of “Crown Land” in s 4, liable further to be dealt with by the Crown under s 6. Moreover, as will appear later in these reasons, whilst entry by the lessee was essential, at common law, to the creation of the reversion, s 6(2) operated effectually to vest interests granted under the statute in advance of and without dependence upon entry. In addition, special provision was made by s 135 for consequences of forfeiture or other premature determination of any lease or licence. Section 135 provided: If the license or lease of any land is determined by forfeiture or other cause before the expiration of the period or term for which it was granted, then, unless in any particular case other provision is made in that behalf by this Act, the land shall revert to His Majesty and become Crown land, and may be dealt with under this Act accordingly. It is apparent that the term “revert” is used in the particular sense of the reassumption of the character of “Crown land” liable to further disposition under s 6. Further, as I seek to explain later in these reasons, whilst entry was necessary to create the common law reversion, compliance with s 6(2) effectually vested without the need for prior entry, the interest granted. Upon that state of affairs, s 135 would operate in the above manner. The 1962 Act contains similar provisions to ss 4, 6 and 135 of the 1910 Act. (The 1962 Act, s 5 (definitions of “Crown land” and “Public purposes”), s 6, s 299 (forfeiture).) Accordingly, I would reject the submission for the State that the scheme of the 1910 Act and the 1962 Act is such that, with respect to the grant of limited interests thereunder by the Crown, the necessary consequence is the acquisition by the Crown of a reversion expectant on the cesser of that interest, thereby generating for the Crown that full and beneficial ownership which is necessarily inconsistent with subsisting native title. Whatever be the interests or other rights created under s 6 of the 1910 Act and the 1962 Act, they “owe their origin and existence to the provisions of the statute” (cf Davies v Littlejohn (1923) 34 CLR 174 at 187-188). TOOHEY J: … Radical title Because of the course taken by the argument before the Court in the present appeals, it is necessary to say something about radical title, though this matter was considered by the Court in Mabo [No 2]. (See generally, Rogers, “The Emerging Concept of “Radical Title” in Australia: Implications for Environmental Management”, Environmental and Planning Law Journal, vol 12 (1995) 183.) As is clear from the judgments in that case, a consequence of sovereignty is the attribution of radical title to the Crown. But radical title does not of itself carry beneficial ownership. Brennan J described it in these terms (Mabo [No 2] (1992) 175 CLR 1 at 48): The radical title is a postulate of the doctrine of tenure and a concomitant of sovereignty. In Amodu Tijani v Secretary, Southern Nigeria ([1921] 2 AC 399 at 403) the Privy Council, in a judgment delivered by Viscount Haldane, spoke of the title of the Sovereign as “a pure legal estate, to which beneficial rights may or may not be attached”. From the distinction thus made, it is apparent that the grant of an estate in land does not require the Crown to assume beneficial ownership of the land. Nor does the relevant legislation so dictate. As Brennan J observed in Mabo [No 2] ((1992) 175 CLR 1 at 51): It is only the fallacy of equating sovereignty and beneficial ownership of land that gives rise to the notion that native title is extinguished by the acquisition of sovereignty. Later his Honour said (Mabo [No 2] (1992) 175 CLR 1 at 68): [2.30]

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Wik Peoples v Queensland cont. If a lease be granted, the lessee acquires possession and the Crown acquires the reversion expectant on the expiry of the term. The Crown’s title is thus expanded from the mere radical title and, on the expiry of the term, becomes a plenum dominium. That the radical title lies with the Crown immediately before the grant of a pastoral lease is clear. But how relevant is it to speak of the Crown acquiring the “reversion” in such a case and of the Crown’s title becoming a plenum dominium? It has been said (Helmore, The Law of Real Property in New South Wales, 2nd ed, (1966), p 227): “A reversion is the interest which remains in a grantor who creates out of his own estate a lesser estate” (emphasis added). In support of the foregoing statement, the author quotes from Blackstone (Commentaries, Book II, Ch 11, p 175): An estate in reversion is the residue of an estate left in the grantor, to commence in possession after the determination of some particular estate granted out by him … For the fee-simple of all lands must abide somewhere; and if he, who was before possessed of the whole, carves out of it any smaller estate, and grants it away, whatever is not so granted remains in him. The doctrine of estates is a feudal concept in order to explain the interests of those who held from the Crown, not the “title” of the Crown itself. The discussion of reversion in the standard texts invariably focuses on the holder of an estate in fee simple who grants some lesser estate, usually a life estate or lease. But that is not the case here. The matter was explained by Brennan J in Mabo [No 2] ((1992) 175 CLR 1 at 50) when he said: Recognition of the radical title of the Crown is quite consistent with recognition of native title to land, for the radical title, without more, is merely a logical postulate required to support the doctrine of tenure (when the Crown has exercised its sovereign power to grant an interest in land) and to support the plenary title of the Crown (when the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown’s territory). To speak, in relation to the Crown, of a reversion expectant on the expiry of the term of a lease as expanding the Crown’s radical title to a plenum dominium is, in my respectful view, to apply the concept of reversion to an unintended end. To say this in no way detracts from the doctrine of sovereignty; the Crown may thereafter deal with the land as is authorised by statute, disposing of it in some way or appropriating it to its own use. (These appeals are not concerned with the operation of the Racial Discrimination Act 1975 (Cth).) Indeed it may deal with the land during the term to the extent that it is authorised by statute or by the terms of the grant to do so. In the present case, once a pastoral lease came to an end, the land answered the description of “Crown land” and might be dealt with accordingly. (See s 135 of the 1910 Act.) The invocation of reversion and plenum dominium, as those expressions are usually understood, does not lie easily with the position of the Crown under the relevant statutes. The proposition that it is the radical title of the Crown with which we are concerned and that, on the expiration or other termination of a pastoral lease, it is still the radical title that must be considered in relation to native title rights, does not minimise the sovereignty of the Crown. Nor does it undermine the principle that native title rights depend on their recognition by the common law. That recognition carries with it the power to extinguish those rights. But it requires a very clear act to do so. To contend that there is a beneficial reversionary interest in the Crown which ensures that there is no room for the recognition of native title rights, is in my view, to read too much into the Crown’s title. Furthermore, if it is the reversion which carries with it beneficial title, why is that title not there in the first place? And if it is the existence of that beneficial title which extinguishes native title rights, why were those rights not extinguished before the grant of a pastoral lease? There is a curious paradox involved in the proposition. While nothing in the judgments of the Court, in particular those in Mabo [No 2], point with any certainty to the answers demanded of the Court in the present proceedings, that decision is a valuable 106 [2.30]

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Wik Peoples v Queensland cont. starting point because it explores the relationship between the common law and the “law” which evidences native title rights. So far as the scope of Mabo [No 2] is concerned, it should be noted that in their joint judgment Mason CJ and McHugh J, with the authority of the other members of the Court constituting the majority, said (Mabo [No 2] (1992) 175 CLR 1 at 16): The formal order to be made by the Court … is cast in a form which will not give rise to any possible implication affecting the status of land which is not the subject of the declaration in … the formal order. This simply reinforces the proposition that while the judgments in Mabo [No 2] are significant for an understanding of the issues in the present appeals, they do not determine their outcome.

[2.35]

Notes and Questions

1. Brennan CJ (in dissent) reiterated the view he expressed earlier in Mabo v Queensland (No 2) (1992) 175 CLR 1, that it was necessary to maintain for Australian land law, the basic underlying principles of English land law. “The doctrines of tenure (with its incident of escheat) and estates ensure that no land in which the Crown has granted an interest is ever without a legal owner” (at 90-91). After reading the extracts above of two of the majority judges, do you agree? 2. By rejecting the argument that the Crown acquired a reversion expectant on the expiration of the pastoral leases, is the High Court also commenting on the application of the doctrine of tenure for Australia? See Godden, “Wik: Feudalism, Capitalism and the State. A Revision of Land Law in Australia” (1997) 5 APLJ 162 and Hepburn, “Feudal Tenure and Native Title: Revising an Enduring Fiction” (2005) 27 Syd L Rev 49. In a series of articles – subsequently consolidated and revised in her book, Secher, Aboriginal Customary Law: A Source of Common Law Title to Land (Hart Publishing, Oxford, 2014) – Dr Ulla Secher has analysed, inter alia, the effect of the Mabo (No 2) and Wik decisions and subsequent High Court cases on the doctrine of tenure for Australia: see Secher, “The Meaning of Radical Title: The Pre-Mabo Authorities Explained – Part 1” (2005) 11 APLJ 179; Secher, “The Meaning of Radical Title: The Pre-Mabo Authorities Explained – Part 2” (2005) 11 APLJ 209; Secher, “A Common Law Doctrine of Suspension of Native Title?: Judicial Interpretations of the “Reversion Expectant Argument” and the Concept of “Operational Inconsistency” – Part 1” (2005) 12 APLJ 1; Secher, “A Common Law Doctrine of Suspension of Native Title?: Judicial Interpretations of the “Reversion Expectant Argument” and the Concept of “Operational Inconsistency” – Part 2” (2005) 12 APLJ 26; Secher, “The Doctrine of Tenure in Australia Post-Mabo: Replacing the “Feudal Fiction” with the “Mere Radical Title Fiction” – Part 1” (2006) 13 APLJ 107; Secher, “The Doctrine of Tenure in Australia Post-Mabo: Replacing the “Feudal Fiction” with the “Mere Radical Title Fiction” – Part 2” (2006) 13 APLJ 140; Secher, “The Concept of “Operational Inconsistency in Australia: Implications for Native Title” – the Common Law and Statutory Positions” (2010) 18 APLJ 218. Despite apparent comments to the contrary by Brennan J in Mabo (No 2), Secher has argued cogently that the majority of judges in the Mabo case (including Brennan J) had already rejected the notion that the doctrine of tenure formed the basis of absolute beneficial ownership in the Crown of unalienated Crown lands: Secher, “The Doctrine of Tenure in [2.35]

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Australia Post-Mabo: Replacing the “Feudal Fiction” with the “Mere Radical Title Fiction” – Part 2” (2006) 13 APLJ 140 at 140-158. 3. Although the doctrine of tenure was originally part of the law of the American colonies, in most states it has been abolished (by legislation, by judicial decision or by constitution): for a discussion, see New Zealand Law Commission, Tenure and Estates in Land (Preliminary Paper No 20, June 1992), pp 11-12. In England, the Law Commission has accepted the need for reform of feudal land law (stating “the present law is indefensible”) and planned to include it in the Ninth Programme of Law Reform (Law Com No 271 [11.26] and Law Com No 294 [6.24]). However, the Commission subsequently decided to defer the project in its Ninth, Tenth and Eleventh Programmes so that other projects of greater public significance could be addressed: Law Com No 330 [3.2]-[3.3]. In Scotland, the system of feudal land tenure has been abolished. (Abolition of Feudal Tenures etc (Scotland) Act 2000 effecting the recommendations of Scottish Law Commission, Report on Abolition of Feudal System 1999 (Scots Law Com No.168). 4. See McNeil, Common Law Aboriginal Title (1989) and the Secher articles and book for discussion of the interface between the doctrine of tenure and native land rights. 5. The only incident of socage tenure to retain any current relevance is that of escheat. Escheat for want of an heir or devisee has been abolished in Australia: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.20]. However, it is still possible, in some circumstances, for escheat to occur. Where a trustee in bankruptcy or a liquidator of a landowner disclaims the land under statutory powers, the land escheats to the Crown. See Re Middle Harbour Investments Ltd [1977] 2 NSWLR 652; Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793; Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (in liq) (1998) 45 NSWLR 556. Any charges on the land remain. In National Australia Bank Ltd v New South Wales (2009) 182 FCR 52; 260 ALR 115 at [23], however, Rares J expressed the view, without deciding, that the process of escheat in these circumstances was subject to the power of the court to make an order vesting title to the disclaimed land in someone other than the Crown, pursuant to provisions of the Bankruptcy Act 1966 (Cth) and the Corporations Act 2001 (Cth). Also see Note, “Escheat: A Medieval Doctrine Revisited” (2010) 84 ALJ 76. 6. In Yanner v Eaton (1999) 201 CLR 351 the High Court held that legislation vesting “property” of all wild fauna in the Crown, did not vest beneficial ownership in the Crown. The legislation was held to be regulatory in nature. The decision provides ideological support for the view that the doctrine of tenure essentially provides the Crown with a supervisory and governmental role and gives rise only to radical or “bare” title in the Crown.

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DOCTRINE OF ESTATES Western Australia v Ward [2.40] Western Australia v Ward (2000) 170 ALR 159 Federal Court of Australia [An extract of the High Court decision in this case and the reasons for decision relating to native title issues can be found at [7.70]. North J was in dissent in the full Federal Court. This part of his judgment is extracted here as it provides a clear summary of the history and development of doctrines of tenures and estates.] NORTH J: … Change as a feature of the history of property law Nowhere has modification and change marked the history of property law more clearly than in relation to the doctrine of tenure. This doctrine was the first way in which the ownership of property was fragmented. It underpinned the feudal system, so that the land law reflected the social demands of the time. Through the process of subinfeudation, a hierarchy was set up in which everyone held land of a superior, with the King at the apex. Each person in the hierarchy owed services to the mesne lord above, and was also owed services by those below. Interests in land were therefore not granted outright to tenants, and it was implicit in the relationship of tenure that both the grantor and the tenant have interests in the land at the same time. In the fifteenth century Littleton classified the various tenures by reference to the nature of service which the grant of land required the tenant to render. Thus, for instance, a tenant holding by knight service was required to fight as a knight or supply knights for battle. A tenant who held by castle-gard was obliged to serve in defence of castles, and a tenant holding by grand sergeanty was required to render service of a personal nature, and so on. A major change in the tenurial system reflected the social changes then occurring. Originally the tenures formed the basis of social organisation and reflected the economic, military and spiritual cooperation between all segments of society. In due course the value of fixed services declined and an economy based on contract and the payment of wages grew up. The obligation to render services was replaced by the obligation to pay “rent”. The position today is described by Simpson in A History of the Land Law 2nd ed, 1986, p 1 as follows: Indeed, so unimportant have tenures become that nobody certainly knows what sorts of tenure can still exist, and in practice this matters not at all. As the incidents of land holding changed so did the ability to transfer those interests. In the earliest times the tenant’s interest in land was not heritable as of right. In due course the tenant was entitled to pass his interest to his heir without the consent of the grantor. By the time of the Statute of Quia Emptores 1290 (UK) it was recognised that the tenant had the right to alienate his interest. Each of these steps constituted a radical change which was accommodated within the system of tenure and which reflected the requirements of contemporary society. By demonstrating that several persons could hold proprietary interests in the one piece of land, the doctrine of tenure laid the groundwork for the division of land in ways other than pursuant to the tenurial relationship. Lawson and Rudden in The Law of Property 2nd ed, 1982 state at p 81, that “tenure, since it denied in principle the unity of ownership, created a mental atmosphere favourable to the division of ownership on other lines also”. In particular, with the evolution of the doctrine of estates, property interests came to be fragmented on the basis of time. Whereas the doctrine of tenure recognised that a number of persons could have a proprietary interest in the one piece of land at the same time, by relying upon duration, the doctrine of estates allowed for the creation of successive interests, present and future, in the same piece of land. [2.40]

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Western Australia v Ward cont. In essence, the doctrine of estates reflected the idea that a person should be able to have an interest in land giving rise to a present right to possession, while at the same time other persons would also have interests in the same land giving them future rights to possession. Kevin Gray and Susan Francis Gray in The Idea of Property in Land (referred to above at [789]) at pp 28-29 discuss the temporal basis of the doctrine of estates in the following terms: It was left to the doctrine of estates to quantify the grades of abstract entitlement which might be enjoyed by any particular tenant (or landholder) within the tenurial framework. This doctrine spelt out a rich taxonomy of “estates” in the land, each estate representing an artificial proprietary construct interposed between the tenant and the physical object of his tenure. Each tenant owned (and still owns) not land but an estate in land. The precise nature of the estate was graded by its temporal duration and by the possible attachment of variegated conditions precedent or subsequent. Each common law estate – whether the fee simple, the fee tail, or the life estate – comprised a time-related segment of the bundle of rights and powers exercisable over land; and the doctrine of estates effectively provided diverse ways in which three-dimensional realty might be carved up in a fourth dimension of time. In Walsingham’s Case (1573) 2 Plowd 547 at 555; 75 ER 805 at 816-817 it was said: … the land itself is one thing, and the estate in the land is another thing, for an estate in the land is a time in the land, or land for a time, and there are diversities of estates, which are no more than diversities of time … Lawson and Rudden also discuss how notions of duration could be divided through the doctrine of estates. The authors state (p 88): In relation to land the solution long ago adopted by English law was to create an abstract entity called the estate in the land and to interpose it between the tenant and the land. Since the estate was an abstract entity imagined to serve certain purposes, it could be made to conform to a specification, and the essential parts of the specification were that the estate should represent the temporal aspect of the land – as it were a fourth dimension – that it should be divisible within that dimension in respect of time according to a coherent set of rules, but that the whole of that dimension, the estate, should be regarded as existing in the present moment so that slices of the estate representing rights to successive holdings of the land should be regarded as present estates co-existing at the same time. The change in the importance of the doctrine of estates is explained by Simpson at pp 1-2 as follows: The doctrine of estates too is still with us, though in a guise which would hardly be intelligible to a medieval lawyer. But although the fundamental nature of these two doctrines [the doctrine of tenure and the doctrine of estates] is avowed in the leading modern textbook on real property, estates no longer have the fascination that once they had, and tenure is little discussed. The emphasis of the modern law passes both doctrines by, and rightly so. If we go back into the history of the land law the emphasis changes. In the eighteenth and early nineteenth centuries the ablest property lawyers are concerned to work out the subtleties of the rules governing the limitation of estates, particularly in connection with the elaborate family settlements of the time; when we reach the fifteenth century Littleton’s treatise on the law of real property is traditionally called Tenures, and though he deals at length with the doctrine of estates it is the tenurial quality of the law which bulks largest in his analysis. Thus, it can be seen that while native title is not an estate recognised by the common law, there is nothing inconsistent within the common law in the concept of suspension of property rights. It reflects an idea which lies at the foundation of the doctrine of estates itself. Further, the changes accommodated through history in the elements of the doctrine of estates show the capacity of property law to change as required by contemporary circumstances. 110 [2.40]

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Western Australia v Ward cont. It should also be remembered that the original estates in property law were the freehold estates of fee simple, fee tail and life estate. Initially, leaseholds were not classified as estates. Leaseholds created contractual rights only and could be enforced by contractual remedies. Late in the fifteenth century the common law courts permitted leaseholders to recover the land itself in an action for ejectment. Once this remedy became available the common law could no longer deny leaseholders the status of estate holders. The incorporation of leaseholds into the doctrine of estates is yet another example of a change by which circumstances have seen structural alterations in the law of property. Indeed change has continued in this area. Last year the House of Lords decided in Bruton v London & Quadrant Housing Trust [1999] 3 WLR 150 that a leasehold does not always create an estate in land. Mr Bruton occupied a flat under an agreement with the Housing Trust. The flat was in a building owned by the London Borough of Lambeth. The Borough and the Trust entered into an agreement designated a licence, in which it was agreed that the Borough did not grant an estate or other proprietary interest to the Trust. The question to be decided was whether the Trust and Mr Bruton were landlord and tenant for the purposes of the statutory repairing obligations. The House of Lords considered that the relationship was that of landlord and tenant. In response to the argument that there could be no lease between Mr Bruton and the Trust because the Borough did not grant any proprietary interest to the Trust, Lord Hoffman, with whom Lord Slynn of Hadley, Lord Jauncey of Tullichettle, Lord Hope of Craighead and Lord Hobhouse of Woodborough agreed, said at 156-157: First, the term “lease” or “tenancy” describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding upon third parties. A lease may, and usually does, create a proprietary interest called a leasehold estate or, technically, a “term of years absolute”. This will depend upon whether the landlord had an interest out of which he could grant it. Nemo dat quod non habet. But it is the fact that the agreement is a lease which creates the proprietary interest. It is putting the cart before the horse to say that whether the agreement is a lease depends upon whether it creates a proprietary interest. No reference to the adaptability of the law to contemporary needs in relation to property dealing would be complete without reference to the growth of uses and trusts. The Courts of Chancery recognised a division between beneficial enjoyment and legal title – a division which the common law did not entertain … [Discussed further at [2.70]ff.] The system of law which saw the growth of a concurrent system to take account of the demands of conscience continues today and is sufficiently flexible to accommodate the notion of the suspension of rights and interests dependent upon the existence of native title. Radical change has, thus, been a part of the development of property law. Indeed, in modern times the international community has developed a legal regime governing the ownership and use of the moon. Whilst Art 11 of the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies (New York 1979 ATS (1986) No 14) prevents any nation from claiming property in the moon, its surface or natural resources, Art 6 confers limited usufructuary rights for the purposes of scientific investigation. The various adaptations described in this section have accommodated changes more radical than those necessary to accommodate the concept of suspension of the rights and interests dependent upon the holding of native title for the duration of the existence of inconsistent rights and interests.

[2.40]

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Tenure and Estates in Land [2.45] New Zealand Law Commission, Tenure and Estates in Land (Preliminary paper No 20, June 1992) pp 6-7, 20-23 30. Together with tenure there grew up the concept of estates in land. The second is historically and logically dependent on the first. As is said in Holdsworth’s History of English Law. It is not until doctrines of tenure and possession have been developed by a strong court that we get the rise of the peculiarly English doctrine of estates in the land (Vol 2, 67). 31. Conceptually, the doctrine of estates was an answer to the question: if a tenant did not own the land itself (for the King had paramount title to all land) what did the tenant own? What was the nature of the tenant’s rights? The early common law developed the abstraction called an “estate” interposed between the person entitled to land and the land itself (Lawson, The Rational Strength of English Law, 87). The most complete form of estate, nowadays tantamount in practice to ownership, was the estate in fee simple. The other freehold estates that have descended to modern times were the estate in fee tail and the estate for life. (The life estate includes the lease for life which is also a freehold estate, rather than a leasehold estate.) The great non-freehold estate is the estate for a term of years, that is, the leasehold. (The leasehold estate has a special and peculiar history that it is unnecessary to trace here.) 32. Theoretically the doctrine of tenure does not require a doctrine of estates as it was developed and still exists. The question might have been answered in other ways. Scotland for example has a doctrine of tenure but not of estates as it is known in New Zealand. But without tenure, there would have been no need for the concept of estates at all. No legal system outside the common law appears to have a system of estates. [After proposing the abolition of the doctrine of tenure, the Commission proceeded to consider the ramifications of such a proposal for the doctrine of estates.] … 86. If owners in fee simple are to become allodial owners, they will own the land itself. It would be meaningless and contradictory to say that owners have any estate in the land or that they will any longer hold it “in fee simple”. So to this extent at least the concept of “estate” must disappear. That is not to say that it has to be expressly abolished. 87. Life and leasehold interests however require a more detailed examination. The question is how any changes can best be accommodated. 88. The relationship between the doctrines of tenure and estates is both integral and intricate. As pointed out above in the Introduction, the second flowed from the first. Under the doctrine of tenure, whereby all land was held from the Crown, the question had to be faced: what was it that the King’s tenant owned? This was answered by the doctrine of estates. The law created an abstract entity called the estate and interposed it between the tenant and the land. Ownership was thus of something wholly conceptual or fictional: As the law of real property became distanced from the physical reality of land and entered a world of almost mathematical abstraction, it was possible to accord an immediate conceptual reality to each “slice” of time represented by an “estate”. (Gray, Elements of Land Law, 59-60.) 89. So the notion of estates enabled land ownership to be divided in respect of time: the land itself is one thing, and the estate in the land another thing, for an estate in the land is a time in the land, or land for a time, and there are diversities of estates which are no more than diversities of time … Walsingham’s Case (1573) 2 Plowden 547,555; 75 ER 805, 816. But the rights of ownership can be divided in time without the need for conceptual fictions. There are no estates in chattels but the leasing of chattels is commonplace. For example A can have exclusive possession of B’s motor car (either conditionally or unconditionally) for one year. The lessor B will continue to own the car, and will resume possession of it after the year has elapsed … 112 [2.45]

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Tenure and Estates in Land cont. Life interests 91. Can the principle that ownership can be divided in terms of time be used to make those who are now life tenants allodial owners for the period of their life? This would mean that the person who is to own the land after the life owner’s death has merely a future ownership. 92. There is no problem with ownership of a future interest as such; it is possible now and ought certainly to be retained. [The Commission considered various problems and continued.] 93. In the Commission’s view, a life estate is properly to be regarded as a dependent interest, the fee simple (at present) or the allodial ownership (under the scheme) always being vested in someone else. This is, of course, the status of a lease, even a lease for a very long term. And just as a lease is subordinate to the superior title of the fee simple proprietor, the present life estate could sensibly be so regarded if allodial ownership were introduced. This is what the scheme proposes. It also takes the opportunity to eliminate obscurities and anomalies. Leases 94. What is the significance of the fact that a lessee has an “estate” in the land? Does it add anything to the fact that a lease gives exclusive possession of the land in accordance with its terms, a possession that the law recognises and will enforce by appropriate remedies? Is the description of a leasehold interest as an estate simply a theoretical way of classifying it? If so, it does not seem to matter whether or not any legislation calls a leasehold interest an estate, but it might be better to get away from the old terminology altogether. However, care is necessary in making any change in the terminology not to create an impression that subleasing is no longer permitted. The scheme proposed does not and is not intended to affect a lessee’s ability to create subleases in accordance with the rules which presently apply to leasehold and subleasehold estates.

[2.50]

Notes and Questions

1. In Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327, the Queensland Court of Appeal commented on the meaning of the word “estate”. The word “estate” has two meanings in law, one narrow and the other broad. The narrow meaning is: “[T]he fee simple of land and any of the various interests into which it could formerly be divided at law, whether for life, or for a term of years or otherwise.” And the broad meaning is: “[A]ny property whatever”: see Halsbury’s Laws of England, 4th ed, vol 39(2), para 2. Under the narrow meaning, the only interests caught are the fee simple – that is, full ownership – and divisions, by reference to time, of that concept. For example, under the narrow meaning a leasehold interest would be an estate but a charge on land would not be. Under the broad meaning, any proprietary interest in land would be treated as an estate. It will be noted that the exclusion of a mortgagee’s interest from the statutory definition of “land” suggests that the reference to “estate” in the definition was intended to convey the broader meaning.

The narrow interpretation of the term “estate” conveys a more accurate description of the term and it is in this context that “estate” is used here. 2. The fee simple is the most extensive estate in duration. It is only the doctrine of tenure which prevents the holder of such an estate from being the absolute owner. The fee simple endures indefinitely and its holder may dispose of the estate inter vivos or by testamentary disposition. The fee simple was not always such an enduring interest: for a description of its development see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, [2.50]

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Thomson Reuters, Sydney, 2016), [2.100]; Epstein, “Past and Future: The Temporal Dimension in the Law of Property” (1986) 64 Wash ULQ 667. 3. The fee tail estate was used only rarely in Australia. The original aim of the fee tail estate was to keep the estate within a particular branch of a family and there was little interest in using the fee tail to effect such a result in Australia: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.105] – [2.120]. South Australia is the only jurisdiction in which the fee tail may still be created over general law land or Torrens system land. In the other jurisdictions, the fee tail can no longer be created and existing fees tail have either been automatically converted into fees simple or may be so converted by statutory provisions providing for the barring of the entail: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.125]. 4. The life estate may exist in two forms: it may be granted for the life of the grantee or for the life of a person other than the grantee, an estate pur autre vie. The latter form often arises not pursuant to a direct grant but as a result of the holder of a life interest conveying the estate to another person. 5. The doctrine of waste is the means whereby the common law balanced the interests of persons with successive interests in land. Any act in respect of the land which affected its ongoing character was potentially regarded as waste. Thus, the holder of a future interest could restrain any harm to the land by the person currently entitled to possession. The doctrine is also relevant to the relationship of a tenant (particularly under a fixed-term lease) and a landlord and probably as between co-owners each at present entitled to possession of the land and of whom one may be acting in a way which is detrimental to the land. There are four types of waste: voluntary waste, permissive waste, ameliorating waste and equitable waste. Voluntary waste is constituted by an intentional act damaging the land or buildings; permissive waste occurs where deterioration to land is allowed (normally a failure to repair); ameliorating waste is an act in relation to the land which benefits the land; equitable waste is a more serious form of voluntary waste – the intentional causing of serious harm. It is difficult to perceive situations in which ameliorating waste will give rise to any legal dispute. Liability for waste depends upon the terms of the instrument creating the limited interest. An owner is liable for voluntary waste unless exempted by the terms of the instrument (described as being made unimpeachable for waste). Such an exemption does not extend to liability for equitable waste unless it is specifically stated to so extend. Liability for permissive waste only occurs where liability is imposed by the instrument. Voluntary waste includes not only intentional damage to the land or building but some acts which constitute exploitation of the land. The opening of a mine and the cutting of timber are clearly established acts of voluntary waste. For further discussion of the doctrine of waste, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.45]–[13.65]. See also Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.110]–[13.190] for a discussion of the various statutory rights and duties which cover the relationship of the life tenant and the remainderman. 114 [2.50]

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6. As is discussed in Chapter 14, the lease was not originally considered an estate in land: rather it was considered a personal, contractual transaction and relationship between the landlord and tenant. During the 15th century, however, the tenant’s right to recover the land on dispossession was recognised and the estate less than freehold, the leasehold estate, was recognised. What is the defining difference between a freehold estate and a leasehold estate? During the 20th century and beyond, changing social and economic conditions led to an increased importance for the contractual aspects of the landlordtenant relationship. Many contractual principles which were not formerly applied to the landlord-tenant relationship, have now been held to do so. Nevertheless, until recently, a tenancy was still always seen as giving rise to a proprietary interest, a leasehold estate in the land. However, the House of Lords in Bruton v London & Quadrant Housing Trust [2000] 1 AC 406 held that it is possible to have a lease which does not create a leasehold estate in the land but which is effective only in contract between the parties. 7. In order to create each of the estates, it was necessary to use a particular form of words, “words of limitation”. However, in all jurisdictions except South Australia, statute has modified the position and it is now the case that a disposition without the correct words of limitation is effective to pass a fee simple estate unless there is a contrary intention. Legislation concerning fee simple: Conveyancing Act 1919 (NSW), s 47(1), (2), (3) after 1 July 1920; Property Law Act 1958 (Vic), s 60(6), from 3l January 1905 to 31 December 1918 – the words “to A in fee” and “to A in fee simple” in addition to the correct words of limitation “to A and his heirs” passed a fee simple estate. Section 60(1), after 31 December 1918 the fee simple passed without the use of correct words of limitation unless there was a contrary intention – “to A”, “to A forever”; Property Law Act 1974 (Qld), s 29(1) – (2) after 4 December 1952; Property Law Act 1969 (WA), s 37(1) – (4), after 1 August 1969; Conveyancing and Law of Property Act 1884 (Tas), s 61(2), after 18 September 1874; Law of Property Act (NT), s 29. Legislation concerning the fee tail: Conveyancing Act 1919 (NSW), s 19(1), after 1 July 1920; Property Law Act 1958 (Vic), s 249 – a limitation which would have created a fee tail, for example, “to A and the heirs of his body” created a fee simple estate from 1 January 1886; s 60(6) – a limitation which showed an intention to create a fee tail, for example, “to A in tail male” created a fee simple estate from 31 January 1905. Query a limitation “to A in fee tail”; Property Law Act 1974 (Qld), s 22 after 1 December 1975; Property Law Act 1969 (WA), s 23(1) after 1 August 1969; Conveyancing and Law of Property Act 1884 (Tas), s 65 after 1 January 1884; Law of Property Act (NT), s 22. In Queensland and Western Australia, it appears that where there is a clear intention to create a fee tail but words are used which would not have been sufficient to create a fee tail (for example, “to A in tail”) the common law remains applicable and a life estate by default would result. Neither of the relevant provisions (ss 22 and 29 in Queensland and s 23(1) and s 37 in Western Australia) appear to apply. See Note (1953) ALJ 648. The use of correct words of limitation has never been required in relation to Torrens land. (For a more detailed discussion see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.175] In relation to dispositions by will a more lenient approach has always been adopted, with the courts putting into effect the intention of the testator (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.185], [2.195] and [2.205]). [2.50]

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8. Inherent in the doctrine of estates is a recognition and acceptance of the concept of the creation of successive interests in land. In turn, this involves a clear recognition that future interests in land may exist. See above Note 5. Future interests are discussed in detail in Chapter 11. Would it be possible for future interests in land to exist if there were no doctrine of estates? See New Zealand Law Commission, Tenure and Estates in Land (Preliminary paper No 20, June 1992) pp 6-7, 20-23 extracted above. 9. The Victorian Law Reform Commission has proposed that the ability to create successive legal interests in land be abolished, and that successive interests only be created in equity, as beneficial interests under a trust. See Victorian Law Reform Commission, Review of the Property Law Act 1958 Final Report (2010), pp 66-70, 73. 10. Apart from the doctrine of estates other types of proprietary interests in land can exist (for example, the easement, the profit à prendre and the restrictive covenant). These rights do not involve tangible, possessory rights over the land but rather involve particular and specific rights with respect to the land. See Chapters 17 and 18. Determinable and conditional interests [2.55] Further limitations on the estates could be imposed by the inclusion of restrictions in the grant designed to limit the duration of the estate.

Zapletal v Wright [2.60] Zapletal v Wright [1957] Tas SR 211 Supreme Court of Tasmania CRISP J: The plaintiff and the defendant in this suit – the appellant and respondent respectively in the appeal – are registered proprietors as joint tenants of 2 roods 29 1/10 perches of land at Bellerive, subject to the encumbrances noted on the certificate of title. The plaintiff is claiming a sale of the property and division of the proceeds. The defendant was a married man, separated from his wife. Two or three years after the separation, he commenced cohabitation with the plaintiff and this continued for some fifteen years until 1955 when the plaintiff left and married another. Two children were born of the union. The defendant bought the land in 1951. The learned trial judge found that the plaintiff was not a contributor to the purchase. However, the defendant agreed at the plaintiff’s request to put the title in their joint names, which he did and they were so registered. The learned trial judge found that in doing so, the defendant’s intention was to confer a gift on the plaintiff of a joint interest in the land subject to the limitation or condition shortly to be noticed. This express intention he found sufficed to rebut the implication of any resulting trust in the defendant’s favour, and in this I think he was plainly right. The defendant’s evidence, which the learned judge accepted, as to the circumstances of the gift was as follows. The plaintiff had been worrying him that she had no security and that if he were to die his lawful wife would take all in preference to her. She therefore, asked for an interest in the land he was purchasing. He, for his part, was worried that if he did he might lose both her and the land. As he said, “He knew he couldn’t trust her,” that is, to remain with him. He therefore, before completing the gift by having her registered as joint proprietor, asked her what would be the position if she left him. Her answer, according to his evidence was, “Don’t be silly Jim. If I ever do that I will take my name off it the next day,” or another version of the same promise was, “I’d sign it back to you the next day if I did leave.” In another part of his evidence he said, “It was given to her on her own terms, that she would stick to me and behave herself.” The learned judge regarded the transaction as a gift, subject to a condition subsequent, the term of the condition being that if she should cease to cohabit with the defendant (otherwise than by the 116 [2.55]

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Zapletal v Wright cont. death of either of the parties) her interest should cease. I think that it was correctly so regarded. Initially I had some doubts as to whether it was not a terminable limitation, that is, an estate during cohabitation which is to be distinguished from an estate in fee subject to determination if she should cease to cohabit. The distinction is often a fine one, but it is well established. The subject is lucidly dealt with in Professor Cheshire’s The Modern Law of Real Property, 5th ed, Ch VI, s 1, where other references will be found. On this point some of the authorities are not always easy to follow, but I think that the agreement for the determination of the estate should be regarded as a condition subsequent for the following reasons. The form of the gift was an undivided moiety in fee; it was not in terms limited to an estate defined by reference to any prior event. In fact it might continue after the event in which defeasance was to take place or might become impossible or irrelevant, that is, after the defendant’s death. The form of the condition is such that it did not denote the extent of the estate but only the event in which the larger estate conferred may have been cut short. But it is better said by Preston: The (determinable) limitation marks the bounds or compass of the estate, and the time of its continuance. The condition has its operation in defeating the estate before it attains the boundary or has completed the space of time described by the limitation. (Preston on Estates, Vol 1, p 49, quoted by Cheshire, op cit, at p 523.) The distinction is important, because a condition subsequent void on a ground of illegality or because it is contra bonos mores may be ignored (Egerton v Brownlow (1853) 4 HLC 1, 120; Ex parte Naden, In re Wood (1874) LR 9, Ch 670) leaving the primary gift good but a terminable limitation void for the same reasons fails entirely. (In re Moore (1888) 39 Ch D, 116.) There is no law that a man may not make a valid gift to his mistress (Ayerst v Jenkins (1873) LR 16, Eq 275, 283). The primary gift is therefore good. Then, what of the condition which is a distinct clause by which an estate already limited is to be defeated. The learned trial judge in analysing the intention of the parties states his conclusions thus: Here the agreement between the parties showed a composite intention – first, that the plaintiff should have a beneficial interest so long as she continued to cohabit with the defendant, and secondly, an intention that if she should cease to cohabit, the whole beneficial interest should go to the defendant, but with respect I think this is very like stating the same thing in two different ways, the first as a conditional limitation (cf In re Lovell, Sparks v Southall (1873) LR 16, Eq 275, 283) and the second as a condition subsequent. The provision in question must, I think, be one or the other, it cannot be both. I have given my reasons for thinking it to be a condition subsequent and I think plainly its object was to bind the plaintiff to the defendant and to provide inducement for her not to leave him. In the defendant’s own words, “It was given to her on her own terms, that she would stick to me and behave herself,” that is, in the sense of being a loyal paramour. Hence I would say that the condition was void as tending to promote immorality (Gray v Mathias (1800) 5 Ves 286). It is true that the object of the gift may be regarded as a desire to make some provision for the plaintiff’s maintenance in the event of the defendant’s death when he should be no longer able to do so, and the gift may from that aspect be regarded as in the nature of “voluntary compensation by way of maintenance made to the (appellant) for the injury done to her by this past illicit connection” (Gibson v Dickie (1815) 3 M & S 463, and see In re Wootton Isaacson, Sanders v Smiles (1904) 21 TLR 89 and Knye v Moore (1822) 1 Sim & St 61, and other cases on the subject of past cohabitation as a valid consideration) but it is the condition to which attention must be directed as a distinct and separable provision, and the object of the condition in this case was not to secure to the plaintiff maintenance after cohabitation ceased, but to deprive her of it in the event of her voluntary termination of an immoral state. It may thus be said to have acted in terrorem, and in this respect the matter is completely distinguishable from Gibson v Dickie (1815) 3 M & S 463 and the other cases cited. [2.60]

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Zapletal v Wright cont. In my opinion, therefore, the plaintiff took by way of gift as joint tenant in fee simple free from the condition which is void (cf Ex parte Naden, In Re Wood (1874) LR 9, Ch 670) and she would be entitled to a declaration accordingly. She has not in fact asked for a declaration but for a sale. I think she is entitled to the order she seeks under ss 4 and 16 of the Partition Act 1869 (See Bray v Bray (1926) 38 CLR 542) and I would therefore uphold the appeal. BURBURY CJ: …The presence of the condition subsequent in the transaction from its inception I think must be taken as tending to perpetuate the illicit relationship and to keep the respondent apart from his legal wife. I think it must follow that the condition is void as tending to immorality. That upon its true construction it operates as a condition subsequent and not as a conditional limitation of the estate granted is I think immaterial for the purpose of determining its validity. The distinction is a vital one; as an illegal conditional limitation it would destroy the whole of the appellant’s interest, as an illegal condition subsequent it enables the appellant to retain her vested interest free from the condition. But that is a consequence which flows from the distinction made in the law of property between a conditional limitation and a condition subsequent. It follows in my opinion that the appellant is entitled to an absolute interest as a joint tenant for an estate in fee simple in the property the subject matter of the action and is entitled to all the rights of a joint tenant under the Partition Act 1869 (33 Vict No 11). Those rights are incidental to her legal estate and in giving effect to them the court is not enforcing an immoral transaction.

[2.65]

Notes and Questions

1. Although the distinction between conditional and determinable limitations has been described as “absurd” (Re Baillie, Faithful v Sydney Industrial Blind Institution (1907) 7 SR (NSW) 265), there is no doubt that it remains part of the law and as Gummow J in Caboche v Ramsay (1993) 119 ALR 215 at 227 stated there are clear logical and conceptual reasons for the differentiation. From your reading of Zapletal v Wright [1957] Tas SR 211, what are these reasons? See also Perpetual Trustee Co Ltd v Gilmour [1979] 2 NSWLR 716, Cram Foundation v Corbett-Jones [2006] NSWSC 495 and Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 at 471-418, 439-440, where the distinction is accepted. 2. Consider whether a condition encouraging co-habitation outside legal marriage could now be considered a void one. See, for example, Seidler v Schallhofer [1982] 2 NSWLR 80. See also the legislation governing property disputes following the breakdown of de facto relationships. Currently, this legislation comprises the Family Law Act 1975 (Cth), ss 4AA, 90SL, 90SM and the Family Court Act 1997 (WA), ss 205ZA, 205ZB. In addition to the ACT and NT, the Commonwealth Act applies to all States, other than Western Australia, pursuant to a referral of power by the respective State Parliaments to the Commonwealth Parliament. This legislation gives recognition to the status of opposite sex and same sex de facto relationships (Family Law Act 1975 (Cth), s 4AA(5); Interpretation Act 1984 (WA), s 13A(3)) and is indicative of a change in prevailing attitudes to relationships other than legal heterosexual marriage. Do you consider that the introduction of such legislation could affect the findings in a case such as Zapletal?

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3. The fee simple absolute is far more prevalent than the conditional and determinable fees. As Gray and Gray remark in Elements of Land Law (5th ed, OUP, London, 2009) at p 244, the latter “throw up a range of complication wholly disproportionate to their contemporary significance”. Note, however, that in Australia, some grants of Crown land closely resemble grants of determinable fees simple: see Wilson v Anderson (2002) 213 CLR 401. 4. In what way is the distinction made between a conditional and a determinable interest? Consider the differences which result from a finding that a determinable or conditional interest exists. Note that the Victorian Law Reform Commission has proposed that determinable limitations be converted into conditional limitations, so that a small difference in drafting does not result in differences in legal validity. See Victorian Law Reform Commission, Review of the Property Law Act 1958 Final Report (2010), pp 71-73. 5. Historically, the courts have struck down conditions and limitations in a wide variety of circumstances. Conditions comprising substantial restraints on alienation (see, for example, Elton v Cavill (No 2) (1993) 34 NSWLR 289; John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334; Re Rosher (1884) 26 Ch D 801; cf Re Macleay (1875) LR 20 Eq 186); conditions imposing total restrictions on marriage (Morley v Rennoldson (1843) 2 Hare 570; 67 ER 235 and conditions which lack certainty (Clayton v Ramsden [1943] AC 320) have all been held to be void. In contrast, conditions constituting limited restraints on alienation (Reuthlinger v MacDonald [1976] 1 NSWLR 88; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551; Western Metals Resources Ltd v Murrin Murrin East Pty Ltd [1999] WASC 257; Vercorp Pty Ltd v Lin [2007] 2 Qd R 180; Southlink Holdings Pty Ltd v Morerand Pty Ltd [2010] VSC 214) or marriage (Re Macleay (1875) LR 20 Eq 186; Duggan v Kelly (1848) 10 Ir Eq Rep 473) and conditions restraining choice of religion (Blathwayt v Baron Cawley [1976] AC 307) have been upheld. In relation to restraints on alienation, the modern judicial approach “… indicates a distinct unwillingness to apply any sweeping view that all contractual restraints on alienation are necessarily void” (see Mackie “Contractual Restraint on Alienation” (1998) 12 Journal of Contract Law 255.) The leading recent example of this is Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 82 NSWLR 665, where the New South Wales Court of Appeal upheld the validity of an almost total restraint on the alienation of a fee simple in a retirement village unit on the basis that it promoted the public policy of providing affordable accommodation for the aged. For a further discussion of relevant cases, see Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), pp 227-230; Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.235] – [2.260] and Grattan, “Revisiting Restraints on Alienation: Public and Private Dimensions” (2015) 41 Monash University Law Review 67. 6. It is important to consider the possible distinction between restraints on alienation imposed as a condition in the grant of an estate and restraints in covenants or agreements. In Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 Brennan J stated: In this country a court may hold invalid restraints on alienation imposed not only by conditions annexed to a gift or grant of an estate in land but also by covenants and agreements, Hall v Busst (1960) 104 CLR, 217-218, 223-224, 236, [2.65]

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246. But the grounds on which a condition subsequent to the gift or grant of an estate of freehold may be held invalid are not necessarily the same as the grounds on which invalidity strikes a covenant or agreement in an instrument which does not itself give or grant the estate the alienation of which is restrained. In the former case, as Dixon CJ said in Hall v Busst (1960) 104 CLR, at 217, “[t]he invalidity may be put on the ground of repugnancy to the grant or upon public policy or for that matter it may conceivably be attributed to an indirect effect of quia emptores”. In the latter case, the only basis for holding the covenant or agreement invalid is public policy.

However, in Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 82 NSWLR 665, 738 - 740, Campbell JA expressed a preference for the view that the timing of the restraint vis a vis the acquisition of the relevant property, rather than the form of the restraint, was more significant. That is, his Honour thought that restraints imposed as part of the acquisition of the property by the restrained party should be decided on the same principles, whether the restraint was imposed by a condition in the grant of the estate or by contract. By contrast, his Honour thought that restraints imposed by contract at a later time and which were unconnected with the acquisition of the property by the restrained party were more likely to be valid on the basis that they served a legitimate interest. See Grattan, “Revisiting Restraints on Alienation: Public and Private Dimensions” (2015) 41 Monash University Law Review 67, 91 - 93. 7. Do you consider that some of the protections available in the Constitution may be relevant in this area? For example, in Australia, would the protection for freedom of religion in the Constitution affect the validity of a condition restraining choice of religion? Compare the European Convention for the Protection of Human Rights and Fundamental Freedoms: see Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), pp 229-230.

EQUITABLE INTERESTS – THE DEVELOPMENT OF THE TRUST [2.70] The development of the equitable interest in land law began primarily as a result of the many fetters the common law placed on the holders of freehold estates. The holder of a freehold estate was unable, for example, to dispose of an estate by will (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.290] for further detail). In order to avoid the fetters created by the common law, and in particular to gain free alienability of the interest in land, the freeholder began to employ the use. Typically, the freeholder conveyed the land to a trusted person who held the land not for his or her own use or benefit, but for the use of the grantor during the grantor’s lifetime and then for other members of the grantor’s family after the grantor’s death. The trusted person taking the legal estate was called the “feoffee to uses” and the person entitled to the use of the land was called the “cestui que use”. The problem was that the common law courts refused to view the cestui que use as having any interest in the land. From the beginning of the 15th century, the Chancellor on behalf of the King and in the exercise of the King’s residual judicial power, heard special petitions from persons with legitimate complaints who could find no appropriate cause of action in the defined forms of writ available in the common law courts. The Chancellor and the Chancery Council (later the Court of Chancery) gradually developed a set of rules in dealing with these petitions. These became the rules of equity. It was the Court of Chancery which began to enforce the use and provide protection for the cestui que use. (See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.315].) 120 [2.70]

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In general, equity followed the common law in the types of interests in land which could be created. However, there was the capacity for equity to permit the creation of interests unattainable at common law, and equity did, and continues to, use this capacity. For example, equity recognises the restrictive covenant, an interest in land which can exist in equity only. (See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), Ch 18, Pts II and III.) One of the aims of the freeholder in employing the use was to avoid the payment of feudal dues. The King, being at the top of the feudal pyramid, lost a great deal from the reduction in payment of dues and so instigated the passing of the Statute of Uses in 1535. The aim of the statute was to abolish the use and to vest the legal estate in the cestui que use so that in a conveyance “to A and his heirs to the use of B and his heirs”, B took the legal estate and A took nothing. Upon the death of B, the legal estate holder, feudal dues would again be payable. Over the next 100 years, the equitable interest re-emerged. Eventually a grant “to A and his heirs to the use of B and his heirs to the use of C and his heirs” was recognised by the Court of Chancery as creating a legal interest in B (the Statute of Uses having executed the use) and an equitable interest in C. C’s equitable interest was equivalent to the equitable interest created by one single use before the Statute of Uses. The terminology altered and the words “to A and his heirs to the use of B and his heirs on trust for C and his heirs” became effective to create a legal estate in B and an equitable estate in C. Eventually, A’s name was removed and a grant “unto and to the use of B and his heirs on trust for C and his heirs” was equally effective to confer legal title on B and equitable title on C. B, the feoffee to uses, became the trustee and C, the cestui que use became the cestui que trust or “the beneficiary”. The Statute of Uses has been repealed in New South Wales (Imperial Acts Application Act 1969, s 8), Victoria (Imperial Acts Application Act 1980, s 5), Queensland (Property Law Act 1974, s 7) and the Northern Territory (Law of Property Act, s 6). In these jurisdictions the words “to A in fee simple on trust for B in fee simple” are effective to create a trust and legal and equitable title in A and B respectively (see also Property Law Act 1958 (Vic), s 19A). See further Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [10.145]. The trust [2.75] In the course of his judgment in DKLR Holdings Co (No 2) v Commissioner of Stamp

Duties [1980] 1 NSWLR 510, Hope JA discussed the origins and nature of the trust. The analysis of Hope JA is unaffected by the decision of the High Court in the case (see (1982) 149 CLR 431.) His comments have been referred to and approved a number of times, most authoritatively by Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at 606 and 612. See also, for example, Quarmby v Keating [2008] TASSC 71 at [17], Legal Services Commissioner v Dempsey [2008] 2 Qd R 272 at [38] and Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 at 309-310. The judgment of Hope JA is extracted here for its discussion on the nature of the trust. The case concerned complex issues of stamp duty and references to the facts and decision have been omitted where possible.

DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [2.80] DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [1980] 1 NSWLR 510 New South Wales Court of Appeal [2.80]

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DKLR Holdings Co (No 2) v Commissioner of Stamp Duties cont. HOPE JA: … The starting point of a consideration of the questions which this part of the case raises seems to me to be the principles concerning the nature of legal and equitable estates. An unconditional legal estate in fee simple is the largest estate which a person may hold in land. Subject to qualifications arising under the general law, and to the manifold restrictions now imposed by or under statutes, the person seised of land for an estate in fee simple has full and direct rights to possession and use of the land and its profits, as well as full rights of disposition. An equitable estate in land, even where its owner is absolutely entitled and the trustee is a bare trustee, is significantly different. What is, perhaps, its essential character is to be traced to the origin of equitable estates in the enforcement by Chancellors of “uses” or “trusts” (a term originally synonymous with “uses”) in the confidence that he would perform which the owner had enfeoffed another person with land. When the Chancellor began to enforce the uses so confided, he intervened to enforce the duty which he considered the conscience of the feoffee bound him to satisfy; he did not intervene to enforce an obligation otherwise recognised at common law. “… at common law the use was nothing at all-not even a chose in action.”: Holdsworth, History of English Law, 3rd ed, Vol IV, 2nd ed, p 440. Moreover, as Maitland pointed out in his Lecture on Equity, 2nd ed, p. 31: “… the remedy is given not to the trustor but to the destinatory. In the earliest instances the trustor and the cestui que trust (or use) are the same person-still it is as destinatory, not as ‘author of the trust’ that he has the remedy. This marks it off from contract … This principle runs through our law of equity to the present day – the destinatory, beneficiary, cestui que trust has the remedy.” In due course, the obligation to carry the use into effect was enforced by the Chancellors against most, although not all, persons acquiring the legal ownership of the land: Holdsworth, op cit, pp 432, 433. When the modern trust developed, after the enactment of the Statute of Uses, it was similarly enforced and, indeed, the classes of persons against whom it could not be enforced became more limited. After some hesitation, a trust interest in respect of land came to be regarded, not merely as some kind of equitable chose in action, conferring rights enforceable against the trustee, but as an interest in property. The fact that equitable estates were not enforceable against everyone acquiring a legal title to the property did not prevent them from being so regarded; a legal owner of land could lose his estate in, or become unable to enforce his rights in respect of, land in a number of ways. Although there has long been a controversy whether trust interests are true rights in rem: cf Pettit, Equity and the Law of Trusts, 3rd ed, pp 48, 49, 50, there can be no doubt that the interest of the cestui que trust is an interest in property. As Rolle J said in R v Holland (1647) Style 20, 21; 82 ER 498, 499: “… a trust is not a thing in action, but may be an inheritance or a chatell (sic) as the case falls out.” These essential features of interests arising under private trusts are thus described in Jacobs’ Law of Trusts, 3rd ed, p 109: “… the trustee must be under a personal obligation to deal with the trust property for the benefit of beneficiaries, and this obligation must be annexed to the trust property. This is the equitable obligation proper. It arises from the very nature of a trust and from the origin of the trust in the separation of the common law and equitable jurisdictions in English legal history. The obligation attaches to the trustees in personam, but it is also annexed to the property so that the equitable interest resembles a right in rem. It is not sufficient that the trustee should be under a personal obligation to hold the property for the benefit of another, unless that obligation is annexed to the property. Conversely, it is not sufficient that an obligation should be annexed to property unless the trustee is under the personal obligation.” Several consequences follow. Firstly, an absolute owner in fee simple does not hold two estates, a legal estate and an equitable estate. He holds only the legal estate, with all the rights and incidents that attach to that estate. If he were to execute a declaration that he held the land in trust for himself absolutely, the declaration would be of no effect; it would give him no separate equitable rights; he would remain the legal owner with all the rights that a legal owner has. At least where co-extensive and commensurate legal and equitable interests are concerned, “… a man cannot be a trustee for 122 [2.80]

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DKLR Holdings Co (No 2) v Commissioner of Stamp Duties cont. himself.”: Goodright v Wells (1781) 2 Dougl 771, 778; 99 ER 491, 495 per Lord Mansfield. “You cannot have a legal estate in trust for yourself.”: Harmood v Oglander (1803) 8 Ves Jun 106, 127; 32 ER 293, 301 per Lord Eldon. Secondly, although the equitable estate is an interest in property, its essential character still bears the stamp which its origin placed upon it. Where the trustee is the owner of the legal fee simple, the right of the beneficiary, although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives him in accordance with the obligations which equity has imposed upon him. The trustee, in such a case, has at law all the rights of the absolute owner in fee simple, but he is not free to use those rights for his own benefit in the way he could if no trust existed. Equitable obligations require him to use them in some particular way for the benefit of other persons. In illustrating his famous aphorism that equity had come not to destroy the law, but to fulfil it, Maitland, op cit, at 17, said of the relationship between legal and equitable estates in land: “Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust. There was no conflict here.” This relationship can, perhaps, be usefully illustrated by reference to the possession, and the right to possession, of land which is held by a trustee subject to a private trust. As legal owner, and subject to any disposition of the right, such as would occur upon the granting of a lease, the trustee has at law the right to possession of the land and, unless somebody else is in possession, under him or adversely to him, he also has the legal possession of the land. He may maintain trespass against anyone who infringes that possession, and ejectment against any person who, without his consent, takes possession. At law a cestui que trust has no right to possession. He cannot sue the trustee at common law in ejectment: Roe d Reade v Reade (1799) 8 TR 118, 121, 122, 123; 101 ER 1298, 1300, 1301. If the trustee holds as a bare trustee for a beneficiary absolutely entitled, that beneficiary is, in equity, entitled to be put into possession if he so wishes, but he cannot sue the trustee in ejectment. His right can be enforced only by an order made in the exercise of the equitable jurisdiction of the court. If necessary, the court will, upon an appropriate indemnity being given, compel the trustee to allow the beneficiary to use his name to bring ejectment. When placed in possession by the trustee, at law the beneficiary is merely tenant at will of the trustee, the tenancy being determinable at law at any time on demand of possession by the trustee: Garrard v Tuck (1849) 8 CB 231, 250; 137 ER 498, 506; Melling v Leak (1855) 16 CB 652, 668, 669; 139 ER 915, 921, 922. As a corollary, the trustee might at law determine the beneficiary’s tenancy and recover the land from him in an action for ejectment, and the beneficiary would have no legal defence. He would, of course, have an equitable defence which he has long been able, by statute, to plead in the action at law. This position can be analysed in a similar way in respect of all the rights given to a trustee who holds property at law in trust absolutely for a beneficiary. In some cases the right vested in the trustee may be such that he cannot be compelled to allow the beneficiary to exercise it except (unless, because of the nature of the right, it is not permissible to do so) in his, the trustee’s, name. If this analysis be correct, although the beneficiary has an interest in the trust property, the content of that interest is essentially a right to compel the trustee to hold and use his legal rights in accordance with the terms of the trust.

[2.80]

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DKLR Holdings Co (No 2) v Commissioner of Stamp Duties cont. Where the trustee holds absolutely for the beneficiary, the beneficiary has a right in equity to be put, so far as practicable and generally subject to appropriate indemnities being given, into a position where directly, or indirectly, or for all practical purposes, he enjoys or exercises the rights which the law has vested in the trustee …

[2.85]

Notes

1. The trust is an obligation imposed on a person who has the legal title to property. The obligation binds such a person (the trustee) to use or deal with the property for the benefit of another person (the beneficiary). As the above historical introduction and the extract from DKLR Holdings Co (No 2) v Commissioner of Stamp Duties [1980] 1 NSWLR 510 demonstrate, the obligation of the trustee is enforceable in equity. Thus if X the owner of property conveys the property to A, on trust for B, the obligation of A to hold the property for the benefit of B is recognised and enforced in equity. As Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), p 76 commented, “[t]he core of every trust is the idea that the formal or titular interest in some asset (eg the legal estate in fee simple) is vested, in a nominal capacity in one or more persons as trustee. The strict duty of such persons is to deflect all beneficial enjoyment of the trust asset to [those who hold the equitable interests under the trust].” 2. In the absence of an obligation of the kind described above being imposed on the holder of a legal title, how is the title held? See Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311 and Allen v Snyder [1977] 2 NSWLR 685 at 701. In Re Transphere, McLelland J stated: It is important to recognise the true nature and incidents of legal and equitable estates in property subject to a trust. They are clearly and succinctly described in the judgment of Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510, 518-520. (His Honour’s analysis is not affected by the decision of the High Court in that case – see 149 CLR 431.) I would not wish to detract from the value of Hope JA’s exposition by trying to summarise it. But what is significant for present purposes is the imprecision of the notion that absolute ownership of property can properly be divided up into a legal estate and an equitable estate. An absolute owner holds only the legal estate, with all the rights and incidents that attach to that estate. Where a legal owner holds property on trust for another, he has at law all the rights of an absolute owner but the beneficiary has the right to compel him to hold and use those rights which the law gives him in accordance with the obligations which equity has imposed on him by virtue of the existence of the trust. Although this right of the beneficiary constitutes an equitable estate in the property, it is engrafted onto, not carved out of, the legal estate. Hope JA (at 519) illustrates the point by the following quotation from Maitland – Lectures on Equity 2nd ed (1949) at 17: Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust. There was no conflict here.

See also Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 where the comments of Hope JA on the nature of the trust were quoted with approval. 124 [2.85]

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3. Historically and in the modern day context, the trust has been used to serve a number of purposes and to facilitate a variety of transactions. (See Note 6.) In whatever context it arises, however, the setting up of a trust reflects a need to vest beneficial use and enjoyment of the property in one person and to vest administration and varying degrees of control in another person. In some trusts, the trustee may have little or no effective control and no administrative tasks to perform. In such a trust, the trustee holds no more than the “bare” legal title. In other trusts, the trustee may have wide powers and detailed administrative duties to perform with respect to the trust property (see Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), pp 77-78). 4. Regardless of the type of trust, the trustee has a fiduciary duty to manage the trust property in as profitable a manner as possible and the trustee must not profit by reason of his or her position as a trustee. (See Keech v Sandford (1726) 2 Eq Cas Ab 741; 22 ER 629; Boardman v Phipps [1967] 2 AC 46 and Attorney-General (Hong Kong) v Reid [1994] 1 AC 324 in which the nature of the duty is discussed. See also Barnes v Addy (1874) LR 9 Ch App 244; Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Royal Brunei Airlines v Tan [1995] 3 WLR 64 and Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.) 5. The discussion above suggests that a trust arises only where it has been expressly set up. In fact, over the years equity has implied a trust relationship into a number of fact situations. Thus the major dichotomy in the types of trust which can exist is between express and non-express trusts. Non-express trusts fall into two main categories – resulting and constructive trusts. The categories of resulting and constructive trusts are dealt with in detail in Chapter 10. Glass JA in Allen v Snyder [1977] 2 NSWLR 685, 689 clearly summarised the categories of trust. Although this categorisation can be stated simply, the courts have often struggled both to use the terms in a consistent fashion and to demonstrate clear dividing lines: Any claim to a beneficial interest in real property by a person in whom the legal title is not vested must be based upon a trust. Trusts may be express, implied or constructive. An express trust of land is not enforceable unless it is evidenced in writing and signed by the party able to declare the trust: Conveyancing Act 1919, s 23C. By way of exception, an express trust may be proved by oral evidence where otherwise the statute would be made “an instrument of fraud”: Rochefoucauld v Boustead [1897] 1 Ch 196, 206. An implied trust (also called a resulting trust) arises where the legal owner has provided none or only part of the purchase price. A resulting trust is presumed in favour of the party providing the money. His beneficial interest is proportionate to his contribution. If, however, the legal owner is a wife, and the purchase price has been provided by her husband, there is a countervailing presumption of advancement viz that she takes the beneficial interest as a gift. Both presumptions, being rebuttable, will yield to evidence as to the actual intention of the parties. Constructive trusts arise where it would be a fraud for the legal owner to assert a beneficial interest. Unlike express and implied trusts, which reflect actual intentions, they are imposed, without regard to the intentions of the parties, in order to satisfy the demands of justice and good conscience: Snell, Principles of Equity, 27th ed, s 185; Jacobs, Law of Trusts in Australia, 4th ed, p 232. Constructive and implied (resulting) trusts may be enforced without evidence in writing: Conveyancing Act 1919, s 23C(2).

6. Historically, the subject matter of the trust was land. The trust is now used to achieve a variety of objectives and the subject matter of the trust may often not involve land. Some of the modern day uses of the trust are discussed in Moore, Grattan and Griggs, [2.85]

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Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.370]. For example, the funds held under pension and superannuation schemes and by unincorporated associations are often held in a trust. The discretionary trust has been used to minimise income tax and the unit trust has been used to enable smaller investors to participate in broadly based investment opportunities.

PRIORITIES UNDER THE GENERAL LAW LAND SYSTEM [2.90] A priority dispute arises where two or more persons claim wholly or partially inconsistent proprietary interests in the land (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.375] – [2.380]). The interests may be legal or equitable and may involve different types of proprietary interests (for example, a fee simple, a mortgage, a lease, an easement). In relation to general law land, rules evolved to settle the various kinds of priority disputes: some of these rules are highlighted in the cases extracted at [2.95]-[2.135]. Although only a very small number of general law land titles remain, some knowledge of these rules is necessary in order to understand properly the way in which the Torrens system operates. Further, several of the principles form the basis for the resolution of some priority disputes under the Torrens system and thus clearly retain relevance (see [6.85]-[6.90]). A more detailed examination of general law land priority rules can be found in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), Ch 2, Pt VI. The specific rules for determining priority between inconsistent interests centre around two factors. The first is the respective dates of creation of the interests (that is, which was created earlier and which was created later). The second is the nature of each of the competing interests: that is, whether it is a legal interest, an equitable interest, or a mere equity. The ways of differentiating between interests that are legal and those that are equitable are dealt with in Chapter 9 (where it will be seen that the formalities required for the creation of legal interests differ from those required for equitable interests) and in Chapter 10 (where it will be seen that equitable interests can arise in some cases where a transaction is to some extent “defeasible”). The nature and means of creation of a mere equity is dealt with in Chapter 6. Accordingly, specific priority rules apply in the following contexts:

• prior legal interest against subsequent legal interest (where the rule is that the prior interest prevails: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.400]) • prior equitable interest against subsequent legal interest (considered below) • prior legal interest against subsequent equitable interest (considered below) • prior equitable interest against subsequent equitable interest (considered below and, because of its particular importance in regard to Torrens land, also in [6.85]–[6.180]) • prior mere equity against subsequent equitable (or legal) interest (considered in the context of Torrens land in [6.185]–[6.190]). Prior equitable interest against subsequent legal interest

Pilcher v Rawlins [2.95] Pilcher v Rawlins (1872) 7 Ch App 259 English Court of Appeal 126 [2.90]

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Pilcher v Rawlins cont. [The abbreviated facts are taken from the headnote of the case. The trustees of a settlement advanced the trust money on the security of real property which was conveyed to them by the mortgagor, the mortgage deed noticing the trust. The surviving trustee of the settlement afterwards reconveyed part of the property to the mortgagor on payment of part of the mortgage money, which he appropriated. The mortgagor then conveyed that part of the property to new mortgagees, concealing, with the connivance of the trustee, both the prior mortgage and the reconveyance. When the fraud was discovered, the cestuis que trust under the settlement filed a bill against the new mortgagees claiming priority.] SIR G MELLISH LJ: I agree in the conclusion to which the Lord Chancellor and the Lord Justice have arrived. I do not think it necessary to give any opinion whether Carter v Carter 3 K & J 617 was rightly decided. In my opinion if it is to be supported it must be supported upon the grounds stated by the Lord Chancellor today, namely, that there were such peculiar circumstances in that case as to make it inequitable that the purchaser should be allowed to rely upon the second will. But I think it cannot be supported on the grounds upon which the Master of the Rolls thought it had been decided, and upon which the Master of the Rolls acted in the case now before us. The Master of the Rolls, as I understand his judgment, held that a purchaser for valuable consideration, who has obtained a conveyance of the legal estate, is in this Court always to be held to have notice of the contents of the deeds which form a link in the chain by which the legal estate was conveyed to him. And he held that the doctrine of constructive notice ought to be enlarged, and that, although in point of fact the deed in question was never produced to the purchaser – although he had neither knowledge nor the means of knowledge of its contents – although he and his advisers were guilty of no negligence whatever in not obtaining knowledge of its contents – yet, nevertheless, he must in this Court be held to have notice of the contents, if it was a deed which, when ejectment was brought against him in a Court of Law, he would be bound to produce. It is admitted that that rule had never been laid down prior to the case of Carter v Carter; there were not even dicta, or any authority whatever that I have been able to find, tending to shew that any such rule had prevailed in this Court; and I am of opinion most clearly that it ought not to be so laid down. I do not agree with the Master of the Rolls that the purchaser for valuable consideration in such a case as he describes, is approbating and reprobating. A person who approbates and reprobates is acting inconsistently. He must, in fact, be affirming and denying the same proposition at the same time. But I cannot see any such inconsistency here. If an action of ejectment is brought, it is wholly immaterial whether the Defendant in that action of ejectment had or had not at any time whatever notice of the contents of the deed or instrument on which he rests his title. What inconsistency is there in his saying, “If I am attacked in a Court of Law, and an action of ejectment is brought against me, I rely on this deed as being one of the deeds through which the legal estate has been conveyed to me,” and then, if he is attacked in a Court of Equity, saying, as the truth is, “I had no notice of this deed. At the time when I obtained my conveyance I had no knowledge and no means of knowledge of the deed.” I cannot see that there is any inconsistency in his so acting. The general rule seems to be laid down in the clearest terms by all the great authorities in equity, and has been acted on for a great number of years, namely, that this Court will not take an estate from a purchaser who has bought for valuable consideration without notice; and I find that the Appellants in both the cases before us are very clearly purchasers for valuable consideration without notice. Unless this doctrine of constructive notice, enlarged as it has been by the Master of Rolls, is to prevail, I am of opinion that the Appellants have made out their case. As it is admitted that, with the exception of what is supposed to have been said in Carter v Carter, this rule of constructive notices, as laid down by the Master of the Rolls, has never been established, I will proceed to consider it a little upon principle. It happens, curiously enough, that in one, if not in both, of the two cases before us the Appellants are themselves trustees for other cestuis que trust, and [2.95]

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Pilcher v Rawlins cont. the question then arises which of the two sets of cestuis que trust are to bear the loss. Is the loss to fall upon the cestuis que trust whose trustee has fraudulently conveyed away the estate which was entrusted to him? Or is the loss to fall upon those whose trustees have honestly taken a conveyance of that estate and who have advanced the money of their cestuis que trust on the faith of the estate which they have really got? It is surely desirable that the rules of this Court should be in accordance with the ordinary feelings of justice of mankind. Now if the first set of cestuis que trust, those who will unfortunately have to bear the loss, were asked how it happened that they had suffered this loss, they would answer that their father conveyed the estate to the uncle, and he turned out to be a dishonest man, and parted with the estate. That is an explanation which any ordinary man of intelligence would understand. It might not be satisfactory to the losers, but they must see at once how it came to happen that they lost their estate. If you trust your property to a man who turns out to be a rogue, it stands to reason that you may lose it. But supposing the Master of the Rolls’ doctrine to prevail, and supposing the other cestuis que trust to be asked how they had lost their property, the answer would be, “Our trustee invested our property on mortgage on the faith of a person who said that he had the legal estate, and who had it, and who conveyed it to our trustee as a security for the sums advanced, our trustee being guilty of no negligence whatever, having taken the advice of a perfectly competent conveyancer in order to see that the title was a good one. But the Court of Chancery says that we have lost it because our trustees had notice of the prior mortgage; though they had, in fact, no notice whatever. They had neither knowledge nor means of knowledge, but nevertheless the Court of Chancery says that, according to its doctrine, they had notice.” The only conclusion which any one would come to is that these cestuis que trust had been deprived of their property by the Court of Chancery, for reasons which, to an ordinary mind, were perfectly incomprehensible. I am clearly of opinion, whether, under the peculiar circumstances of that case, Carter v Carter, was rightly decided or not, as to which I will say nothing, that where a trustee in breach of trust conveys away a legal estate which he possesses, and that legal estate comes into the possession of a purchaser for valuable consideration without notice, that purchaser can hold the property against the cestuis que trust who were defrauded by the conveyance of the trustee; and that it makes no difference whatever that if the purchaser is challenged in a Court of Law, and an action of ejectment is brought against him, he may have to rely upon some deed which was in fact concealed from him, and of which he had neither knowledge nor means of knowledge. SIR W M JAMES LJ: I propose simply to apply myself to the case of a purchaser for valuable consideration, without notice, obtaining, upon the occasion of his purchase, and by means of his purchase deed, some legal estate, some legal right, some legal advantage; and, according to my view of the established law of this Court, such a purchaser’s plea of a purchase for valuable consideration without notice is an absolute, unqualified, unanswerable defence, and an unanswerable plea to the jurisdiction of this Court. Such a purchaser, when he has once put in that plea, may be interrogated and tested to any extent as to the valuable consideration which he has given in order to shew the bona fides or mala fides of this purchase, and also the presence or the absence of notice; but when once he has gone through that ordeal, and has satisfied the terms of the plea of purchase for valuable consideration without notice, then, according to my judgment, this Court has no jurisdiction whatever to do anything more than to let him depart in possession of that legal estate, that legal right, that legal advantage which he has obtained, whatever it may be. In such a case a purchaser is entitled to hold that which, without breach of duty, he has had conveyed to him. In the case of Carter v Carter, which was decided by the present Lord Chancellor, and which was followed by the Master of the Rolls in this case, and with which I am bound to say I am unable to agree, an exception from that rule was, under the circumstances, supposed to exist. 128 [2.95]

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Pilcher v Rawlins cont. It is very clearly expressed in a few lines of the judgment in that case: “But here the purchaser taking the conveyance under one will, supposed by all parties to be really the last will of the testator, finds himself driven to rely upon another and a second will containing on the face of it all the trusts which the testator has created;” – and that circumstance is supposed to create the exception. To my mind there are to that supposition two short and conclusive answers – the one a matter of principle, and the other a matter of fact. My view of the principle is, that when once you have arrived at the conclusion that the purchaser is a purchaser for valuable consideration without notice, the Court has no right to ask him, and has no right to put him to contest the question, how he is going to defend himself, or what he is going to rely on. He may say, honestly and justly, “I am not going to tell you. I have got the deeds; I defend them, and you will never be able to make me produce them, and you will never be able to produce secondary evidence of them. I am not obliged to produce them at all; probably before you get half way through your action of ejectment you will find a jus tertii which you will not dispose of; the estate is in the hands of a legal tenant to whom I have let it, and no one can determine that tenancy without notice, and no one can give that notice but myself; I will not give that notice, and no Court has any power to compel me to give it. I have a right to rely, as every person defending his position has, on the weakness of the title of the person who is seeking to displace me.” That seems to be exactly the position of such a purchaser as this. The purchaser in Carter v Carter did not rely on the will which created the trust; he relied on another title; for the will formed the title of the adverse party. And the answer to that adverse party is, by the good luck which sometimes attends honest men, “Though you produce an instrument which points out your title, and gives the property to some one else, yet I am prepared with a legal defence in a conveyance which was executed before.” It appears to me that there is no right in this Court to prevent the purchaser from setting up that defence to the claim so made against him. If there was ever a case in which, according to my judgment, any Court ought to be in favour of a purchaser and against such a title, it is a case in which a testator has, through the grossest negligence, allowed two wills to exist after his death, so that some members of his family produce one will apparently making out a perfectly good title to a mortgagee or purchaser, and then, when a mortgagee or purchaser has been induced unwittingly to pay or advance his money, some other members of the family produce the other will, which has been suppressed or concealed during the whole of that time, and then seek to take the estate away from the mortgagee or purchaser. It seems to me to be a very ingenious device by which a testator would be able to give his property twice over to his family; but, in my opinion, it is a device which ought not to be encouraged in any way in a Court of Equity. I am therefore of opinion that whatever may be the accident by which a purchaser has obtained a good legal title, and in respect of which he has paid his money and is in possession of the property, he is entitled to the benefit of that accident, just as a purchaser would be entitled to avail himself of the possession so acquired, without any reference to the rights of the persons who may be otherwise interested. [Lord Hatherley LC delivered a judgment to similar effect.]

[2.100]

Notes and Questions

1. What is the principle expressed in Pilcher v Rawlins (1872) 7 Ch App 259 and why were the holders of the equitable interest unable to demonstrate that there was no notice of their interest? 2. What is the difference in the sphere of enforceability of a legal interest on the one hand and an equitable interest on the other? [2.100]

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3. If a purchaser of the legal estate for value without notice of a prior equitable interest, subsequently sells the legal estate to a person who does have notice of the equitable interest, what is the result? See Wilkes v Spooner [1911] 2 KB 473 discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.555]. 4. The doctrine of notice is considered in some detail below at [2.105]-[2.110] and [6.170]-[6.180]. Other parts of the principle expressed in Pilcher v Rawlins (1872) 7 Ch App 259 have also been subject to interpretation and scrutiny by the courts: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.460]-[2.465].

Smith v Jones [2.105] Smith v Jones [1954] 1 WLR 1089 English High Court of Justice, Chancery Division ACTION: In 1946 a number of farms, part of the Parmoor estate, Buckinghamshire, were sold at auction. One of the farms was purchased by the defendant. He had knowledge that the farm was in the occupation of a tenant (the plaintiff); before the sale he had inspected a copy of the plaintiff’s tenancy agreement at the office of the auctioneers, and formed the opinion that under the terms of the repairing covenant the responsibility for doing repairs to the farmhouse and buildings was on the tenant. For many years the estate management had used a standard printed form of tenancy agreement, and it had always been their belief and the belief of the tenants that under the repairing covenant the estate was responsible for repairs to buildings; they and the tenants had always acted accordingly, and the plaintiff, when he signed his agreement in 1939, was told that that was its effect. After the purchase of the farm by the defendant disputes arose between the plaintiff and the defendant, as each required repairs to be done while refusing to do them himself. Eventually a case was stated for the opinion of a county court judge, under regulations made pursuant to the provisions of the Agricultural Holdings Act 1948, which raised, inter alia, the question of the proper construction of the repairing covenant. The judge held that the plaintiff was liable for structural repairs, but suggested that there might be a case for rectification, and stayed all proceedings until that question was decided. The plaintiff accordingly brought this action, claiming rectification of the tenancy agreement by providing that, while he was to keep the house, cottages and buildings in good order, the defendant was to keep the same in repair. At the hearing it was not disputed that the county court judge had been right in rejecting the extrinsic verbal evidence and in holding that the covenant, as amended, made the plaintiff responsible for repairs to the buildings. In answer to the claim for rectification, the defendant contended (1) that no right to rectification was made out on the evidence; (2) that, supposing that such a claim was made out, he was a bona fide purchaser for value and not bound by an equity to rectify; (3) that the plaintiff could not at such a late stage assert a claim for rectification. The case is reported on the second contention only. … on the first contention [it was] found that the plaintiff and the Parmoor estate intended to have an agreement in the common estate form, under which both parties mistakenly thought that on its true construction the responsibility for repairs fell on the landlord. On those facts … the claim for rectification [was dismissed]. UPJOHN J: Counsel for the plaintiff contended that, as the plaintiff was in actual occupation as tenant, the defendant was affected with notice of all his rights and equities, including an equity to rectify. On the view which I have formed of the facts and law as to rectification this point does not strictly arise, but as it has been fully argued I think that I ought to express my views thereon. 130 [2.105]

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Smith v Jones cont. In Barnhart v Greenshields (1853) 9 Moo PC 18, where the law is conveniently and compendiously stated, the judgment of the Privy Council was delivered by Mr Pemberton Leigh (later Lord Kingsdown), who said (9 Moo PC 18 at 32): With respect to the effect of possession merely, we take the law to be, that if there be a tenant in possession of land, a purchaser is bound by all the equities which the tenant could enforce against the vendor, and that the equity of the tenant extends not only to interests connected with his tenancy, as in Taylor v Stibbert (1794) 2 Ves J 437, but also to interests under collateral agreements, as in Daniels v Davison (1809) 16 Ves J 249, Allen v Anthony (1816) 1 Mer 282, the principle being the same in both classes of cases; namely, that the possession of the tenant is notice that he has some interest in the land, and that a purchaser having notice of that fact, is bound, according to the ordinary rule, either to inquire what that interest is, or to give effect to it, whatever it may be. Later in the judgment (9 Moo PC 33) Mr Pemberton Leigh cited a passage from the judgment in Allen v Anthony (1809) 16 Ves J 249, where Lord Eldon, LC, said (1 Mer, 284): It is so far settled as not to be disputed, that a person purchasing, when there is a tenant in possession, if he neglects to inquire into the title, must take, subject to such rights as the tenant may have. On the other hand, counsel for the plaintiff has not produced any case which goes so far as to say that an equity of rectification is an equity which is enforceable against a purchaser. In my judgment, it would be extending the doctrine of notice and the obligation to make inquiry far too much if the doctrine was intended to cover an equity of rectification. Of course, the purchaser is bound by the rights of the tenant in occupation-that is quite clear. As is shown by earlier cases, notably, I think, Taylor v Stibbert 2 Ves J 437, he is not entitled to assume that the tenant is in possession from year to year. He must look at the agreement and he is bound by the agreement, and if, as in Daniels v Davison 16 Ves J 249, the tenant has not only a tenancy agreement but also an option to purchase, he is bound by that also. In my judgment, however, a purchaser is not only entitled but bound to assume, when he is looking at the agreement under which the tenant holds, that that agreement correctly states the relationship between the tenant and the landlord, and he is not bound to ask or to make inquiry whether the tenant has any rights which would entitle him to have the agreement rectified. Barnhart v Greenshields was followed by the Court of Appeal in Hunt v Luck [1902] 1 Ch D 428, where the principle was again stated, but as Cozens-Hardy LJ, pointed out in argument ([1902] 1 Ch 430), and as Vaughan Williams LJ, pointed out at the beginning of his judgment (ibid, 432), the real question to determine was the true construction of the Conveyancing Act 1882, s 3. Farwell J, who heard the case at first instance [1901] 1 Ch 45, had dealt with the matter without reference to the statutory enactment. I have no doubt that that was because he treated the Act as merely declaratory of the existing law, but it is, after all, a matter of construction of the Act, although I have already expressed an opinion as though the matter rested solely on decided cases. The provisions of the Conveyancing Act 1882, s 3, are replaced by s 199(1)(ii), (2) and (3), of the Law of Property Act 1925. Section 199(1) reads: A purchaser shall not be prejudicially affected by notice of: (i) any instrument or matter capable of registration under the provisions of the Land Charges Act 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless – (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him. The question which I have to answer is this. What inspection and inquiries ought reasonably to have been made by the defendant of the plaintiff before the sale, so far as relevant to this question? I think [2.105]

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Smith v Jones cont. that the only relevant inquiry which he should have made would have been to say to the plaintiff: “May I see your tenancy agreement? I want to see whether it corresponds with the copy agreement which I have seen in the auction room?” That is the document which governed the rights of the parties. He ought to have asked whether he had seen a correct copy, but he was under no obligation, in my view, to proceed further and say: “Does that correctly represent your rights?” In fact, if he had asked that question the answer, honestly but erroneously given, would have been “Yes”. Still less was he bound to take the plaintiff step by step through the document and ask him how he interpreted its provisions. The defendant could not be so bound, and it would be most unwise for any intending purchaser to do so. In my judgment, the defendant is entitled and bound to rely on the terms of the document, and the document speaks for itself. Accordingly, had I come to a contrary conclusion on the claim for rectification, I should have found that the action was barred by the plea of bona fide purchaser for value without notice. In the circumstances, I must dismiss the action, with costs.

[2.110]

Notes and Questions

1. What was the nature of the interest the plaintiff asserted in Smith v Jones [1954] 1 WLR 1089? Does the court accept that the right asserted is proprietary in nature? Cf Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 extracted at [6.45]. 2. Compare the decision in Smith v Jones [1954] 1 WLR 1089 with the decision in Downie v Lockwood [1965] VR 257 extracted at [14.105]. 3. The case of Hunt v Luck [1902] 1 Ch 428 also demonstrates that there are limits to the duty to investigate. In this case it was held that the purchaser was not under a duty to investigate to whom a tenant paid the rent. Such an inquiry would have revealed that the recipient was not the vendor and was a person with some beneficial interest in the property. 4. The categories of notice recognised at common law are set out in statutory form in some jurisdictions (Conveyancing Act 1919 (NSW), s 164; Property Law Act 1958 (Vic), s 199; Property Law Act 1974 (Qld), s 346; Law of Property Act 1936 (SA), s 117; Conveyancing and Law of Property Act 1884 (Tas), ss 5 and 35A (relating to notice and restrictive covenants)). The provision in Victoria, s 199, is in the following form: (1) A purchaser shall not be prejudicially affected by notice of any instrument, fact or thing unless – (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his legal practitioner or other agent, as such, or would have come to the knowledge of his legal practitioner or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the legal practitioner or other agent.

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(2) This section shall not exempt a purchaser from any liability under, or any obligation to perform or observe, any covenant condition, provision or restriction contained in any instrument under which his title is derived, mediately or immediately; and such liability or obligation may be enforced in the same manner and to the same extent as if this section had not been passed. (3) A purchaser shall not by reason of anything in this section be affected by notice in any case where he would not have been so affected if this section had not been passed. (4) This section shall apply to purchases made either before or after the commencement of this Act.

Although the forms of notice are now effectively limited by the statutory provisions, case law interpreting what constitutes each form of notice is relevant: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.490]-[2.550]. With respect to constructive notice (s 199(1)(b)) it appears that the inquiries which a purchaser of the legal estate should make fall into two main categories: first, the purchaser should check the title documents and secondly, he or she should inspect the land in order to determine if any outstanding equitable interests exist (see, for example, Barnhart v Greenshields (1853) 9 Moo 18; 14 ER 204). 5. With respect to checking the title documents, the purchaser should search the documents in the vendor’s chain of title and a purchaser who does not do so is said to have constructive notice of all the equitable interests which he or she would have discovered had a search been made. In the absence of statutory provisions restricting necessary searches, a prudent purchaser would need to search all documents in the vendor’s chain of title going back to the original Crown grant. In all States except South Australia there are statutory provisions which attempt to limit the searches required of a purchaser to a set period (generally 30 years), providing the documents go back to a “good root of title”. (Conveyancing Act 1919 (NSW), s 53(1); Property Law Act 1958 (Vic), s 44(1); Property Law Act 1974 (Qld), s 237(1); Conveyancing and Law of Property Act 1884 (Tas), s 35(1) (20 years); Sale of Land Act 1970 (WA), s 22. Presumably the 60-year period insisted upon at common law in England is the relevant period for South Australia.) Further statutory provisions provide protection from notice of equitable interests contained in documents before the commencement of the statutory period. (Property law statutes: Conveyancing Act 1919 (NSW), s 53(3); Property Law Act 1958 (Vic), s 44(6); Property Law Act 1974 (Qld), s 237(6); Conveyancing and Law of Property Act 1884 (Tas), s 35(5).) See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.525]-[2.545]. 6. The nature and the extent of the duty to inspect the land have been considered in a number of cases: see, for example, Caunce v Caunce [1969] 1 WLR 286; Hodgson v Marks [1971] Ch 892; Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266; Lloyds Bank Plc v Rosset [1989] Ch 350 (Court of Appeal decision. Reversed by the House of Lords on another ground: [1991] 1 AC 107). Problems may arise where the vendor/legal title holder is in possession of the land but another person, with some equitable interest in the property, is also in possession with the vendor. This may often occur in family situations. It appears that such co-occupation constitutes constructive notice of the equitable interest: Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783; Platzer v Commonwealth Bank of [2.110]

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Australia [1997] 1 Qd R 266; Lloyds Bank Plc v Rosset [1991] 1 AC 107. Cf the earlier decision of Caunce. (Note that most of the English decisions did not directly concern constructive notice: rather they concerned an interpretation of s 70(1)(g) of the Land Registration Act 1925 (UK). See now Land Registration Act 2002 (UK), Sch 3, para 2. See Note 8 below and Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.515]-[2.520]. 7. In Kingsnorth Trust Ltd v Tizard [1986] 1 WLR 783 the issue of constructive notice was raised directly. The wife was separated from the husband, but returned to the matrimonial home on most days to care for the children. In these circumstances, the mortgagee was held to have constructive notice of her interest. The agent of the mortgagee had not inquired or inspected with sufficient diligence: first, the occupation of the children should have alerted the mortgagee to the possibility of a spouse; secondly, the husband had originally described himself as a spouse and admitted to being married but separated; and thirdly, the time of inspection (a Sunday afternoon) was set up by the husband. It was held that where one of the objects was to ascertain who is in possession, “an inspection at a time pre-arranged with the vendor” will not necessarily achieve that object. Do you consider that the duties required of a purchaser as suggested in the Kingsnorth case are too onerous? 8. In Lloyds Bank Plc v Rosset [1989] Ch 350 the property in dispute was being renovated and the wife visited each day to supervise. The wife was held to be in “actual occupation” under the English statutory regime and so her equitable interest was protected. (The Court of Appeal decision was reversed by the House of Lords but on the basis that the wife had not demonstrated that she had an equitable interest: see Lloyds Bank Plc v Rosset [1991] 1 AC 107.) See similarly Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266, a Torrens title case, extracted at [6.170] where the occupation of a builder constructing a house on the land (together with some other factors) was sufficient to provide notice of the wife’s equitable interest held under a resulting trust. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.515]. 9. Even where a person is only in possession of part of the land, such possession may still provide notice of an interest over all the land. In Ferrishurst Ltd v Wallcite Ltd [1999] Ch 355, the English Court of Appeal held that the overriding interest under s 70(1)(g) of the Land Registration Act 1925 (UK) of “the rights of a person in ‘actual occupation’, protected all the rights even where the person was only in possession of part of the premises”. The case concerned registered land and the Court of Appeal cautioned against aligning directly statutory “actual occupation” with the doctrine of notice. The Court of Appeal made it clear that although the purpose of both doctrines was to protect the interest of the occupier, the method used to provide such protection in each case was different and care should be taken not to draw direct analogies: per Robert Walker LJ at 372. Cf the earlier view of Russell LJ in Hodgson v Marks [1971] Ch 892 at 931 where his Honour was “prepared to assume … that s 70(1)(g) of the Land Registration Act 1925 is designed only to apply to a case in which the occupation is such, in point of fact, as would in the case of unregistered land affect a purchaser with constructive notice of the rights of the occupier”. The ramifications of the Ferrishurst case are discussed in Hill, “Overriding Interests: Occupation of Part of the Land” (2000) 63 MLR 113. See also McNicol, “Constructive Notice of a Spouse in Actual Occupation” (1981) 13 MULR 226. In 134

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England, the principle in the Ferrishurst case has been effectively reversed by statute. By Sch 3, para 2 of the Land Registration Act 2002 (UK), the rights of an occupier are now only protected insofar as they relate to “land of which he is in actual occupation.” Query the position in Australia. Will the doctrine of notice be applied so that occupation of part of land provides notice of an interest in the whole of the land? 10. Once a person has actual notice of a prior interest, he or she can only take free of the interest if all reasonable care has been taken to independently ascertain that the prior interest has been expunged. It is insufficient to rely on the assurance of a vendor or mortgagor who created the earlier interest: Jared v Clements [1903] 1 Ch 428; Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [2003] VSC 495. Cf IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 at [223]. A failure to make reasonable enquiries to verify the discharge of earlier equitable interests, means the actual knowledge cannot be negated. In general, the doctrine of notice applies to general law land in Australia. The Torrens system of land registration sets up a different scheme under which the doctrine of notice is inapplicable to disputes between unregistered (equitable) interests and subsequent registered (legal) interests: see [5.45] – [5.55]. However, the doctrine of notice has been used in some types of priority disputes concerning Torrens land: [6.170]-[6.180]. For recent examples, see Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266, Moffett v Dillon [1999] 2 VR 480 and Perpetual Trustees Co Ltd v Smith [2010] V ConvR 54-779. 11. The deeds registration system (see [2.145]) sets up a scheme under which instruments affecting interests in general law land may be registered. A purchaser would be deemed to have notice of any equitable interest which could have been discovered by a search of the deeds register (see Mills v Renwick (1901) 1 SR (Eq)). Note, however, the phasing out of deeds registration systems: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.605]. 12. Consider whether the same duties as suggested in Kingsnorth would be required of a purchaser in the Australian jurisdictions. What is the impact of legislation such as s 32 of the Sale of Land Act 1962 (Vic) requiring the vendor to provide specific information to the purchaser? See Jacobs v Platt Nominees Pty Ltd [1990] VR 146 extracted at [6.125]. Prior legal interest against subsequent equitable interest

Northern Countries Fire Insurance Co v Whip [2.115] Northern Countries Fire Insurance Co v Whipp (1884) 26 Ch D 482 English Court of Appeal On the 11th of January 1878, Crabtree, who was the manager of the Plaintiff company, executed a legal mortgage of a freehold property, known as Millbank, to the Plaintiff company, to secure £4,500, and, according to the conclusion drawn by the Court of Appeal from the evidence, Crabtree, at or about the same time, delivered the title deeds to the company, and received the £4,500 from the company in cash. On the 24th of May, 1878, Crabtree made a legal mortgage to the Plaintiff company of certain other freehold property to secure £2,500, and the title deeds were (according to the conclusion at which the Court of Appeal arrived on the evidence) delivered to the Plaintiff company … The deeds of the mortgaged properties were placed in a safe of the company, and were seen there on the occasion of the audit in May 1878. [2.115]

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Northern Countries Fire Insurance Co v Whip cont. Crabtree, … was entrusted with one of the two keys which opened the one lock which secured the safe in which the deeds of the company were kept, and it appeared that in November 1878, he produced the deeds in question to the Defendant’s solicitor, Mr Milne Whitehead, to whom Crabtree had applied for a loan on mortgage of these two properties. As the result of this application the Defendant, Mrs Whipp, advanced £3,500 to Crabtree on a mortgage, dated the 19th of December 1878, of the two properties included in the Plaintiffs’ securities, and she at the same time received from Crabtree the title deeds of the two properties, but not the mortgages to the Plaintiff company. The Defendant’s mortgage was taken by her, and the mortgage money paid by her to Crabtree, in entire ignorance of the securities to the Plaintiff company. Crabtree went into liquidation in November 1879, and in the following month an order [was made] for winding up the Plaintiff company. In 1880 the liquidator commenced, in the name of the company, this action, against Mrs Whipp and Crabtree’s trustee in liquidation, for foreclosure. The trustee disclaimed, and the action was dismissed as against him. Mrs Whipp put in a defence and counterclaim by which she asked that the securities of the Plaintiff company might be declared fraudulent and void as against her, or in the alternative that they might be postponed … FRY LJ (delivering the judgment of the court comprising Cotton, Bowen and Fry LJJ): The Plaintiffs being possessed of mortgages earlier in date than the mortgage of the Defendant, and under these instruments, being the owners of the legal estate, are prima facie entitled to priority over the Defendant, but the Defendant seeks to postpone the Plaintiffs’ legal estate on various grounds. The main contention on the part of the Defendant, which succeeded in the Court below, was that by reason of the negligent conduct of the Plaintiffs, after they had taken their mortgages, these securities ought to be postponed to the security of the Defendant; and this point has been argued at such length and with so extensive a reference to the authorities, that it appears to us necessary to consider the matter fully. The question which has thus to be investigated is – What conduct in relation to the title deeds on the part of a mortgagee who has the legal estate, is sufficient to postpone such mortgagee in favour of a subsequent equitable mortgagee who has obtained the title deeds without knowledge of the legal mortgage? The question is not what circumstances may as between two equities give priority to the one over the other, but what circumstances justify the Court in depriving a legal mortgagee of the benefit of the legal estate. It has been contended on the part of the Plaintiffs that nothing short of fraud will justify the Court in postponing the legal estate. It has been contended by the Defendant that gross negligence is enough. The cases which assist in answering the question thus raised will be found to fall into two categories: (1), those which relate to conduct of the legal mortgagee in not obtaining possession of the title deeds; (2), those which relate to the conduct of the legal mortgagee in giving up or not retaining the possession of the title deeds after he has obtained them. The two classes of cases will not be found to differ in the principles by which they are to be governed, but they do differ much in the kind of fraud which is to be most naturally looked for … [T]he cases which have arisen on the conduct of the mortgagee in not obtaining possession of the title deeds may be ranged in the following classes: (1)

Where the legal mortgagee or purchaser has made no inquiry for the title deeds and has been postponed, either to a prior equitable estate as in Worthington v Morgan 16 Sim 547, or to a subsequent equitable owner who used diligence in inquiring for the title deeds, as in Clark v Palmer 21 Ch D 124. In these cases the Courts have considered the conduct of the mortgagee in making no inquiry to be evidence of the fraudulent intent to escape notice of a prior equity,

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Northern Countries Fire Insurance Co v Whip cont. and in the latter case that a subsequent mortgagee, who was, in fact, misled by the mortgagor taking advantage of the conduct of the legal mortgagee, could as against him take advantage of the fraudulent intent. (2)

Where the legal mortgagee has made inquiry for the deeds and has received a reasonable excuse for their non-delivery, and has accordingly not lost his priority, as in Barnett v Weston 12 Ves 130; Hewitt v Loosemore 9 Hare, 449; Agra Bank v Barry Law Rep 7 HL 135.

(3)

Where the legal mortgagee has received part of the deeds under a reasonable belief that he was receiving all and has accordingly not lost his priority, as in Hunt v Elmes 2 DF & J 578, Ratcliffe v Barnard Law Rep 6 Ch 652, and Colyer v Finch 5 HLC 905.

(4)

Where the legal mortgagee has left the deeds in the hands of the mortgagor with authority to deal with them for the purpose of his raising money on security of the estate, and he has exceeded the collateral instructions given to him. In these cases the legal mortgagee has been postponed, as in Perry-Herrick v Attwood 2 De G & J 21. This case was decided not on the ground that the legal mortgagees had been guilty of fraud, but on the ground that as they had left the deeds in the hands of the mortgagor for the purpose of raising money, they could not insist, as against those who in reliance on the deeds lent their money, that the mortgagor had exceeded his authority.

The cases where the mortgagee having received the deeds has subsequently parted with them, or suffered them to fall into the hands of the mortgagor, will be found to fall into the following classes: (1)

Where the title deeds have been lent by the legal mortgagee to the mortgagor upon a reasonable representation made by him as to the object in borrowing them, and the legal mortgagee has retained his priority over the subsequent equities, as Peter v Russel, or Thatched House Case 1 Eq Ca Abr 321; Martinez v Cooper 2 Russ 198.

(2)

Where the legal mortgagee has returned the deeds to the mortgagor for the express purpose of raising money on them, though with the expectation that he would disclose the existence of the prior security to any second mortgagee: Briggs v Jones Law Rep 10 Eq 92. In such cases the Court has, on the ground of authority, postponed the legal to the equitable estate. This is the same in principle as the decision in Perry-Herrick v Attwood 2 De G & J 21.

No case has been cited in which the legal mortgagee has (as by the Vice Chancellor in this case) been postponed by reason of negligence in the custody of the deeds. The decisions on negligence at common law have been pressed on us in the present case, but it appears to us enough to observe that the action at law for negligence imports the existence of a duty on the part of the defendant to the plaintiff, and a loss suffered as a direct consequence of the breach of such duty; and that in the present case it is impossible to find any duty undertaken by the Plaintiff company to the Defendant, Mrs Whipp. The case was argued as if the legal owner of land owed a duty to all other of Her Majesty’s subjects to keep his title deeds secure; as if title deeds were in the eye of the law analogous to fierce dogs or destructive elements, where from the nature of the thing the Courts have implied a general duty of safe custody on the part of the person having their possession or control. This view is in our opinion impliedly negatived by the whole course of decisions, and it is expressly repelled by the observations of the present Lord Chancellor in Agra Bank v Barry Law Rep 7 HL 157, where he said, “It has been said in argument that investigation of title and inquiry after deeds is ‘the duty’ of a purchaser or a mortgagee; and, no doubt, there are authorities (not involving any question of registry), which do use that language. But this, if it can properly be called a duty, is not a duty owing to the possible holder of a latent title or security. It is merely the course which a man dealing bona fide in the proper and usual manner for his own interest, ought, by himself or his solicitor, to follow, with a view to his own title and his own security. If he does not follow that course, the omission of it may be a thing requiring to be accounted for or explained. It may be evidence, if it is [2.115]

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Northern Countries Fire Insurance Co v Whip cont. not explained, of a design, inconsistent with bona fide dealing, to avoid knowledge of the true state of the title. What is a sufficient explanation, must always be a question to be decided with reference to the nature and circumstances of each particular case.” These observations appear to us conclusive on the point, and they at the same time suggest the conclusion, that if in any case it shall appear that a prior legal mortgagee has undertaken any duty as to the custody of the deeds towards any given person, and has neglected to perform that duty with due care, and has thereby injured the person to whom the duty was owed, there the legal estate might be postponed by reason of the negligence. But no such case appears as yet to have arisen, nor does it seem one likely often to occur. The point certainly does not rise in the present case, and we therefore give no opinion upon it. The authorities which we have reviewed appear to us to justify the following conclusions: (1) That the Court will postpone the prior legal estate to a subsequent equitable estate: (a), where the owner of the legal estate has assisted in or connived at the fraud which has led to the creation of a subsequent equitable estate, without notice of the prior legal estate; of which assistance or connivance, the omission to use ordinary care in inquiry after or keeping title deeds may be, and in some cases has been, held to be sufficient evidence, where such conduct cannot otherwise be explained; (b), where the owner of the legal estate has constituted the mortgagor his agent with authority to raise money, and the estate thus created has by the fraud of misconduct of the agent been represented as being the first estate. But (2) that the Court will not postpone the prior legal estate to the subsequent equitable estate on the ground of any mere carelessness or want of prudence on the part of the legal owner. Now to apply the conclusions thus arrived at to the facts of the present case. That there was great carelessness in the manner in which the Plaintiff company through its directors dealt with their securities seems to us to admit of no doubt. But is that carelessness evidence of any fraud? We think that it is not. Of what fraud is it evidence? The Plaintiffs never combined with Crabtree to induce the Defendant to lend her money. They never knew that she was lending it, and stood by. They can have had no motive to desire that their deeds should be abstracted and their own title clouded. Their carelessness may be called gross, but in our judgment it was carelessness likely to injure and not to benefit the Plaintiff company, and accordingly has no tendency to convict them of fraud. Then comes the inquiry whether the Plaintiff company constituted Crabtree their agent to raise money, in which case the Defendant might be entitled to priority. The circumstance most favourable to this contention was, in our opinion, the possession by Crabtree of the key. But the Defendant has not proved the circumstances attending this fact, or the duties for the performance of which the key may have been essential, with sufficient distinctness to enable us to conclude from the possession of the key that it implied an authority to deal with the securities of the Plaintiff company. The cases in which Crabtree did so deal with the securities, when carefully considered, appear to us insufficient to support the authority claimed; and the fact that Crabtree in dealing with the Defendant suppressed his mortgage to the company and dealt with her, not as agent of the company having an authority to pledge its securities, but as the unencumbered owner of the property, goes, we think, far to negative the suggested authority. On this point, therefore, we agree with the Vice Chancellor.

[2.120]

Notes and Questions

1. In what circumstances, if any, did the Court of Appeal envisage that negligence might be sufficient to postpone the prior legal interest holder? 2. What differences, if any, did the court draw between a legal mortgagee’s conduct in not getting in the title deeds and his or her conduct in letting them go subsequently? 138 [2.120]

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3. Did Mrs Whipp intend to acquire legal mortgages over Crabtree’s properties when she advanced moneys to him? Why was she unable to acquire such interests? 4. Compare Northern Countries Fire Insurance Co v Whipp (1884) 26 Ch D 482 with Barry v Heider (1914) 19 CLR 197 (extracted at [6.25]), a case concerning Torrens system land.

Walker v Linom [2.125] Walker v Linom [1907] 2 Ch 104 English High Court of Justice, Chancery Division [Walker was the holder of the legal fee simple. He conveyed the legal fee simple to trustees to be held on certain trusts. The relevant trusts were to Walker for life or until he attempted to alienate, then to his wife for life and thereafter upon other stated trusts. The solicitors who acted for both Walker and the trustees took possession of the title deeds but unbeknown to them or to the trustees, Walker retained the deed in the chain by which the land had originally been conveyed to him. At a later date, Walker, by using the deed, held himself out to be the legal owner of the property and procured a loan from X on the security of the deed. He also purported to execute a formal legal mortgage in favour of X. Subsequently, X sold to Linom.] PARKER J: [I]t will be convenient to consider separately the position of the plaintiff [Walker’s wife] and her trustees. I will deal first with the position of the trustees. Now it cannot be disputed that the settlement constituted a conveyance for value, and that the trustees have the legal estate. The circumstances under which a mortgagee or purchaser with the legal estate is, by reason of some conduct on his part in relation to the title deeds, postponed to some person having only an equitable interest is discussed fully in the case of Northern Counties of England Fire Insurance Co v Whipp … Now, as I have already said, I cannot under the circumstances of this case find that anyone concerned in the 1896 settlement, with the exception of George Church Walker, acted otherwise than honestly, and, if I treat Fry LJ’s judgment as meaning that in no case can a prior legal estate be postponed to a subsequent equitable estate without the existence of fraud in its ordinary common law sense as necessarily connoting a dishonest intention, I must hold that the trustees are not postponed. There are, however, subsequent cases which suggest that at any rate in cases of postponement, based on no inquiry having been made for the deeds, fraud is not necessary. [After considering these cases, Parker J continued:] In my opinion any conduct on the part of the holder of the legal estate in relation to the deeds which would make it inequitable for him to rely on his legal estate against a prior equitable estate of which he had no notice ought also to be sufficient to postpone him to a subsequent equitable estate the creation of which has only been rendered possible by the possession of deeds which but for such conduct would have passed into the possession of the owner of the legal estate. This must, I think, have been the opinion of Fry LJ in Northern Counties of England Fire Insurance Co v Whipp 26 Ch D 482; for he explains both Worthington v Morgan 16 Sim 547 and Clarke v Palmer 21 Ch D 124 as based upon the same sort of fraud. I do not think, therefore, that there is anything in the authorities to preclude me from holding, and I accordingly hold, that the trustees, although they have the legal estate, are postponed to the defendant.

[2.130]

Notes and Questions

1. How did the court reach the conclusion that the mortgagee and in turn the purchaser from [2.130]

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the mortgagee, had any interest in the land? Will gross negligence per se by the holder of the prior legal estate be sufficient to postpone the interest to a subsequent equitable interest? 2. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.410], [2.445]; and Heydon, Leeming and Turner, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, Lexis Nexis, Sydney, 2015), pp 350–351 for a more detailed discussion of this type of priority dispute. 3. Mrs Walker, as a beneficiary under the trust, also had her interest postponed to that of Linom. See [2.140] note 2 below. Prior equitable interest against subsequent equitable interest

AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2.135] AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2010] QCA 83 Supreme Court of Queensland, Court of Appeal (footnotes incorporated into text) HOLMES JA. The appellant, AG(CQ) Pty Ltd, appeals a judgment by which it was declared that the interest of the first respondent, A&T Promotions Pty Ltd, as equitable mortgagee in a lot at Mackay had priority over AG(CQ)’s interest, also as equitable mortgagee, in the same lot. The learned judge held that A&T Promotions’ interest, the first in time, should prevail, the competing interests being equal in merit and A&T Promotions having been guilty of no act or omission that would make that result unfair. The agreed facts The parties proceeded at first instance on a statement of agreed facts which forms the basis of the following outline: 1.

The second respondent, Mr Ikin, owned and controlled a company, Maccaral Developments Pty Ltd, which in July 2005 entered a loan agreement with A&T Promotions, pursuant to which Maccaral was advanced $3,000,000. Ikin gave a guarantee in respect of the loan agreement.

2.

On 26 March 2007, Ikin, as trustee for the Mackay Trust, executed a Success Fee Deed with AG(CQ) by which AG(CQ) covenanted to pay him, as trustee, a success fee for procuring the sale of two parcels of land to AG(CQ). The amount of the success fee was $3,800,000, which was payable on the land’s being sold to AG(CQ). $2,000,000 of that amount was to be paid on settlement of the sale, with the balance met by transfer from AG(CQ) to Ikin, as trustee, of a proposed lot to be created by subdivision from the two amalgamated parcels of land. The lot was to be transferred to Ikin within 14 days of the registration of the survey plan of the land creating the lot.

3.

AG(CQ) completed the purchase of the land on 31 May 2007 and $2,000,000 was paid to Ikin or at his direction.

4.

On 5 June 2007, the Maccaral loan not having been repaid when it fell due, A&T Promotions, Maccaral and Ikin entered a Deed of Variation extending the repayment date to 30 July 2007. Maccaral and Ikin failed once again to make payment by that date.

5.

In September 2007, Ikin provided A&T Promotions with a copy of the Success Fee Deed, together with a letter sent by facsimile from AG(CQ)’s solicitors to Ikin which confirmed the terms of the Success Fee Deed as to the reward he was to receive and as to how and when he was to receive it. (The letter, dated 2 May 2007, was written some four weeks before the anticipated settlement date for the purchase of the two parcels of land, on 31 May 2007.) It went on to confirm that Ikin had given authority for repayment of $500,000 with interest,

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. owed to another company, from the funds payable under the Deed, and it advised that AG(CQ) sought reimbursement from those funds of $30,000 on account of monies it had paid elsewhere. 6.

Two weeks later, A&T Promotions, Maccaral, Ikin and Ikin as trustee entered into a second Deed of Variation, pursuant to which: the repayment date was extended to 2 October 2007; Ikin as trustee granted a mortgage over the proposed lot to A&T Promotions; and Ikin personally and as trustee entered into a guarantee and indemnity in relation to the second Deed of Variation. By clause 5.1(c)(ii) of the Deed, Ikin agreed: Upon request, and where the New Mortgage has not registered with the Queensland Department of Natural Resources and Water, [to] assign the Success Fee Deed to [A&T Promotions] on terms acceptable to [A&T Promotions].

Ikin further agreed that he would not vary the terms of the Deed without obtaining the written consent of A&T Promotions and that he would immediately notify A&T Promotions when the lot was created and provide its description and title reference. He irrevocably authorised A&T Promotions to complete and register the mortgage which he had executed. Ikin warranted (although what follows were expressed as “covenants”) that the Success Fee Deed was a valid and existing document; that he had power to assign his rights under it; that there had been no breach of it which would entitle AG(CQ) to terminate it; that it comprised the whole of the agreement between him and AG(CQ); and that there were no outstanding mortgages, charges or other encumbrances relating to the Success Fee Deed and the proposed lot. 7.

On 17 March 2008, Ikin as trustee granted AG(CQ) a mortgage over the proposed lot to secure an advance of $627,000 together with a further sum of $700,000 to be paid as headworks charges on the lot. He, with AG(CQ), executed a transfer, settlement notice and authority to complete in respect of it, none of which contained a title reference, since the lot had yet to be created and registered.

8.

Subsequently, in April 2008 and May 2008, Ikin as trustee charged the proposed lot in favour of two further creditors, both of whom acknowledged that the priority of their respective interests ranked behind that of A&T Promotions and AG(CQ).

9.

A&T Promotions did not make any request for the assignment of the interest of Ikin as trustee in the Success Fee Deed until 4 August 2008, and it did not notify AG(CQ) of its interest as a mortgagee until 26 August 2008.

10.

The lot was created on 24 December 2008. It has not been transferred to Ikin.

… The test Underlying the parties’ submissions [as to which equitable mortgage had priority] was a divergence as to whether the rule of priority for the interest first created was one of first or last resort. Certainly, both approaches may be found in the authorities. In Rice v Rice 61 ER 646, cited by the learned judge at first instance, Kindersley V-C identified the rule (at 649): As between persons having only equitable interests, if their equities are in all other respects equal, priority of time gives the better equity; or, qui prior est tempore potior est jure. He went on to explain it as meaning that, in a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to; i.e., that a Court of Equity will not prefer the one to the other, on the mere ground of priority of time, until it finds upon an examination of their relative merits that there is no other sufficient ground of preference between them, or, in [2.135]

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. other words, that their equities are in all other respects equal; and that, if the one has on other grounds a better equity than the other, priority of time is immaterial. In examining into the relative merits (or equities) of two parties having adverse equitable interests, the points to which the Court must direct its attention are obviously these: the nature and condition of their respective equitable interests, the circumstances and manner of their acquisition, and the whole conduct of each party with respect thereto. And in examining into these points it must apply the test, not of any technical rule or any rule of partial application, but the same broad principles of right and justice which a Court of Equity applies universally in deciding upon contested rights. (At 649.) But in Lapin v Abigail, also cited by her Honour, a different approach was taken, both in the High Court and the Privy Council. Mr and Mrs Lapin, the registered proprietors of land, had given transfers by way of security to creditors who fraudulently mortgaged it. The majority in the High Court held that the unregistered security of the subsequent lender did not take priority over the Lapins’ equitable right to redeem. Knox CJ and Dixon J, in the majority, and Gavan Duffy and Starke JJ, in the minority, agreed that prima facie the equitable interest of the prior equity holder took priority of the later. That position could be disturbed by disentitling conduct on the part of the holder of the prior equity which warranted its postponement to the subsequently acquired equity. In passages relied on here by A&T Promotions, Knox CJ (at 183-184) said that he regarded a number of earlier decisions as establishing that there would be no such postponement unless there was an act or omission proved against the prior equity holder which had contributed to a belief on the part of the subsequent claimant at the time he acquired his equity that the prior equity was not in existence, while Gavan Duffy and Starke JJ (at 196) posed the relevant question as whether the words and actions of the person having the prior equity had caused another to alter his position. Dixon J was less definitive in his language; he said that the act or default of the earlier interest holder must be such as to make it inequitable as between him and the subsequent interest holder that he should retain his priority, which, he said (at 204), generally means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity. The use of the word “generally” allows, of course, for other possibilities. Isaacs J approached the question more broadly, suggesting (at 186) that one party might have a better equity independent of any act or omission on the part of the other. While there was a “working rule” applicable in most cases – that priority in time would govern unless there had been some act or omission on the part of the owner of the prior interest such as to cause it to be postponed – it did not state the principle, which was that the court sought: …not for the worst, but for the best equity. And the best equity – for there may be several claimants – is that which on the whole is the most meritorious, it may be because the others are, by reason of circumstances indicated in the passages quoted, lessened in relative merit, or because one is, by reason of some additional circumstance, not attributable to any act or omission of the others, rendered in the eye of equity more meritorious than the rest. (The reference to “circumstances indicated in the passages quoted” was to previous cases dealing with an act or omission on the part of one of the claimants justifying postponement of its title.) On appeal to the Privy Council [Abigail v Lapin (1934) 51 CLR 58; [1934] AC 491], the decision in Lapin v Abigail was reversed on the basis that the Lapins’ conduct in arming their creditors with the capacity to become the registered proprietors was disentitling conduct. The Judicial Committee rejected Kindersley V-C’s position that priority in time was the test only where the equities were otherwise equal. It was, they said (at 68), clearly established that prima facie, priority in time would decide the matter unless there was something “tangible and distinct having grave and strong effect” to warrant taking away the pre-existing equitable title. 142 [2.135]

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. But in Latec Investments Limited v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265 at 276, Kitto J restated Kindersley V-C’s formulation: In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v. Rice. But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest. (citation omitted) In Heid [Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333, 339, and 348], the High Court endorsed Kitto J’s explanation of the rule in Latec Investments. Having discussed estoppel as a rationale for postponing an earlier equity, Mason and Deane JJ (at 341) went on to express a preference for: …a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances. It will always be necessary to characterize the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest. In Latec Investments, Kitto J, had, they said, explained Dixon J’s test in Lapin, of whether the prior owner’s conduct had led the later owner to acquire his interest on the supposition that the earlier interest did not exist, as just one instance of a case in which the merits were unequal. That was consistent with what Isaacs J had said in Lapin. Mason and Deane JJ continued (at 341): To say that the question involves general considerations of fairness and justice acknowledges that, in whatever form the relevant test be stated, the overriding question is “…whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made …”. (citing Sykes, Law of Securities, 3rd Ed. (1978), p.336). They went on to observe (at 342) that an equitable interest would not necessarily be postponed to one created later in time merely because there was a causal nexus between an act or omission by the prior equitable owner and an assumption on the part of the later equitable owner that no such prior equity existed. Fairness and justice demanded focus on: acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest. AG(CQ) here relied on Isaac J’s approach in Lapin v Abigail and on Barnes v James (1902) 27 VLR 749 to argue that the question was not whether the prior equity holder was guilty of disentitling conduct, but whether one of them had been more diligent than the other. In Barnes v James, James agreed to transfer to Barnes, from whom he had borrowed money, a mining lease about to be issued. After the lease was issued and registered, James sold it to a company and executed a transfer to it. The company lodged a caveat against any dealings with the lease, having no notice of Barnes’ rights. What Beckett J described as “accident” prevented the company from registering the transfer. Beckett J resolved (at 752) the matter thus: [2.135]

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. I think there is a better right on the part of the defendant company, and I think that the better right consists in this, that no step was omitted by it by which it could have ascertained the existence of a prior interest in any other person. I cannot say that the plaintiff was negligent, but he might have done more than he did to protect his title by entering a caveat when he ascertained that a lease was issued. In Clark v Raymor (Brisbane) Pty Limited [No 2] [1981] Qd R 790, purchasers of land who had received the certificate of title had been unable to register themselves as proprietors before the holder of an equitable charge on the property given prior to its sale lodged a caveat. The first instance decision, that the purchasers’ equity to have their transfer registered took priority, was upheld on appeal. Thomas J, with whom the other members of the Court agreed, cited (at 795) the passage already set out from Kitto J’s judgment in Latec Investments and observed that in determining the question of priority: The fact that one interest was created before the other is a factor of last resort only. The correct function is “to determine where the better equity lies.” The application of the test Judges in such cases at first instance and on appeal have not generally regarded it as necessary that evidence be called in order to establish what a reasonable equity holder would have done. I do not think that there is anything about this case requiring a different approach. One can accept as correct these propositions advanced by AG(CQ) on the strength of the more recent authorities: the question is as to which is the better equity, and in determining that question the conduct of both parties will be relevant. But one can also say that it is proper to look for both meritorious and unmeritorious (or disentitling) conduct as, in my respectful view, the learned judge did in this case; and it is legitimate to determine the worse of the equities in order to establish the better. The position advanced by A&T Promotions, that there must have been conduct on its part to arm Ikin to hold out the title to the proposed lot as unencumbered before postponement of its interest could be justified, is too restricted. Negligence in putting another person in a position in which he can misrepresent his interest to a third party may be sufficient to cause the holder of the first interest in time to lose his priority, but it is not essential. On the other hand, notwithstanding the broad formulations of the rule by Isaacs J in Lapin v Abigail and Beckett J in Barnes v James, I doubt the correctness of AG(CQ)’s argument that the mere fact of greater diligence on the part of the subsequent interest holder in protecting its interest should give it priority. That proposition is difficult to reconcile with the emphasis which Mason and Deane JJ in Heid (1983) 154 CLR 326 at 341 placed on characterising the conduct of the earlier interest-holder. I reject the submission that AG(CQ)’s actions, in obtaining and retaining those documents necessary to complete a transfer once the lot issued, per se created an imbalance in the respective merits sufficient to give it the better equity. It may be accepted, however, that AG(CQ) did what it could to secure its position. A&T Promotions’ argument that AG(CQ), by giving Ikin the Success Fee Deed, armed him with the capacity to represent the title to the proposed lot as unencumbered is entirely unconvincing. The further inquiries A&T Promotions suggested AG(CQ) might have made were not identified, and a search of its own title would seem to have been entirely pointless. Nor is it obvious that it should have lodged a caveat over parcels of land registered in its own name, any more than the bank in J & H Just (Holdings) [J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1970] 3 NSWR 372 at 375], where the High Court rejected just such an argument. There, the bank held a duplicate certificate of title without which further dealings could not be registered, and was entitled to rely on those circumstances for protection. I should say here that I do not think the learned judge’s allusion to AG(CQ)’s possession of the incomplete transfer documents as not having prevented Ikin from obtaining further advances on the 144 [2.135]

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. security of the proposed lot indicates any error in reasoning. Her Honour’s statement was literally correct. She did not go on to draw the inference which AG(CQ) attributes to her, and for which A&T Promotions here contends, that the later mortgagees’ conduct was indicative of the response of a prudent lender. The learned judge in the present case was correct in identifying a risk to both A&T Promotions and AG(CQ) that title to the proposed lot would not issue, leaving them both without security for the moneys lent by them. But in practical terms, the risk run by AG(CQ) was entirely different from that of A&T Promotions, because if the lot did not issue it had an advantage which offset the loss of its security: it remained the owner of the land. A&T Promotions was vulnerable, having taken security over an unregistered lot. There was no register to search and there was no means of general notification of its interest. As counsel for AG(CQ) submitted, it was inherent in that type of transaction that Ikin could repeat the transaction without the knowledge of either A&T Promotions or any subsequent lender. Ikin had twice defaulted on repayment of the Maccaral loan, and had already, as the solicitors’ letter showed, committed a large proportion of the funds payable under the Success Fee Deed to two creditors, one of them AG(CQ). It was entirely foreseeable that he might seek to raise more money on his prospects in relation to the land. Only the most unworldly would regard his covenants as any real guarantee against his dealing with his interest in the lot. It was not reasonable, in my view, for A&T Promotions to rely on its arrangements with Ikin. A&T Promotions says, correctly, that it had no right to demand incomplete transfer documents of the kind which AG(CQ) had in readiness. But it could have asked AG(CQ) to provide it with a signed transfer of the lot to Ikin. It might well have been refused, but it was a possible and simple step to securing its position. It could also have sought an assignment of Ikin’s rights under the Success Fee Deed. Clause 5.1(c)(ii) of the second Deed of Variation, on its proper construction, conferred an immediate right to require an assignment; indeed, in the event, A&T Promotions sought such an assignment in August 2008, well before the lot was created. Having obtained an assignment of Ikin’s rights, A&T Promotions could have notified AG(CQ) accordingly and thereafter dealt with it directly. A&T Promotions could have inquired of AG(CQ) if and when the transfer was expected, and could have advised AG(CQ) of its interest. Instead, it chose to rely on a four month old facsimile from AG(CQ)’s solicitors, without inquiring as to whether its contents remained current, and on Ikin’s undertaking to notify it when the lot issued. It was imperative to A&T Promotions’ protection and the protection of others that it know when the lot was created so that it could register its mortgage. But it did nothing to give itself any independent means of knowing when the survey plan of the land creating the lot was likely to be registered, and, accordingly, when the lot would be transferred to Ikin; although it was obvious that once Ikin obtained the transfer he could use it to deal with others unaware of A&T Promotions’ interest. And although it could not be assumed that AG(CQ), if advised of A&T Promotions’ interest, would pass that information on to others inquiring, it was, in the absence of the register of titles, the only way of communicating A&T Promotions’ position to those who might be affected by it. Its failure to inquire and notify meant that it failed to take the only means by which it could attempt to ensure that Ikin could not encumber his interest further or do as he pleased with the evidence of title when it became available. It did not take sensible and obvious steps to protect itself, let alone others. Its failure to make its interest known to AG(CQ) in any way was a failure to act as a prudent lender and led directly to AG(CQ)’s position. AG(CQ) could reasonably assume in the absence of notice from any party of any interest in the Success Fee Deed or the proposed lot that Ikin had not assigned or encumbered his rights in respect of either. [2.135]

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AG(CQ) Pty Ltd v A&T Promotions Pty Ltd cont. Those deficiencies in A&T Promotions’ conduct went unrecognised by the learned primary judge. AG(CQ) has succeeded in showing that her Honour erred in her assessment of the relative merits of the respective interests, and that it had the better equity. Its interest should take priority. I would allow the appeal. [McMurdo P and McMeekin JA agreed with Holmes JA.]

[2.140]

Notes and Questions

1. Note that AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2010] QCA 83 is a Torrens title case, but is considered here because the usual distinguishing characteristics of a priority contest between unregistered interests in Torrens land were absent. Because no certificate of title had issued for the relevant parcel of land, it was not possible for the parties to search the register for interests affecting the land or to lodge a caveat. For how the principle expressed in this case is applied in the usual Torrens title context, see [6.85]-[6.180]. 2. The issue of what does and what does not constitute postponing conduct has been considered in a number of cases. The relevance of possession of the title deeds is often material and depends on the individual facts of each case: in many circumstances the holder of the first equitable interest gains protection by such possession and may lose priority if he or she has not taken possession of the deeds. Where the holder of the first equitable interest is a beneficiary under a trust, the priority rules may vary. Where the trustee deals with the title deeds in a fraudulent or negligent manner and another equitable interest is created the beneficiary does not lose priority because of the conduct of the trustee: Shropshire Union Rlys & Canal Co v The Queen (1875) LR 7 HL 496. That is, the beneficiary’s equitable interest is not tainted with the reprehensible conduct of the trustee. The underlying reason for this principle is that a beneficiary, unless entitled to call for the legal estate, is not entitled to possession of the title deeds. It would be unfair, therefore, to penalise a beneficiary not entitled to possession of the title deeds, for misuse of the deeds by the trustee. Where the reprehensible conduct of the trustee concerns a failure to get in the title deeds, the position is different. The beneficiary’s interest falls in with that of the trustee and the beneficiary is in no better position than that of her trustee: Walker v Linom [1907] 2 Ch 104; cf Coleman v London County & Westminster Bank Ltd [1916] 2 Ch 353 at 360–361. 3. A variety of other priority disputes may arise. Consider the sorts of disputes which may arise and the priority rules which may be applied to them. See, for example, Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 extracted at [6.185]. The case concerned Torrens land and a dispute between a prior mere equity and a subsequent equitable interest. It is generally accepted that the priority principle applied to that dispute is equally applicable to general law land. The effect of the deeds registration system on general law land priority disputes [2.145] Before the introduction of the Torrens system of land registration, a number of

statutory provisions designed to simplify the general law land system were introduced. 146 [2.140]

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Probably the most important of these was the establishment of a centralised register in which abstracts or memorials of all dealings affecting an individual piece of land could be recorded. It was considered that the searching process would be simplified by such a system. Registration of deeds legislation was passed in all states. (The current legislation is contained in the following Acts: Conveyancing Act 1919 (NSW), ss 184A – 184J; Property Law Act 1958 (Vic), Pt I (the Transfer of Land (Single Register) Act 1998 (Vic) prevents the registration of any further deeds or instruments under Pt I of the Property Law Act 1958 (Vic)); Property Law Act 1974 (Qld), ss 241 – 249; Registration of Deeds Act 1935 (SA); Registration of Deeds Act 1856 (WA); Registration of Deeds Act 1935 (Tas).) The registration system does not operate to affect the validity of documents creating or passing interests in land: for instance, a deed is still required to create or dispose of a legal estate in land. However, in order to encourage the use of the registration system, priority was conferred on registered over unregistered or subsequently registered instruments. The legislation has been interpreted in a number of cases: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.600] – [2.655].

[2.145]

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CHAPTER 3 Possession [3.05]

CONCEPT OF POSSESSION .................................................................................. 149

[3.15]

POSSESSION AS A SOURCE OF TITLE TO GOODS ............................................. 150 [3.15]

Taking possession ................................................................................ 150 [3.15] [3.25] [3.35]

[3.45]

Possession of objects in or on land .................................................... 159 [3.45] [3.50]

[3.60]

Chairman, National Crime Authority v Flack ........................... 159 Waverley Borough Council v Fletcher ....................................... 163

Abandonment of possession .............................................................. 168 [3.60]

[3.70]

Young v Hichens ................................................................... 150 The Tubantia ........................................................................ 151 Bremner v Bleakley ................................................................ 155

Re Jigrose Pty Ltd .................................................................. 168

POSSESSION AS A SOURCE OF TITLE TO LAND ................................................. 171 [3.75]

Rights flowing from possession of land ............................................ 172 [3.75] [3.85] [3.95]

[3.100] [3.105]

The limitation principle: adverse possession .................................... 179 Commencement of limitation period ............................................... 181 [3.105]

[3.115]

Asher v Whitlock ................................................................... 172 Perry v Clissold ...................................................................... 173 Mabo v Queensland (No 2) ................................................... 176

Whittlesea City Council v Abbatangelo .................................... 181

Running of the limitation period ....................................................... 197 [3.115]

Mulcahy v Curramore Pty Ltd ................................................. 197

CONCEPT OF POSSESSION [3.05] In An Introduction to American Law (1919), E Pound describes the concept and

meaning of “possession” as follows (at 36-37): [Possession] is a legal addition to and extension of the idea of custody. Where custody (exercised by oneself or by another) is coupled with the mental element of holding for one’s own purposes, there is possession, and the law gives to the person so in possession a legal right to continue in possession and be restored to possession should he lose or be deprived of it, as against every one but the owner. In the case of custody, the law secures the relation of the physical person to the object, in order to secure the physical person. In case of possession the law secures the will of the possessor to hold for his own purposes.

Note

[3.10]

Provided that the two elements of possession – exclusive physical control (custody) and an intention to exclude others – are present, the law will recognise a person’s possession even if it has been wrongfully obtained. So, a thief’s possession of goods or a squatter’s possession of land will be good against all the world except for those with a better title to the goods or land. Such a better title would be based upon true ownership or a superior possessory interest. See [3.10]

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Clarke and Kohler, Property Law Commentary and Materials (Cambridge University Press, Cambridge, 2005), p 259. Why might the law take this position, rather than refusing to protect possession that has been wrongfully obtained?

POSSESSION AS A SOURCE OF TITLE TO GOODS Taking possession

Young v Hichens [3.15] Young v Hichens (1844) 6 QB 606; 115 ER 228 English High Court of Justice, Full Court of Queen’s Bench Trespass The first count charged that defendant, with force, etc, seized and disturbed a fishing sean and net of plaintiff, thrown into the sea for fish, wherein plaintiff had taken and inclosed, and then held inclosed in his own possession, a large number of fish, to wit, etc, and that defendant threw another fishing sean and net within and upon plaintiff’s sean and net, and for a long time, to wit, etc, prevented plaintiff from taking the fish, so taken and inclosed, out of his sean and net, as he could otherwise have done; and drove, etc the fish; whereby part of them died, part were injured, and part escaped; and the sean and net was injured. Second count, the defendant with force, etc, seized, took, and converted fish of plaintiff. Pleas 1

Not guilty. Issue thereon.

2

To the first count, as to preventing plaintiff from taking the fish alleged to be inclosed in his possession, and driving, etc the said fish: that the fish were not plaintiff’s fish, and he was not possessed of them, in manner, etc: conclusion to the country. Issue thereon.

3

To the second count, that the fish were not the plaintiff’s fish, in manner, etc: conclusion to the country. Issue thereon.

4 & 5. As to other parts of the declaration, raising defences under statutes 16 G 3, c 36, and 4 & 5 Vict c 1vii (local and personal, public), relating to the St Ives (Cornwall) pilchard fishery. Issues of fact were tendered and joined on those pleas. On the trial, before Atcherley Serjt, at the Cornwall Spring Assizes, 1843, it appeared that the plaintiff had drawn his net partially round the fish in question, leaving a space of about seven fathoms open, which he was about to close with a stop net; that two boats, belonging to the plaintiff, were stationed at the opening, and splashing the water about, for the purpose of terrifying the fish from passing through the opening: and that, at this time, the defendant rowed his boat up to the opening, and the disturbance, and taking of the fish, complained of, took place. The learned serjeant left to the jury the question of fact whether the fish were at that time in the plaintiff’s possession, and also other questions of fact on the other issues. Verdict for plaintiff on all the issues, with damages separately assessed, namely, £68 for the value of the fish, and £1 for the damage done to the net. LORD DENMAN CJ: It does appear almost certain that the plaintiff would have had possession of the fish but for the act of the defendant: but it is quite certain that he had not possession. Whatever interpretation may be put upon such terms as “custody” and “possession”, the question will be whether any custody or possession has been obtained here. I think it is impossible to say that it had, until the party had actual power over the fish. It may be that the defendant acted unjustifiably in preventing the plaintiff from obtaining such power: but that would only show a wrongful act, for which he might be liable in a proper form of action. 150 [3.15]

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Young v Hichens cont. PATTESON J: I do not see how we could support the affirmative of these issues upon the present evidence, unless we were prepared to hold that all but reducing into possession is the same as reducing into possession. Whether the plaintiff has any cause of action at all is not clear: possibly there may be a remedy under the statutes. WIGHTMAN J: I am of the same opinion. If the property in the fish was vested in the plaintiff by his partially inclosing them but leaving an opening in the nets, he would be entitled to maintain trover for fish which escaped through that very opening. (Coleridge J was absent.) Rule absolute for reducing the damages to 20s, and entering the verdict for defendant on the second and third issues.

[3.20]

Notes and Questions

1. What do you think is the rationale behind the court’s reluctance in this case to find that possession in the fish vested in the plaintiff in the circumstances of this case? What would the plaintiff have had to prove in order to be successful? 2. In State v Shaw (1902) 67 Ohio St 157, 65 NE 875, the facts of the case were similar to those in Young v Hichens (1844) 6 QB 606; 115 ER 228. In this case, the person who interfered with the fisherman who had already practically encircled the fish was charged with larceny. At first instance, the trial judge directed the jury to return a verdict of “not guilty” on the theory that the fish must be confined so that there is absolutely no possibility of escape. This ruling was overturned on appeal, Davis J stating that the owners of the nets had acquired such a property in the fish contained that the taking of them was larceny. Young v Hichens was expressly stated to be inapplicable to this case. Why? 3. The fish in this case would be classified at common law as ferae naturae. The position at common law in relation to such animals is that “only a qualified right of property can be acquired in them, a right which is wholly lost when, escaping from their captor, without any intention of returning, they resume their former freedom”: 2 Bl Com 392. For cases involving claims based on possession of wild animals, see, for example, Kearry v Pattinson [1939] 1 KB 471 (CA) (claimed possessory right over a swarm of bees); Ebers v MacEachern [1932] 3 DLR 415 (PEI Sup Ct) (silver and black foxes); Campbell v Hedley (1917) 39 OLR 528 (Ont Sup Crt, App Div). 4. The efforts of Australian governments to prevent any claim to wild animals by vesting property in the government is the subject of Yanner v Eaton (1999) 201 CLR 351 extracted in Chapter 1 at [1.50].

The Tubantia [3.25] The Tubantia [1924] P 78 English High Court of Justice, Probate, Divorce and Admiralty Division ACTION for damages for trespass and/or for wrongful interference with the plaintiffs’ salvage services on and attendant at the wreck of the steamship Tubantia and/or her cargo. According to the statement of claim, in January, 1916, the Dutch steamship Tubantia sank in the North Sea in over 100 ft of water after being torpedoed by a German warship. No attempt was made [3.25]

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The Tubantia cont. by any one to salve the ship or cargo until the beginning of 1922, when the plaintiffs, Major Sippe, DSO, and others, determined to fit out an expedition in order to raise the vessel or recover anything of value in her. They accordingly engaged steamers and tugs and employed divers and salvage experts. In April, 1922, the plaintiffs started sweeping operations and sent divers down and eventually located the Tubantia, but owing to her broken condition found there was no possibility of raising her. Throughout the summer of 1922 the plaintiffs continued diving operations whenever the weather conditions permitted until the month of November, when it became impracticable to continue working through the winter. The plaintiffs then buoyed the Tubantia so as to indicate her position and left her until April, 1923, when the operations were resumed. On July 9, 1923, the defendants, Vincent Grech and Count Zanardi Landi, British subjects and partners (together with one Cecil Reed, who was added as a defendant in the course of the hearing) in a company called the British Semper Paratus Salvage Company, proceeded with their steamship Semper Paratus to the place of the wreck and anchored her in close proximity to the plaintiffs’ salvage steamer, thereby interfering with the plaintiffs’ operations. Though requested to leave, the defendants remained with the Semper Paratus at or near the wreck until after the issue of the writ in the present action on July 16, 1923. On July 13, when in close proximity to the wreck, the defendants got their sounding lines entangled in the plaintiffs’ lines. On the same day the defendants tried to moor a motor launch to one of the plaintiffs’ buoys and to raise the plaintiffs’ grappling irons and anchor; and on several occasions they sent down divers on to or in close proximity to the wreck. The plaintiffs alleged that the defendants intentionally and without justification or excuse interfered with the plaintiffs’ possession of, and their salvage operations on, the Tubantia and her cargo; that the ultimate success of the operations was imperilled; and that the plaintiffs, who had spent approximately £40,000 up to the beginning of the proceedings in the action, had thereby suffered damage. The plaintiffs claimed (a) a declaration that they were entitled to possession of the Tubantia and her cargo; (b) damages; (c) an injunction restraining the defendants from proceeding to, remaining at, or interfering with, the Tubantia and/or her cargo; (d) a reference to the registrar and merchants to assess the amount of damage. The defendants denied the plaintiffs’ possessory rights and the alleged infringement of them; and the defendant Count Landi further denied that the plaintiffs had the ability, appliances, or competency to save any of the property, or to do so without aid. He alleged that he was ready and willing to co-operate with the plaintiffs for the purpose of saving any property capable of being saved, and to bring into Court anything he might succeed in recovering from the wreck. The President (Sir Henry Duke) read the following judgment: The plaintiffs in this action – a British subject and four citizens of the French Republic – bring their action in respect of alleged wrongful acts of the defendants upon the high seas. The place in question is a point in the North Sea some fifty miles from our shores, and from twenty to twenty-seven miles from the coasts of France, Belgium and Holland, where, at a depth of nineteen or twenty fathoms, lies so much as is now in being of the hull and cargo of a Dutch steamer, the Tubantia, which was a vessel 541 feet long and of 15,000 tons register. Alleged rights over the Tubantia and her cargo are the real subject matter of the controversy. The vessel was, as the parties say, sunk at the place in question in January, 1916, by a German warship. The plaintiffs assert possessory rights over the wreck and its contents and complain of trespasses thereon and also of wrongful interference by the defendants and their servants with the lawful business of the plaintiffs. They claim a declaration to establish the possessory rights which they allege, an injunction to restrain interference by the defendants with their possession of or operations upon the Tubantia, and damages to be assessed by the registrar and merchants according to the practice of this Division.

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The Tubantia cont. The defendants against whom the action has proceeded are Cecil Finlay Reed, Vincent Grech and C Zanardi Landi, who constituted, as appears, the partnership called in the pleadings the Semper Paratus Salvage Company and under that name added to the defendants in the cause. The steamship Semper Paratus was used by the defendants, as is alleged, in doing the acts complained of by the plaintiffs. She is of British register. The defendants deny the alleged possessory rights of the plaintiffs, and the alleged trespasses and molestations. The defendant Landi raises alternative defences which treat the plaintiffs as would-be salvers of the Tubantia who were unable to effect their salvage undertaking and assert that the defendants were ready and willing to co-operate with the plaintiffs as salvors and to bring into Court any salved property. There was evidence at the hearing of a serious belief among the parties that the wreck of the Tubantia contains treasure of large value. A salvage agreement into which the three defendants entered for the purposes of their joint undertaking specifies a sum in gold of the German prewar currency worth not less than two million pounds sterling. The particulars I have stated show the controversy between the parties to be of an unusual kind, and the plaintiffs are invoking in respect of it powers of the Court derived from the Judicature Acts which rarely come in question here. On the defendants’ part one short answer which was made to the claims of the plaintiffs was that they are without precedent. The absence of specific authority no doubt necessitates caution in the consideration of the case. What is really to be decided, however, is whether in respect of the Tubantia and her cargo any rights of the plaintiffs have been infringed by the defendants and, if so, what are the appropriate remedies. The things in question here are, as I find, derelict in the limited sense in which that term is constantly used here in cases of salvage-what Lord Stowell called “the legal sense”: The Aquila 1 C Rob 37. They are not in the possession or control of any owner or person acting on behalf of an owner. The possession of a salvor in a ship or cargo, or cargo, or wreck derelict in this sense is, however, as well known to the law as any other right of a salvor. It has often been asserted, and, indeed, vindicated in the Admiralty jurisdiction. The plaintiffs are, therefore, entitled to a decision as to whether they had in July, 1923, as they assert they had, possession by their agents of the wreck of the Tubantia and the cargo therein. The facts on which the plaintiffs rely in support of their claim that they had possession in July, 1923, are fully set forth in the statement of claim, and, in all material particulars, were proved at the hearing. Their operations began in April, 1922, and for a long time were discontinuous. Their controversy with the defendants arose in July, 1923. They then had, and from that time to the hearing they have kept, craft and divers at the place in question. What had been done, and what was going on in July, 1923, are matters in dispute, and must be stated in some detail. The plaintiffs, by employing during two seasons various vessels suitable for salvage work with competent crews, ascertained and marked out the area occupied by the Tubantia, and by means of buoys properly moored they were able to, and did, keep in position, at and above the wreck, craft from which work could be carried on upon the hull and in the holds. They established and in July, 1923, were using, various buoyed moorings by which they had direct access to the deck at various points. They cut out a hole in the ship’s side 14 ft by ten, which gave them access to No 4 hold, in which a great bulk of cargo appears to have been stowed, and by means of tackle fixed at the side of the hold their divers had a way of approach to and entry upon that hold. The various appliances to which I have referred were of the nature of fixed plant on and around the Tubantia, such that when the weather and the state of the tide permitted, divers could by its use work in and upon the wreck and among the cargo. Two pairs of divers were so at work during May, June, and July, 1923. They explored the wreck, removed obstructions, opened the approaches to and worked upon the cargo, and brought up parts of the structure and of the cargo. The possible working hours in each day, however, did not exceed two spells of one and three-quarter hours at a time, of which 45 minutes at a time were spent in the holds. The number of working days in 1923 seems not to have exceeded 25, and the working plant was liable to be carried away or [3.25]

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The Tubantia cont. destroyed by the sea. Some of it sometimes was. The appliances I have mentioned, and the frequently interrupted access to the wreck which the plaintiffs had in the summer of 1923, are the evidences of possession at the dates in question in this case on which the plaintiffs rely. On the question whether in the state of facts I have described the plaintiffs could be found to have had possession of the Tubantia when the defendants appeared on the scene, counsel on both sides cited largely from Sir Frederick Pollock’s well-known treatise on possession: Pollock and Wright, Possession in the Common Law. The questions suggested in this way I have sought to apply. They involve inquiries such as these: what are the kinds of physical control and use of which the things in question were practically capable? Could physical control be applied to the res as a whole? Was there a complete taking? Had the plaintiffs occupation sufficient for practical purposes to exclude strangers from interfering with the property? Was there the animus possidendi? I have also taken this to be a true proposition in English law: A thing taken by a person of his own motion and for himself, and subject in his hands, or under his control, to the uses of which it is capable, is in that person’s possession. “Omnia ut dominum gessisse” is, Sir Frederick Pollock says, a good working synonym for “in possessione esse”, and I cannot doubt that if the owners of the Tubantia in 1916 had put themselves, in 1923, in the position in which the plaintiffs put themselves they would be held to have been in actual possession. It would not be safe, though, to rely on this, for there is a presumption in law which aids the operative effect of the possessory acts of an owner. To illustrate my meaning, I am told that the Trinity House commonly holds possession of the wreck of a ship by mooring upon it a single buoy. I had the advantage of the assistance of the Elder Brethren at the hearing, and I have consulted them as to the practical aspects of the matters in question. They advise me that by reason of the great depth at which the wreck lies the difficulties involved in the work of the plaintiffs are formidable, but that, if I accept the plaintiffs’ evidence, they were in effective control of the wreck as a whole; that they were in a position to prevent any useful work by new-comers; and that, while the plaintiffs’ people remained in the position they claimed to have taken up, no new-comer could, without violence, have exercised upon the wreck the kind of control the plaintiffs had, or could have made any valuable use of the wreck. They advise me that what the plaintiffs did upon the wreck was what a prudent owner would probably have done, assuming he did not know how the holds of the Tubantia were stowed and desired to inform himself fully as to the situation on the wreck before employing larger craft or more powerful appliances than the plaintiffs were employing. These opinions entirely commend themselves to my judgment, and I have come to certain conclusions which I will now state. There was animus possidendi in the plaintiffs. There was the use and occupation of which the subject matter was capable. There was power to exclude strangers from interfering if the plaintiffs did not use unlawful force. The plaintiffs did with the wreck what a purchaser would prudently have done. Unwieldy as the wreck was, they were dealing with it as a whole. The fact on the other side which is outstanding is the difficulty of possessing things which lie in very deep water and can only be entered upon by workmen in fine weather and for short periods of time. Must it be said that, because the work of the plaintiffs’ divers was that of only one pair at a time, in short spells with long interruptions, and because access to the holds of the Tubantia was often prevented altogether by stress of weather, therefore the vessel, and her cargo, were incapable of possession? To my mind this would be an

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The Tubantia cont. unfortunate conclusion, very discouraging to salvage enterprise at a time when salvage, by means of bold and costly work, is of great public importance. I do not feel bound to come to it. I hold that the plaintiffs had in July, 1923, the possession of the Tubantia and her cargo, which they allege.

[3.30]

Notes

1. To what extent (if any) do you consider that analogies can be drawn between the facts of this case and those cases involving animals ferae naturae for the purposes of determining possessory rights over the wreck? 2. On what facts and by what legal process was the court able to conclude in this case that the plaintiff had possession of the wreck? Do you agree with the legal reasoning? Is it consistent with the reasoning in Young v Hichens (1844) 6 QB 606; 115 ER 228? 3. Do you think that the result in this case might have been different if the wreck were situated in shallow tropical waters off the coast of Queensland? If so, why? 4. On the facts of this case, it is clear that the original owners of the Tubantia had long since abandoned possession of the ship. What difference would it have made to the result in this case if the original owners had claimed that they still had the animus possidendi (the intention to possess the ship)? What would have resulted if the defendants had been given permission by the original owners to raise the wreck?

Bremner v Bleakley [3.35] Bremner v Bleakley (1923) 54 OLR 233 Supreme Court of Ontario, Appellate Division HODGINS JA: The appeal is by the defendants from a judgment of Middleton J for damages and an injunction. The frame of the injunction is that the defendants are restrained from “excavating in and removing sand and gravel from their lands … in such a way as to cause sand and gravel to be carried away from the plaintiffs’ lands”. Upon the argument matters appeared to be much clarified by the explanation that the complaint was really that the appellants dug holes or trenches in the beach upon their lands on the shore of Van Wagner’s Beach on Lake Ontario, where the sand met the grass-covered bank, that sand was swept from off the respondents’ lands by storms and was carried by the wind across the appellants’ beach, and came to rest in these holes and trenches. Consequently, when the next storm came, the sand failed to emerge from these holes, and so had no chance to be, and was not, blown back to the respondents’ lands. It was not the combined action of wind and hole that caused what happened. It was the action of two separate and disconnected things. The wind brought it to the appellants’ land, and the holes kept it there – and its return being thereby prevented – ergo, it was wrongfully detained by the appellants. The learned trial Judge followed and applied the case of Cleland v Berberick (1915-16), 34 OLR 636, 36 OLR 357, where the owner of the land had the right to have it left in its natural plight and condition, and that it was a wrongful act on the part of another landowner so to facilitate the action of natural forces as to interfere with the enjoyment of the land in its original condition. “Lateral support is, in my view, only one application of a wide principle. There by excavation the force of gravity operates to the prejudice of the neighbour. Here the excavation results in the shifting of the sand from the remaining beach into the hole made.” [3.35]

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Bremner v Bleakley cont. He then proceeds to apply the principle which he lays down, to the situation I have described, in these words (at 126): The defendants and others along the beach seem to regard the phenomenon as akin to the widow’s curse, and fail to realise the fundamental dishonesty of their conduct. This shifting sand is not the property of no one, waiting for some one to appropriate it. It is all land owned by the different proprietors along the beach. When shifted by the operation of nature, none can complain, but when any individual undertakes for his own profit to intervene and aid nature he violates his neighbour’s property-right. I have read all the cases cited to us and others, and I am unable to see that that principle has any relevancy on the facts of this case, as I understand them. The digging of holes and trenches did not in any way cause or contribute to the movement of the sand from the respondents’ beach. It did no injury or damage to the respondents in itself, and no action can, therefore, be properly found on it. Excavation upon a person’s own land gives no cause of action-a cause of action arises only on proof of damage from that excavation. This is clearly put in Smith v Thackerah (1866), LR 1 CP 564, a case of lateral support, by Erle CJ: But for a man to dig a hole in his own land is in itself a perfectly lawful act of ownership, and only becomes a wrong if it injures his neighbour; and since it is the injury itself which gives rise to the right of action, there can be no right of action unless the damage is of an appreciable amount. Lord Halsbury in Darley Main Colliery Co v Mitchell (1886), 11 App Cas 127 at 133, says: Since the decision of this House in Bonomi v Backhouse (1861), 9 HLC 503, it is clear that no action would lie for the excavation. It is not, therefore, a cause of action; that case established that it is the damage and not the excavation which is the cause of action. The facts, however, raise a rather interesting question as to whether the appropriation of this sand by the appellants gives the respondents a cause of action. It appears that the wind, having moved the loose particles of sand from the respondents’ land and that of others nearby, sweeps it across the appellants’ beach, where it is stopped and held in the holes and trenches. This would seem to be a very natural result, and it would equally happen if the appellants were engaged in a praiseworthy effort to dig a foundation or run a drain. The real grievance is that the appellants, being furnished by nature’s forces with a quantity of sand, which they arrest in its career from the respondents’ beach, are selling it at $1 per load and keeping the money. This may be unneighbourly, but is it such a wrongful act as to render the appellants liable to the respondents? The sand thus moved must either retain its character as soil or must become a chattel, and in either event I am unable to conclude that the respondents have a cause of action. Treating it as part of the soil cast upon the appellants’ land in the way described, the appellants are appropriating property consisting of the particles of sand shifted, with sand from other lots, by the action of the wind and settling down elsewhere than on the land where it originates. When it reaches the land of another it is practically indistinguishable from sand belonging to others, moved by the same force, and also from the sand on that particular piece of land. If it rests there it becomes incorporated with the land upon which it descends. Warrington LJ, in Nesbitt v Mablethorpe Urban District Council [1918] 2 KB 1 at 17, states the general law applicable to the constant action of wind as well as of water when he says: The sandhills are a natural barrier to the encroachment of the sea, and appear to have been formed gradually by the action of the sea. They would thus prima facie be properly treated as accretions to the adjoining land. I am unable to follow the idea that because it would lie on the surface if there were no hole, and might be caught by a storm from another direction, and returned to its place of origin, it, therefore, remains the property of the owner from whose land it came, and that he is entitled to hold the appellants accountable for it. The appellants might rather be entitled to resent the intrusion of the 156 [3.35]

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Bremner v Bleakley cont. sand on to their property. If the respondents have and retain property in it, it would seem to follow that the appellants could compel its removal by them. This conception of the situation would present such extraordinary difficulty of proof that I am not surprised that no authority was put forward giving the respondents the right to claim its return or requiring them to remove it. If sand forms, by its gradual accumulation, new land reclaimed from the water, it would be the property of the owner of the land under or bordering upon that water. If it filled up holes on the next owner’s property, I would think the same rule would apply, and it would become his property as part of his land. It is not a case where the excavation produced the original movement, as in Trinidad Asphalt Co v Ambard [1899] AC 594. Put at its highest, it is a case of appropriation of something cast on the appellants’ land by the forces of nature. Tested by the law as to things thrown up by the sea, as it is said that the sand came visibly from time to time and not imperceptibly, the appropriation of it by the appellants would seem to vest the property in the person on whose land it is deposited. See Regina v Clinton (1869) Ir 4 CL 6. That reduction into possession must not be by any wrongful act (Blades v Higgs (1865) 11 HLC 621), and there is, as has been pointed out, no wrongful act done by the appellants in digging the holes. In Brew v Haren (1877) Ir R 11 CL 198, where an old case decided by Jebb J of Howe v Stawell (1833) Alc & Nap 348 at 353, was approved, his opinion is given in this quotation (Ir R 11 CL at 201): Seaweed, as Mr Justice Jebb says, is on the same footing as sand or gravel. Sand and gravel and trees are swept in by one tide, and swept out by the next, and it cannot be argued that the owner of the shore has no property in the sand or gravel, and that every subject may carry it away, or so much of it as the owner does not anticipate him in appropriating. The principle on which this right rests is as old as the law of England; it is that the owner of land is entitled to all the natural advantages belonging to that land, and therefore, to all things which in the course of nature may be deposited thereon. Quantities of alluvial clay or gravel may be brought down by streams or floods; these become the property of the owner of the land, for they are found on his land; they are not artificial products which, of course, if they had been previously private property would not lose that quality by being found upon another person’s land. We were referred to an American case in 2 Johnson’s Reports, which I have since read in King’s Inns Library, and the law is there clearly stated, and referred to the principle of the owners of the soil being entitled to all their natural advantages. Considering it from another point of view, if particles, or a mass of sand, are or could be considered as chattels, their sale might amount to conversion. This might be deduced from the opinions delivered by Avory and Lush JJ, in Mills v Brooker [1919] 1 KB 555. But this analogy to a chattel seems to be a far-fetched idea, for which I can find no warrant. The case nearest in analogy to this is, I think, that of Salt Union Limited v Brunner Mond & Co [1906] 2 KB 822. There there were rock salt mines owned by the plaintiffs, which had for many years been flooded by brine. They were connected with one another by underground channels which it was impossible to close and thus formed one large reservoir of brine. Into this other brine flowed from other owners’ properties, but a substantial part came from the plaintiffs’ rock salt. “The defendants, in the exercise of a license to pump brine granted to them by the previous owner of one of the plaintiffs’ mines, pumped large quantities of brine from the said mine and from the reservoir and appropriated it for their own profit: Held, that the defendants were not guilty of any actionable wrong in so doing, notwithstanding that they thereby abstracted salt which had formed part of the plaintiffs’ rock, and that the continuance of the pumping would cause fresh surface water to dissolve further portions of the plaintiffs’ rock into brine, which in turn would be abstracted by the defendants’ pumps.” The same argument was made there as here, in these words (827): “Any contrivance by which one person takes the rock salt of another, whether it be by means of a pickaxe or a pump, is equally wrongful.” Lord Alverstone CJ, who says it is a case of first impression, decided (832) that “when a man puts down a shaft and pumps in his own land (both of which acts are prima facie lawful) the act does [3.35]

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Bremner v Bleakley cont. not of necessity become unlawful simply because it turns out that the brine thereby obtained may be the result of dissolution of rock in another man’s property.” It is to be observed that in that case the act of pumping was what drew the brine to the defendants’ land and made it useful to them. There that element is missing, for the appellants’ trench has no effect until the wind blew the sand into it. And this seems to me to sever the chain of causation so as to free the appellants from liability unless the sand can be considered a chattel upon its severance by the wind from its original situs. (Where is the situs of shifting sand?) And this I do not think has been or can be established. See Pollock & Wright on Possession (1888), p 230. I would allow the appeal and dismiss the action. MacLaren and Ferguson JJA agreed with Hodgins JA. MEREDITH CJO: … the judgment of my brother Middleton was based upon the assumption that the removal of the sand which is complained of was occasioned by the making of the hole on the appellants’ land. That is not in accordance with the facts: the sand was driven by the wind and waters from the respondents’ land, and the complaint is that the existence of the hole prevented the sand from being driven back to his land when the wind and water were operating in a different direction. I am of opinion that, even had that been the case, the action would not lie. The respondents had not property in the sand after it had been driven from their lands. I also think that there was no evidence that would justify the conclusion that, but for the existence of the hole, sand would have been brought back to the respondents’ land. Magee JA agreed with Meredith CJO.

[3.40]

Notes

1. To what extent is the mental element and intention of the respondents relevant in determination of this case? Would the result in this case have been different if respondents had deliberately dug holes on their property for the purpose of trapping blowing sand? Would the result have been different if the digging of the holes by respondents on their land had caused or aggravated the incidence of blowing sand?

the the the the

2. Why was this case regarded as one of personal property? Why is sand not regarded as real property on the basis of its attachment to the land? If, during a violent storm, the roof of the appellants’ house were to blow onto the respondents’ land, could the respondents justify keeping it and for selling it based on the result in this case? If not, why not? Cf Mills v Brooker [1919] 1 KB 555, where Lush J held that apples fallen from a branch overhanging a neighbour’s property remain the property of the owner of the tree in all circumstances, regardless of whether the apples fall naturally, are blown off by the wind, or are deliberately severed. 3. Note the comment in the judgment of Hodgins JA that “the owner of land is entitled to all the natural advantages belonging to that land, and therefore to all things which in the course of nature may be deposited thereon”. Consider the scope of application of this principle. Does this mean that if I drop a $20 note which blows onto neighbouring property that my neighbour may lawfully keep the money? If not, why not? 158 [3.40]

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Possession of objects in or on land

Chairman, National Crime Authority v Flack [3.45] Chairman, National Crime Authority v Flack (1998) 86 FCR 16 Federal Court of Australia HEEREY J: The respondent Margaret Elizabeth Flack (Mrs Flack) was the tenant of residential premises at 6 Broughton Street, Glebe. Police officers executed a search warrant on the premises and in so doing they discovered a locked briefcase which was found to contain $433,000 in cash. The search warrant was based on suspicion that Mrs Flack’s son Glen had been involved in drug related offences. However no prosecutions were launched against him. Mrs Flack brought a proceeding against the first appellant, the Chairperson of the National Crime Authority (NCA), and the second appellant, the Commonwealth of Australia. The trial judge (Hill J) ordered that the Commonwealth deliver up to Mrs Flack the briefcase and cash. The Glebe premises Mrs Flack at all material times was a weekly tenant under a residential tenancy agreement with the New South Wales Department of Housing. At the time of the events with which the case is concerned she was aged 55. She was the sole occupant of the premises and had lived alone there since the death of her husband in September 1990. Her son Glen, who was aged 38, had a few clothes in a back room. According to Mrs Flack, he did not stay at the house but visited “about twice a week”. Glen had a key to the house, as also did a Mr Sinclair who lived nearby and who was a close friend of Mrs Flack until he died on 24 February 1994. Her married daughter Deborah Ann Nichols had a key as well. Mrs Flack said the various persons who had keys used them “reasonably frequently” and might come into the house when she was not there. The warrant On 12 April 1994 a Justice of the Peace issued a warrant under s 10 of the Crimes Act 1914 (Cth) to Detective Constable David Stewart of the Australian Federal Police. The Justice recited that she was satisfied by information on oath that there were reasonable grounds for suspecting that there were in or upon the Glebe premises things which satisfied all three of the following conditions. First, that the things were one or more of the following namely cannabis in leaf form or as cannabis resin, correspondence, diary entries, telephone indexes, messages, receipts, wrappings, money, weighing scales and customer and price lists. Secondly, that the things related to Glen Flack. Thirdly, that there were reasonable grounds for believing that the things would afford evidence as to the commission of the crime of being in possession of prohibited imports to which s 233B(1)(c) of the Customs Act 1901 (Cth) applied, that is narcotic goods reasonably suspected of having been imported into Australia. The warrant authorised the holder to enter at any time the Glebe premises and to seize the things which satisfied all of the three conditions. Execution of the warrant At about 8.20 am on 13 April 1994, Detective Stewart and four other police officers attended at the Glebe premises. They were admitted by Mrs Flack. Detective Stewart produced the warrant. The police officers asked Mrs Flack if she had a son named Glen Flack. Upon that being confirmed they informed her that they had information that he may be storing narcotics in the house. A search of the house took place. During the latter part of the search Detective Stewart and another officer searched a cupboard in an entrance hallway. In the lower portion of the cupboard were, amongst other things, an ironing board and a fold-up hammock. The police officers then opened the top half of the cupboard and removed what were described as a Balmain bag, a Balmain Fleggs bag and two travel bags, all of which were empty. When those bags were removed a large sized black briefcase was revealed. It was [3.45]

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Chairman, National Crime Authority v Flack cont. removed and found to be locked with a combination lock. The lock was forced and inside were seen a large number of bundles of Australian currency, predominantly fifty dollar notes. The police officers then came into the hallway with Mrs Flack and showed her the black briefcase in a closed position. Detective Stewart asked her who owned the bag. Mrs Flack said “I have never seen it before. I don’t know whose it is”. The police then opened the bag exposing the money inside. The following exchange took place: Mrs Flack: “Oh my God”. Detective Stewart: “Is there anything else you can tell us about that?” Mrs Flack: “No, nothing. I’ve never seen it before, I swear.” Mr Stewart (pointing to where the bag had been found): “It was up there”. Mrs Flack: “Well I never go up there. I don’t need to. That’s what I use for the linen press there.” She indicated a nearby cupboard in use as a linen press. Mrs Flack said she had no idea how the briefcase came to be in the cupboard and that she had not seen her son with the bag. As to the other bags she said: “They’re just old bags of Glen’s and that one [indicating a travel bag] is mine. I used it when I travelled.” She was asked: “Have you ever seen anyone go to this cupboard?” She said: “No, oh, hang on, only Tony who did the painting but I don’t know if he was there or not. I doubt it.” On 19 July 1994 Mrs Flack was examined before a member of the NCA. She was questioned about the cupboard in which the briefcase was found. The following took place: Q. Have you ever been up that high in the cupboard yourself? A. I’d say when I first moved into the house, when I first moved in there 12-13 years ago, when we put the bags and that up there to have somewhere to put things, but that’s about the only time, that I’d ever ever been there. B. So there were other bags up there? C. Well, there were, yes. There was old football bags, etcetera, up there. D. Did you put them up there? E. Years ago I did, yes. F. I am really asking you this to say that it was you, not your husband or someone else? G. Well I put a few up there. I don’t know if my husband put any up there, I wouldn’t have a clue. H. The ones that you put up there, when were they were put up there? I. When I first moved into the house about 12-13 year ago. J. And since that time have you had any occasion to go up there? A. No. Q. To look up there? A. No. B. Or to take anything from there? C. No. A Reserve Bank official gave evidence on affidavit that one of the banknotes in the briefcase had a Westpac Banking Corporation stamp dated 13 January 1994 and that another note was from a series first printed in April 1994. Reasoning Mrs Flack’s case is that she manifested an intention to exercise control over any chattels on the Glebe premises, including chattels of whose existence she was unaware: J G Fleming, The Law of Torts (8th ed, 1992, Law Book Company, at 69). 160

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Chairman, National Crime Authority v Flack cont. The question has to be considered as at a point in time immediately prior to the discovery of the briefcase containing the cash. The issue is whether the occupier manifests a sufficient intention to control all chattels, known and unknown, which are on the premises, subject only to any superior right. Therefore one does not ask: “What was Mrs Flack’s intention in relation to the large amount of cash?” All the cases which were contests between occupiers and finders were dealt with on the basis that the occupier was not aware of the existence of the chattel until the finder found it. Since Mrs Flack was the tenant of an ordinary residential house she had possession in law of those premises. In the circumstances, that fact was sufficient to establish the requisite manifestation of intention to possess all chattels on the premises. In Parker v British Airways Board [1982] QB 1004 the English Court of Appeal had to consider the question of an occupier’s intention in relation to the international executive lounge at Terminal One, Heathrow Airport. The plaintiff had found a gold bracelet lying on the floor of the lounge. Donaldson LJ said (at 1018) that, the bracelet not being a fixture, the defendants’ claim must “… be based upon a manifest intention to exercise control over the lounge and all things which might be in it.” His Lordship concluded (at 1019): It was suggested in argument that in some circumstances the intention of the occupier to assert control over articles lost on his premises speaks for itself. I think that this is right. If a bank manager saw fit to show me round a vault containing safe deposits and I found a gold bracelet on the floor, I should have no doubt that the bank had a better title than I, and the reason is the manifest intention to exercise a very high degree of control. At the other extreme is the park to which the public has unrestricted access during daylight hours. During those hours there is no manifest intention to exercise any such control. In between these extremes are the forecourts of petrol filling stations, unfenced front gardens of private houses, the public parts of shops and supermarkets as part of an almost infinite variety of land, premises and circumstances. This lounge is in the middle band and in my judgment, on the evidence available, there was no sufficient manifestation of any intention to exercise control over lost property before it was found such as would give the defendants a right superior to that of the plaintiff or indeed any right over the bracelet. As the true owner has never come forward, it is a case of “finders keepers.” Eveleigh LJ said (at 1020): A person permitted upon the property of another must respect the lawful claims of the occupier as the terms upon which he is allowed to enter, but it is only right that those claims or terms should be made clear. What is necessary to do this must depend on the circumstances. Take the householder. He has a key to the front door. People do not enter at will. They come by very special invitation. They are not members of a large public group, even a restricted group of the public, as users of the executive lounge may be. I would be inclined to say that the occupier of a house will almost invariably possess any lost article on the premises. He may not have taken any positive steps to demonstrate his animus possidendi, but so firm is his control that the animus can be seen to attach to it. It is rather like the strong room of a bank, where I think it would be difficult indeed to suggest that a bracelet lying on the floor was not in the possession of the bank. The firmer the control, the less will be the need to demonstrate independently the animus possidendi. Sir David Cairns said (at 1021): I agree with both Donaldson LJ and Eveleigh LJ, that, in a situation at all similar to that which we are considering, the occupier has a better claim than the finder only if he had possession of the article immediately before it was found and that this is only so (in the case of an article not in or attached to the land but only on it) when the occupier’s intention to exercise control is manifest. I also agree that such an intention would probably be manifest in a private house or [3.45]

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Chairman, National Crime Authority v Flack cont. in a room to which access is very strictly controlled. Where the borderline should be drawn would be difficult to specify, but I am satisfied that this case falls on the wrong side of the borderline from the defendants’ point of view. Thus all members of the Court of Appeal would readily accept that the occupier of a private home will ordinarily manifest the necessary intention to control chattels therein. In my respectful opinion that accords with common sense. I do not see that any different conclusion should be reached in the present case because Mrs Flack’s son and daughter and her good friend Mr Sinclair had keys. The inference to be drawn is that keys given or lent by an occupier in such circumstances are provided for the recipients’ ease of access and not for the purpose of conferring possessory rights over everything on the premises – at any rate not to the exclusion of, or on an equal basis with, the occupier. It would for example be an everyday occurrence for householders to give, or lend, or make available, keys to children, even children of primary school age. Similarly, an occupier may provide a key to guests, or to a house cleaner or other tradespeople. The fact that the briefcase fairly obviously was not lost or mislaid but deliberately placed in the cupboard by the owner or previous possessor is a circumstance which makes no difference. There may be doubt as to whether it was hidden or cached. The cupboard was not locked. It was a logical place to store, or look for, such bags, irrespective of whether Mrs Flack often used it. Also, whoever put the briefcase there would presumably know that persons other than Mrs Flack had access to the house. And this person need not necessarily have known Mrs Flack did not use the cupboard. But in any event the authorities do not deny a possessory right to an occupier where the article in question has been hidden or deliberately placed on the premises: Johnson v Pickering [1907] 2 KB 437 at 444-445, Re Cohen [1953] Ch 88. If Mrs Flack manifested the necessary intention to control chattels on the premises, how do her rights compare or compete with those of the appellants? If the briefcase containing the cash had been found by a guest on the premises, or a thief, it could hardly be doubted that Mrs Flack would have a superior right. But as against the true owner, Mrs Flack would have to yield. The police executing the warrant were clothed with statutory rights to seize and take away any property which satisfied the three conditions – regardless of whether any other person had possession, or indeed ownership. But at common law an article seized under warrant cannot be kept for any longer than is reasonably necessary for police to complete their investigations or preserve it for evidence. As Lord Denning MR said in Ghani v Jones [1970] 1 QB 693 at 709: As soon as the case is over, or it is decided not to go on with it, the article should be returned. Section 3ZV of the Crimes Act 1914 (Cth) now provides that a thing seized under warrant must be returned if “the reason for its seizure no longer exists or it is decided that it is not to be used in evidence … unless the thing is forfeited or forfeitable to the Commonwealth or is the subject of a dispute as to ownership”. Section 3ZV is in Pt 1AA, introduced by the Crimes (Search Warrants and Powers of Arrest) Amendment Act 1994 (Cth), which did not come into force until after the issue and execution of the warrant in the present case. However it would appear to be not relevantly different from the common law. Therefore the appellants’ rights to retain the goods taken from Mrs Flack’s home ceased once it was conceded that those goods were not required for the purposes of further investigation or prosecution. The power to enter on private property and seize goods is a substantial interference with ordinary liberties and should not be extended beyond limits which the law prescribes: see Levine v O’Keefe [1930] VR 70 at 72, Challenge Plastics Pty Ltd v Collector of Customs (1993) 42 FCR 397 at 402-409. Tamberlin J agreed with Heerey J’s findings. FORSTER J (dissenting): 162 [3.45]

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Chairman, National Crime Authority v Flack cont. I return to the finding which I have made, namely that had her son, or anyone else, sought Mrs Flack’s permission to leave this case and its contents in her custody or possession, this permission would have been refused. That is, I am satisfied that she would never voluntarily have taken possession of the briefcase and contents nor assented to them passing into her custody or control. In these circumstances, I ask myself how can it be presumed simply from her status as householder that she had these goods in her possession? To make that assumption on the basis that her occupation and control of her premises as a householder necessarily manifested an intention on her part to exercise control over them would be to fly in the face of a contrary finding of fact. The presumption, which is not irrebuttable, must yield to the finding. To put the matter another way, is it reasonable that Mrs Flack, who clearly manifested shock and horror when confronted with the presence in her home of these goods, and who, quite clearly, would not have countenanced their presence had she known of them, be nevertheless entitled or obliged, by the presumption relied upon, to assume possession of them? This would be to impose upon her possession of unwanted goods. In my respectful view, this is a case where a person to whom Mrs Flack had provided means of access to her premises for lawful purposes has, contrary to the licence so bestowed, imposed upon Mrs Flack by depositing in her premises, in a manner that deliberately concealed the fact from her, goods which she would never have consented to take into her custody or control. In these circumstances, I am not prepared to find that possession of these goods in fact passed from the depositor of them to Mrs Flack. It remained with the depositor. They never came “within the protection of [her] house”.

Waverley Borough Council v Fletcher [3.50] Waverley Borough Council v Fletcher [1996] QB 334 English Court of Appeal AULD LJ: This appeal concerns the collision of two familiar notions of English law: “finders keepers” and that an owner or lawful possessor of land owns all that is in or attached to it. More particularly, it raises two questions. (1) Who, as between an owner or lawful possessor of land and a finder of an article in or attached to the land, is entitled to the article? (2) How is the answer to (1) affected by, or applied, when the land is public open space? The appellant, Waverley Borough Council, is the freeholder of a park, Farnham Park, in Farnham, Surrey, to which it gave free access to the public for pleasure and recreational uses. It exercised control over the park by means of a ranger and his staff and by byelaws. On 28 August 1992 the respondent, Ian Fletcher, took a metal detector into the park to search for metal objects which might be of interest or value. He found, by use of the detector and some determined digging in hard ground, a mediaeval gold brooch about nine inches below the surface. He reported [339] his find, and a coroner’s inquisition was held to determine whether it was treasure trove. The jury found that it was not, and the coroner returned the brooch to Mr Fletcher. I am satisfied that the true legal position is that there must be distinguished, with regard to the question of control, things which are on land and things which are attached to or under it. This distinction makes consistent the decision in Bridges v Hawkesworth, 21 LJQB 75, and the decision in Parker v British Airways Board [1982] QB 1004 which dealt with objects on land and with an absence of control over them with the decisions … dealing with objects attached to or under the land. The extent to which, where objects are attached to or under the land, an absence of control may deprive the owner against a finder is probably limited to cases such as Hannah v Peel [1945] KB 509, where the owner of a house had never entered into possession of it though the title had devolved upon him. [3.50]

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Waverley Borough Council v Fletcher cont. See also Tamworth Industries Ltd v Attorney-General [1991] 3 NZLR 616, in which Eichelbaum CJ, at 619, 621 and 624, accepted as established law the clear distinction to be made between articles found in and on land. Mr Munby, undaunted by that weight of authority, submitted that there is no sensible basis for the distinction. He argued that it is against [345] commonsense that it should make all the difference whether an object is just under or on the surface. That was also the view of the judge. He said that he could see no reason in common sense why the better possessory claim should depend upon whether an object was found on or in ground. Mr Munby gave as one of a number of examples in support of his argument, a lost watch on a muddy path which might within a day or two become covered by a thin coating of mud. Why, he asked, should the landowner’s claim be different and stronger when the watch finally, but only just, disappears from sight? In my view, the authorities reveal a number of sound and practical reasons for the distinction. First, as Donaldson LJ said in Parker v British Airways Board [1982] QB 1004 at 1010, an object in land “is to be treated as an integral part of the realty as against all but the true owner” or that the finder in detaching the object would, in the absence of licence to do so, become a trespasser. Mr Munby suggested that this is wrong because if an object is treated as part of the realty the true owner cannot have priority. However, the English law of ownership and possession, unlike that of Roman Law, is not a system of identifying absolute entitlement but of priority of entitlement, and Donaldson LJ’s rationale is consistent with that: see Buckland and McNair, Roman Law and Common Law (2nd ed, revise, 1965), p 67. It is also consistent with Chitty J’s reasoning in the Elwes case, 33 ChD 562 at 567, which I have quoted. See also Wake v Hall (1883) 8 AppCas 195 at 203-204, per Lord Blackburn and Simmons v Midford [1969] 2 Ch 415 at 421F-G, per Buckley J. Second, removal of an object in or attached to land would normally involve interference with the land and may damage it: cf AL Goodhart’s view in his article in 3 CLJ 195 at 207, that this distinction is not of sufficient importance in principle to warrant separate rules as to possession. Third, putting aside the borderline case of a recently lost article which has worked its way just under the surface, in the case of an object in the ground its original owner is unlikely in most cases to be there to claim it. The law, therefore, looks for a substitute owner, the owner or possessor of the land in which it is lodged. Whereas in the case of an unattached object on the surface, it is likely in most cases to have been recently lost, and the true owner may well claim it. In the meantime, there is no compelling reason why it should pass into the possession of the landowner as against a finder unless he, the landowner, has manifested an intention to possess it. As to borderline cases of the sort mentioned by Mr Munby, potential absurdities can always be found at the margins in the application of any sound principle. It is for the trial judge to determine as a matter of fact and degree on which side of the line, on or in the land, an object is found. The distinction is now long and well established. In addition to the judicial and academic authority to which I have referred, it is to be found in Annex 1 to the Eighteenth Report (Conversion and Detinue) of the Law Reform Committee (1971) (Cmnd. 4774); the Law Commission’s paper Treasure Trove – Law Reform Issues (1987), para 9; Megarry & Wade, The Law of Real Property (5th ed, 1984), p 61; and Halsbury’s [346] Laws of England (4th ed, reissue, vol 2, 1991), p 840, para 1814 and (4th ed, vol 35, 1981), p 623, para 1120. In my view, the two main principles established by the authorities, and for good practical reasons, are as stated by Donaldson LJ in Parker v British Airways Board [1982] QB 1004. I venture to restate them with particular reference to objects found on or in land, for he was concerned primarily with an object found in a building. (1) Where an article is found in or attached to land, as between the owner or lawful possessor of the land and the finder of the article, the owner or lawful possessor of the land has the better title. (2) Where an article is found unattached on land, as between the two, the owner or lawful possessor of the land has a better title only if he exercised such manifest control over the land as to indicate an intention to control the land and anything that might be found on it. I turn now to the judgment of the judge in which he sought to qualify the first of those principles by narrowing the ratio 164 [3.50]

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Waverley Borough Council v Fletcher cont. of the Elwes case, 33 ChD 562 by reference to the particular proprietary interest of the lessor as against the lessee and distinguishing between things naturally in the ground and those put there. He said: It seems to me that this case decided two matters. Firstly, that a person in possession of land as an inheritance under a settlement prima facie has the property and anything on or under that land. Secondly, that the defendant, whose only right to be on the land was under the terms of the lease, could not establish any express or implied licence to remove anything that would not be contemplated as being found during excavation of the land. I say “on or under” because it could not in common sense have made any difference to the plaintiff’s title whether the boat was resting on the top or six feet under … The general rule that an owner of land owns everything that is under his land right up to the centre of the earth, from a common sense point of view, would be applicable to things that are naturally there. It would, for example, include minerals, and any objects which in former days might have become attached to the surface of the land so as to form part of the realty, but which over the years, perhaps centuries, have become covered. But why in the case of lost or abandoned chattels there should be any difference as to who has the better possessory claim dependent merely upon whether the chattel is above or below ground (or on a window ledge as opposed to within a crevice therein), I wholly fail to understand, as I have already commented in relation to the boat in Elwes v Brigg Gas Co (1886) 33 ChD 562. I can find nothing in the authorities to justify the judge’s restriction of the ratio in the Elwes case to things that are naturally in the ground, as distinct from lost or abandoned articles. It is true that in Parker v British Airways Board [1982] QB 1004 at 1010G, Donaldson LJ categorised it as a dispute between a tenant for life of the realty and his lessee rather than a dispute between landowner and finder, but, in the first of his propositions that I have set out, he clearly accepted the general principle enunciated by Chitty J that lawful possession of land includes possession of everything [347] in the land, naturally there or otherwise. Whatever the correct categorisation of the Elwes case, Chitty J clearly regarded the nature of the article or matter in dispute as immaterial. In any event, it is far too late now for it to be suggested that his general proposition should be modified as suggested by the judge. The second question is whether and, if so, in what circumstances a different rule applies to land which is a public open space. The judge found that the council had neither the manifest intent nor the ability to prevent metal detecting in the park and the associated digging and removal of objects. He contrasted the circumstances in the cases of Elwes, 33 ChD 562, Sharman [1896] 2 QB 44 and Webb [1988] IR 353 by suggesting as the ratio in each case that the unsuccessful finder was only allowed on the land for a limited purpose which did not include the taking of the article in question. The undisputed facts here were that the council’s ownership of the park was subject to two covenants in the conveyance under which it derived title: (1) that it was to be used only for purposes “of or incidental to a pleasure or recreation ground for the use of the public;” (2) that it was not to be used for “horse or dog racing or for any other sports pastimes or recreations except the playing of cricket, hockey, netball, football, golf and skating and other games or sports of a like nature” and that the council would “at all times use the … park as an open space within the meaning of the Open Spaces Act 1906 or a recreation ground within the meaning of the Public Health Acts.” In my view, the judge’s reasoning that metal detecting was a recreation within the terms under which the council held the land and that, therefore, it included a right to excavate and carry away objects found, is strained. Whilst some sports or recreations, such as golf or cricket, may involve some disturbance of the soil, metal detecting is not, in my view, “of a like nature” to the “sports pastimes or recreations” mentioned in the second of the covenants to which I have referred. Moreover, the very fact that the activity is inherently invasive is against it being recreational in this context. Even if I am wrong about that, it cannot entitle members of the public to excavate the soil, whether “within reasonable bounds” or not. In Webb v Ireland [1988] IR 353 at 379, Finlay CJ said: [3.50]

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Waverley Borough Council v Fletcher cont. The learned trial judge found that the act of digging was an act of trespass, and even though the plaintiffs may have entered with the implied licence of the owners, as was found by him, this would lead to the legal conclusion that they then became, upon commencing to dig, trespassers ab initio. Further, even if it could be said that such a right existed in this case, it could not include a right to remove anything found. In the Elwes case, 33 ChD 562 at 568 and 569, Chitty J said that a licence to dig does not amount to a licence to take away. Finlay CJ, in another passage in Webb’s case [1988] IR 353 at 379, provides the answer to Mr Munby’s suggestion that digging and taking away incidental to metal detecting should, in the circumstances, be regarded as de minimis. Presumably, that is what the judge had in mind in his qualification “within reasonable bounds.” Finlay CJ said: The principle … that the law leans against the acquisition by a person of property rights by trespass, save in cases of prescription, is based on the requirement of the common good that the ownership and right to possession of land shall be protected from an unlawful invasion of it. There does not appear to me to be any grounds in logic or justice for a rule of law that a person who by a trespass of little extent obtains possession of a very valuable chattel would be exempt from this provision of the law, whereas a person committing a larger or more extensive trespass, and possibly deriving a much smaller profit would be penalised by it. Accordingly, in my view, neither Mr Fletcher’s metal detecting nor his digging nor his removal of the brooch was within any of the purposes for which the council was permitted to, or did, allow the public use of the park. The judge declined to rule on a submission made on behalf of Mr Fletcher, and repeated on this appeal, that the council was not the occupier of the park and for that reason could not assert sufficient control over it to entitle it to things in it. However, as I have said, he ruled that the council had no authority to prevent Mr Fletcher from metal detecting, digging and removing objects in the park. He appears to have taken the view that the only way in which the council could enforce its power and duty of management and control was by prosecution for infringement of byelaws or by recourse to the general criminal law. He said: There are no relevant byelaws and it seems to me that even had the defendant been aware of the council’s desire to prevent metal detecting, which he was not, he would have been entitled to say, “You cannot stop me. What is your authority for trying to?” The basis of that ruling, and of Mr Munby’s submission to like effect before us, was a decision of Finnemore J in Hall v Beckenham Corporation [1949] 1 KB 716, which concerned an action of nuisance against a local authority in respect of noise from the flying of model aircraft in a recreation ground owned, managed and controlled by the authority. Finnemore J found for the local authority holding, in reliance on a rating case, that it was not the occupier of the recreation ground, but merely its custodian or trustee for the public; that its only power to control activities in it was by way of byelaws or enforcement of the general criminal law; and that, as the flying of model aircraft did not contravene either, it had no power to abate the alleged nuisance. Mr Munby submitted in reliance on Hall’s case that the council did not occupy the park; and that it had no right qua owner to regulate its use by a member of the public, who could do what he liked there unless he breached a byelaw or the general criminal law. In my view, the council, whether as owner, possessor or occupier of the park, was a trustee for the general public in the exercise of its powers and duties of management and control under the Act of 1906 and the terms under which it held the land. As such it had a superior right to the brooch over that of Mr Fletcher who, in the absence of a licence from the council, had no entitlement to dig and remove it. In my view, the council was not restricted in its enforcement of that right to the mechanisms of prosecution under byelaws or the general criminal law. The purpose of a byelaw is simply to provide a local authority with a convenient criminal sanction in the enforcement of its public powers and duties. The absence of a byelaw on any matter does not mean that the council has no corresponding civil right, in this instance in its management and control of its land. Hall’s case was quite different. The question there was 166 [3.50]

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Waverley Borough Council v Fletcher cont. whether a local authority was liable in nuisance for noise caused by members of the public using it for a recreational purpose which the authority did not claim an entitlement to control. Here the council sought, in accordance with its [350] power and duty of management and control of the park on behalf of the general public, to protect its property. If and to the extent that Finnemore J’s judgment could be said to suggest that such power and duty can be enforced only through the medium of byelaws or the general criminal law, my view is that it went too far. Accordingly, I can see no basis for not applying the general rule that an owner or lawful possessor of land has a better title to an object found in or attached to his land than the finder, or for modifying it in some way to produce a different result in the circumstances of this case. Mr Fletcher did not derive a superior right to the brooch simply because he was entitled as a member of public to engage in recreational pursuits in the park. Metal detecting was not a recreation of the sort permitted under the terms under which the council held the land on behalf of the general public. In any event, digging and removal of property in the land were not such a permitted use, and were acts of trespass and the council was entitled to exercise its civil remedy for protection of its property regardless of the absence of any applicable byelaw. As to the judge’s third point, the absence of a manifest intention to control, it is, for the reasons I have given in the earlier part of this judgment, not the test for objects found in or attached to land; and, for the reasons I have just given, there is no reason for its application to the circumstances of this case. If there were, given the council’s statutory powers and duties, the terms under which it holds and controls and manages the park and the way in which it exercises that control and management, I would regard it as clearly having the requisite intent and ability to control. For those reasons I would allow the appeal. Sir Thomas Bingham MR and Ward LJ agreed.

[3.55]

Note

The two cases above are the most recent of a long line of cases starting with the decision in Armory v Delamirie (1722) 1 Str 506; 93 ER 664. An apprentice chimney sweep found a jewel in the course of cleaning. He took it to a goldsmith to have it appraised. The goldsmith’s offer was rejected but the jewel was not returned to the apprentice. The apprentice’s claim for damages was upheld on the ground that he had prior possession which provided an entitlement protected against all but someone with a superior right. The original owner was unknown and there does not seem to have been any claim by the occupier of the house whose chimney was being swept. The case reads more like an extract from Mary Poppins than the law reports in that the disadvantaged is successful and damages are awarded as favourably as possible to the apprentice. Apart from the legal principles involved, it is remarkable that an apprentice was able to bring an action in the High Court and be believed against a person carrying the business of a jeweller. For a detailed examination of this area of law, and its relationship of the law of possession generally, see Hickey, Property and the Law of Finders (Hart Publishing, Oxford, 2010). For a comparative analysis of the common law of finding with the rules of other legal systems see Liu, “Possession in the Law of Finding: a Comparative Study of the Doctrine of Possession” (2014) 22 Australian Property Law Journal 211. [3.55]

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Re Jigrose Pty Ltd [3.60] Re Jigrose Pty Ltd [1994] 1 Qd R 382 Supreme Court of Queensland KIEFEL J: The purchasers contend that by reason of cl 28.3 the vendor (applicant) was divested of ownership in the hay on completion of the contract. It is submitted that that is the effect of an “abandonment” under the clause. Clause 28.3 goes on to provide that the goods may (in the event that the plaintiff completes) be appropriated, removed or disposed of by the purchaser. Consistently with the notion that a transferee of property or a donee of a gift has a right to reject or disclaim it (see GM & MY Campbell & Co Pty Ltd v Cotton (Unreported, 1988 No 3886, 18 October 1991, Williams J at 4 and 5), the clause here contemplates a further step or action to be taken by the purchasers consequent upon their decision, before any rights in or with respect to the goods are acquired. The vendor however contends that the purchasers’ action cannot amount to an “appropriation”. If this were so, the question of what results from an abandonment under the clause assumes importance. Given that the purchasers do not acquire title until some act such as appropriation has taken place, if it be that abandonment divests ownership, then for a time the chattels are without an owner. To this, counsel for the applicant vendor submits that the common law could not intend that property in the goods not be vested in someone, and relies in part on the decision in Johnstone and Wilmot Pty Ltd v Kaine (1928) 23 Tas LR 43 (referred to in a decision of the New South Wales Court of Appeal in Moorhouse v Angus and Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700). In Johnstone and Wilmot Pty Ltd v Kaine Clark J referred to a number of commentators and to some of the older cases, from which a difference of view as to the effect of abandonment may be discerned and concluded that it was preferable to adopt a rule that “the intentional abandonment of a chattel by the owner does not divest him of its ownership.” In Moorhouse v Angus and Robertson Hutley JA (702) held: The abandonment of a chattel is conceived as an act by which the chattel becomes capable of appropriation by a taker who thereupon acquires absolute property therein: see Doctor and Student, Selden Society ed, vol 91, p 291 and the authorities quoted by Clark J in Johnstone & Wilmot Pty Ltd v Kaine at 56, 57. and disagreed with the approach of the judge at first instance, which approach had assimilated abandonment to the concept of a gift. Samuels JA (706) resisted the temptation to resolve the apparent conflict between the Doctor and Student on the one hand and Blackstone (17th ed, 1830, Commentaries I, 295, II, 9) on the other, determining the case on the point that there was not in any event an abandonment. The suggested abandonment there was said to be constituted by the leaving of a manuscript with a publisher for some ears and not making earlier steps to recover it. Mahoney JA considered that the nature of the transaction between the party and its terms resolved the issue (711, 712). It seems to me that once one accepts that intention is the critical question where an issue of abandonment is raised, the relationship between the parties and the terms of any transaction by which goods come into the possession of one of the parties will often, if not usually, be determinative as to their interest in the chattels. I have also been referred to two other decisions in Australia which touch on, but could not be said to be conclusive of the question. Angel J in Cook v Saroukos (1989) 97 FLR 33 at 41 considered that, at least in principle, there was not reason why title to a chattel could not be lost by abandonment. And in Robinson v Western Australian Museum (1977) 138 CLR 283, Jacobs J (338) appeared to accept that the common law recognised the immediate acquisition of title by the finder of abandoned chattels. 168 [3.60]

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Re Jigrose Pty Ltd cont. What remains of the Gilt Dragon and its contents, sunk 2.87 nautical miles of the west coast of Australia in 1656, is maritime property and is derelict in the sense in which that word is used in maritime law. Such derelict is to be distinguished from res derelicta or res nullius in the sense of the common law, a chattel abandoned by the owner with no intention of retaining his property therein. Such a chattel when it is thrown in to the sea belongs to a finder. It is neither derelict maritime property nor, if gold or silver, is it treasure trove. Blackstone, Book I, Ch 8, XIII. The principles applicable thereto must be kept distinct from maritime derelict, which is a thing abandoned and deserted at sea by those in charge of it without hope on their part of recovering it and without intention of returning to it (see Kennedy on Civil Salvage, 4th ed, 1958, at p 387) but with no intention on the part of the owner of abandoning his property therein. The distinction his Honour drew is an important one concerning abandonment generally. I put to one side what might be said to be a special position concerning wrecks and the question of abandonment in maritime law (see Stephen J in Robinson’s case, 318). As a general proposition, it I throw something away I truly abandon it. I intend no longer to retain possession. I do not propose to seek it out and I have not further interest in ownership. If however I lose something, I have not those intentions. I could not be said to have abandoned it. The “different intentions, which the law implies in the owner” was explained by Blackstone (Commentaries 17th ed, I, 295) in the context of treasure trove lost or hidden. In the Commentaries II, 9 the author explains that title remains with an original acquirer of the property until there is shown an intention to abandon it. It then becomes of public right and is liable to be appropriated by the next occupier. The Roman law dealt with the question of acquisition of such property by the mode of acquisition “occupatio”, which permitted the acquisition of ownership in a thing which was without an owner. It was achieved by taking possession with an intention to appropriate: Salkowski, Roman Private Law (1886), 390. “Things which could be acquired by occupatio included wild things, things which the owner has given up, intending to renounce ownership in the” (res derelictae) (p 393); and see Buckland, Roman Law from Augustus to Justinian (1990, reprint, p 208). Pollock and Wright, Possession in the Common Law (1888), 124 however raised a doubt as to whether it was possible for a possessor to divest himself by wilful abandonment referring to the view of the common law suggested in Haynes’s Case (1614) 12 Co Rep 113, 77 ER 1389 and the Doctor and Student (Bk ii c 51). Haynes’s Case was an exceptional one, concerning the property in winding sheets. It contains the statement that “a man cannot relinquish the property he hath to his goods unless they be vested in another”, the Court holding that property in the sheets remained with the owner. There is no discussion as to whether they might be considered as a type of gift, nor as to how the owner might claim the property. In the Doctor and Student it is stated (notably by the student) that there is no such law in the realm for “goods forsaken” and that the right to property in abandoned goods remained with the owner. Holdsworth, A History of English Law, vol VII (495, 496) was of the view that there was consequently “some authority” for a difference in the approach of the English common law from that of the Roman law. There are, as Holdsworth noted, few things which are capable of acquisition following abandonment, given the rights which accrue to landowners concerning property at least attached to the land and given the rights of the Crown to bona vacantia. Indeed, in Queensland the Public Trustee Act 1978, Pt VII Unclaimed Property Div 2 permits the Public Trustee to become administrator of unclaimed property and to exercise rights over it. Interestingly, by s 103(2) of that Act property is deemed to be unclaimed where “in the opinion of the Public Trustee: (a) it is not known after due enquiry who the owner of the property is, or where his is, or whether he is alive or dead, or it appears to have been abandoned”. [3.60]

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Re Jigrose Pty Ltd cont. which seems to recognise that abandoned property may not have an owner. Cases involving property which can be said to be truly abandoned will then be relatively rare. The “finder” cases to which I have been referred (see eg Moffatt v Kazana [1969] 2 QB 152 and Parker v British Airways Board [1982] QB 1004) are not of great assistance since they deal with goods apparently lost. In those circumstances it may be said that possession was held without consent of the owner. It certainly could not be said that the owner necessarily intended to abandon the goods. But what if the owner has really proclaimed to the world at large that he or she has not interest in the chattels, desires neither possession nor ownership and will not attempt to reclaim them? Wrangham J in Moffat v Kazana (156) appears to accept that such abandonment can divest title. It seems to me that if I do not wish to retain the possession or property in goods (perhaps most clearly shown by throwing them away), there is no reason in principle why the common law would require me to remain owner. The common law is usually concerned to exclude others from interfering with a person’s interest in property, that interest in turn being one to exclude others: see Holmes, The Common Law (1891), 220. If a person no longer holds that interest it is difficult to see what the common law’s concern could be. For my part I do not consider that there is a difficulty at law with the notion of abandonment divesting ownership. That is not however an end of the question here. It is necessary (as Mahoney JA pointed out in Moorhouse v Angus and Robertson) to consider the terms of the contract itself to see if that result was that intended by the parties. Clause 28 seems to me to provide the answer as to the parties’ intentions concerning the chattels. Under cl 28.1 the vendor is obliged to remove the property not sold and is in breach of that term if that is not done. If the plaintiff then completes, the chattels remaining are deemed to be abandoned, at least as between the parties to that agreement. In these circumstances cl 28.3 seems to me to be equivalent to the vendor representing that it has no further interest in the chattels, neither in possession nor in ownership. To modify the meaning of the word “abandonment” so that title would nevertheless remain in the vendor, at least for a time, would in my view be inconsistent with the finality the clause is seeking to achieve. It seems to me that under cl 28 where a vendor has left chattels on the land sold (and subject to questions such as relief from forfeiture which follow) a vendor would be precluded, as a matter of contract, from thereafter asserting a right either to ownership or possession: see Spencer Bowner & Turner, Estoppel by Representation (3rd ed, 1977), para 158. As I have said, title is not however automatically transferred to the purchasers on abandonment. It will pass where there is an act such as appropriation, although not all of the rights given to the purchasers under cl 28 will necessarily require that property be vested in them, for example, where they are simply removed but there is no act which depends upon full ownership. Such a view of cl 28.3 is not in my view inconsistent with provisions of cl 29. In any event it seems to me that whatever view is taken as to where title lies in the interim, the bales of hay have in this case been appropriated by the purchasers. Appropriation in this sense simply means taking to oneself as one’s property. That would require, in the context of an occupier, a manifest intention to exercise control over it: see Parker v British Airways Board at 1011 and 1020. An intention to exclude others is in my view an exercise of control over the chattels and that has clearly taken place here.

[3.65]

Notes

1. There has been some hesitation to accept that an interest in personal property can lost by abandonment. Public authorities may, for example, seek to hold the owner of a car responsible for its proper disposal. It is difficult, however, not to accept that a person who 170 [3.65]

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dumps an unwanted item by the side of the road has forfeited any claim at least against a subsequent finder. The reluctance to accept abandonment may reflect a view that responsibility should not be able to be renounced as readily as a simple act of discarding. At a factual level, mere inactivity is unlikely to lead to a conclusion that property has been abandoned. In Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700 an author had allowed a manuscript with the engaging title of “The Americans, Baby” to remain with a publisher from 1972 to 1978. The failure to take any step to recover the manuscript during this period was insufficient evidence of abandonment. In criminal cases courts will similarly be reluctant to allow an absence of action by any owner to be a ground for an argument of abandonment. In Keane v Carter (1994) 12 WAR 20 the court quickly dismissed an attempted defence to a charge of receiving stolen property that a gold nugget had been found on a railway terrace with no effort during the day of the finding to seek out the owner. 2. Questions of abandonment arise commonly as between lessor and lessee of residential premises when goods are left at the expiry of a tenancy. The residential tenancies legislation imposes duties on lessors to care for the goods. See, for example, Residential Tenancies Act 2010 (NSW), s 129. 3. The claim of the true owner will be defeated by a failure to claim the item during the limitation period. As with land, time only runs against the true owner so long as there is an adverse possessor. The limitation statutes set out a limitation period of six years for the bringing of actions in conversion and detinue (Limitation Act 1969 (NSW), s 14(1); Limitation of Actions Act 1958 (Vic), s 5(1); Limitation of Actions Act 1974 (Qld), s 10(1); Limitation of Actions Act 1936 (SA), s 35; Limitation Act 2005 (WA), s 38(1); Limitation Act 1974 (Tas), s 4(1); Limitation Act (NT), s 12(1) (3 years); Limitation Act 1985 (ACT), ss 11(1), 18). Further, in most jurisdictions the title to chattels is extinguished on the expiration of the period of time set out for the bringing of actions of conversion and detinue in relation to chattels (Limitation Act 1969 (NSW), s 65; Limitation of Actions Act 1958 (Vic), s 6(2); Limitation of Actions Act 1974 (Qld), s 12(2); Limitation Act 1974 (Tas), s 6(2); Limitation Act (NT), s 19; Limitation Act 1985 (ACT), ss 5, 43).

POSSESSION AS A SOURCE OF TITLE TO LAND [3.70] As seen in the discussion of the doctrines of tenure and estates in Chapter 2, English land law developed in a manner where there was no concept of absolute ownership. Instead, the “seisin of tenants and, subsequently, possession of others, were protected. It is important to note, however, that the statutory limitation principle has for many years ensured that rights arising from possession (as well as rights arising from documentary title) may be lost. The following cases demonstrate the way in which protection for possession was achieved. The operation of the limitation statutes is then considered in outline.”

[3.70]

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Asher v Whitlock [3.75] Asher v Whitlock (1865) LR 1 QB 1 English High Court of Justice, Full Court of Queen’s Bench [At the trial before Cockburn CJ, at the last Bedfordshire Spring Assizes, the following facts appeared in evidence. About Michaelmas, in the year 1842, Thomas Williamson inclosed from the waste of a manor a piece of land by the side of the highway; and in 1850, he inclosed more land adjoining, and built a cottage; the whole being the land as described and claimed in the writ. He occupied the whole till his death in 1860. By his will he devised the whole property, describing it as “a cottage and garden, in Keysoe Row, in which I now dwell”, to his wife Lucy Williamson, for and during so much only of her natural life as she might remain his widow and unmarried; and from and after her decease, or second marriage, whichever event might first happen, to his only child Mary Ann Williamson, in fee. After the death of Thomas Williamson, his widow remained in possession with the daughter, and in April 1861, married the defendant; and from that time they all three resided on the property till the death of the daughter, aged eighteen years, in February, 1863. On her death, the defendant and his wife, the widow of the testator, continued to reside on the premises; the widow died in May, 1863, and the defendant still continued to occupy. The female plaintiff is the heir-at-law of the testator’s daughter Mary Ann Williamson.] COCKBURN CJ: … The defendant, on the facts, is in this dilemma; either his possession was adverse, or it was not. If it was not adverse to the devisee of the person who inclosed the land, and it may be treated as a continuance of the possession which the widow had and ought to have given up, on her marriage with the defendant, then, as she and the defendant came in under the will, both would be estopped from denying the title of the devisee and her heir-at-law. But assuming the defendant’s possession to have been adverse, we have then to consider how far it operated to destroy the right of the devisee and her heir-at-law. Mr Merewether was obliged to contend that possession acquired, as this was, against a rightful owner, would not be sufficient to keep out every other person but the rightful owner. But I take it as clearly established, that possession is good against all the world except the person who can shew a good title; and it would be mischievous to change this established doctrine. In Doe v Dyeball Mood & M 346, one year’s possession by the plaintiff was held good against a person who came and turned him out; and there are other authorities to the same effect. Suppose the person who originally inclosed the land had been expelled by the defendant, or the defendant had obtained possession without force, by simply walking in at the open door in the absence of the then possessor, and were to say to him, “You have no more title than I have, my possession is as good as yours,” surely ejectment could have been maintained by the original possessor against the defendant. All the old law on the doctrine of disseisin was founded on the principle that the disseisor’s title was good against all but the disseisee. It is too clear to admit of doubt, that if the devisor had been turned out of possession he could have maintained ejectment. What is the position of the devisee? There can be no doubt that a man has a right to devise that estate, which the law gives him against all the world but the true owner. Here the widow was a prior devisee, but durante viduitate only, and as soon as the testator died, the estate became vested in the widow; and immediately on the widow’s marriage the daughter had a right to possession; the defendant however anticipates her, and with the widow takes possession. But just as he had no right to interfere with the testator, so he had no right against the daughter, and had she lived she could have brought ejectment; although she died without asserting her right, the same right belongs to her heir. Therefore I think the action can be maintained, inasmuch as the defendant had not acquired any title by length of possession. The devisor might have brought ejectment, his right of possession being passed by will to his daughter, she could have maintained ejectment, and so therefore can her heir, the female plaintiff. We know to what extent encroachments on waste lands have taken place; and if the lord has acquiesced and does not interfere, can it be at the mere will of any stranger to disturb the person in possession? I do not know what equity may say to 172 [3.75]

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Asher v Whitlock cont. the rights of different claimants who have come in at different times without title; but at law, I think the right of the original possessor is clear. On the simple ground that possession is good title against all but the true owner, I think the plaintiff’s entitled to succeed, and that the rule should be discharged. MELLOR J: I am of the same opinion. It is necessary to distinguish between the case of the true owner and that of a person having no title. The fact of possession is prima facie evidence of seisin in fee. The law gives credit to possession unless explained; and Mr Merewether, in order to succeed, ought to have gone on and shown the testator’s title to be bad, as that he was only tenant at will, but this he did not do. In Doe v Dyeball (1829) Mood M & M 346, possession for a year only was held sufficient against a person having no title. In Doe v Barnard (1849) 13 QB 945; 18 LJ (QB) 306, the plaintiff did not rely on her own possession merely, but shewed a prior possession in her husband, with whom she was unconnected in point of title. Here the first possessor is connected in title with the plaintiffs; for there can be no doubt that the testator’s interest was devisable. In the common case of proving a claim to landed estate under a will, proof of the will and of possession or receipt of rents by the testator is always prima facie sufficient, without going on to shew possession for more than twenty years. I agree with the Lord Chief Justice in the importance of maintaining, that possession is good against all but the rightful owner.

[3.80]

Notes and Questions

1. Who had the best title to the land enclosed by Williamson in 1850? Does the result in the case with respect to this piece of land demonstrate that the defence of jus tertii is not a valid one in this context? 2. Cf Doe d Carter v Barnard (1849) 13 QB 945; 116 ER 1524 where it was held that a person in possession for less than the limitation period, who was ejected by another person with no title to the land, could not recover the land from the dispossessor. 3. In Allen v Roughley (1955) 94 CLR 98 the High Court endorsed the concept of relativity of title set out in Asher v Whitlock (1865) LR 1 QB 1. The justices varied in their views, however, as to the availability of the defence of jus tertii: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.65]-[2.70]. In Perry v Clissold [1907] AC 73, however, the Privy Council accepted its availability as a defence. See also Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087; Mulcahy v Curramore [1974] 2 NSWLR 464.

Perry v Clissold [3.85] Perry v Clissold [1907] AC 73 Privy Council LORD MACNAGHTEN: This was an appeal from a judgment of the High Court of Australia, dated June 20, 1904, reversing a judgment of the Supreme Court of New South Wales. It raised a question under the Lands for Public Purposes Acquisition Act, 1880 (44 Vict No 16), now superseded by The Public Works Act, 1900, which consolidates the law on this subject. “The Act of 1880 in its preamble recites that it is expedient to make provision for the acquisition on behalf of the Crown of lands required for certain purposes, including, among others, sites for public schools,” and “to provide compensation for lands so acquired.” The following are the material provisions of the Act. [3.85]

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Perry v Clissold cont. The owners of the land or the persons who, but for the provisions whereinbefore contained, would have been such owners are entitled to receive such sum of money by way of compensation for the land of which they have been deprived under the Act as may be agreed upon or otherwise ascertained under the provisions thereinafter contained (s 10). By notification published in the Gazette of July 17, 1891, a piece of land containing two acres and three perches at Canterbury, in the county of Cumberland, was resumed for a public school site. The land was at the time in the possession of one Frederick Clissold. Notice of the resumption was given to Clissold on July 22, 1891; but nothing further was done then. Clissold died shortly afterwards, and his will was proved on May 5, 1892. In May, 1902, under an order of the Supreme Court, the respondents, who are the trustees of Clissold’s will, and of whom three are his surviving executors, served notice of their claim to compensation in respect of the land resumed by the notification of July 17, 1891, stating that the claimants were the executors of Frederick Clissold, “who at the date of resumption was in possession of such land as the owner thereof, and in receipt of the rents of such lands, and had a title thereto by possession.” It appeared from the papers which were forwarded with the claim that in the year 1881 Frederick Clissold entered into possession of the land, which was then open and vacant, and enclosed it by a substantial fencing, and that ever since the enclosure, up to the time of resumption, Clissold held exclusive possession of the land without notice of any adverse claim, and let it to different tenants and received the rents for his own use and benefit, and duly paid all rates and taxes in respect of the land which stood in his name in the rate-books of the municipality of Canterbury. The Minister refused to entertain the claim to compensation. The Supreme Court upheld the view of the Minister. The High Court reversed this decision, and granted a mandamus requiring the Minister to cause a valuation to be made. The only question on this appeal was whether or not a prima facie case for compensation had been disclosed. On the part of the Minister it was contended that, upon the plaintiffs’ own showing, Clissold was a mere trespasser, without any estate or interest in the land. Their Lordships are unable to agree with this contention. It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by process of law within the period prescribed by the provisions of the Statute of Limitations applicable to the case, his right is for ever extinguished, and the possessory owner acquires an absolute title. On behalf of the Minister reliance was placed on the case of Doe v Barnard, 13 QB 945 which seems to lay down this proposition, that if a person having only a possessory title to land be supplanted in the possession by another who has himself no better title, and afterwards brings an action to recover the land, he must fail in case he shews in the course of the proceedings that the title on which he seeks to recover was merely possessory. It is, however, difficult, if not impossible, to reconcile this case with the later case of Asher v Whitlock, LR I QB 1 in which Doe v Barnard, 13 QB 945 was cited. The judgment of Cockburn CJ is clear on the point. The rest of the Court concurred, and it may be observed that one of the members of the Court in Asher v Whitlock LR 1QB 1 (Lush J) had been of counsel for the successful party in Doe v Barnard. The conclusion at which the Court arrived in Doe v Barnard 13 QB 945 is hardly consistent with the views of such eminent authorities on real property law as Mr Preston and Mr Joshua Williams. It is opposed to the opinions of modern text-writers of such weight and authority as Professor Maitland and Holmes J of the Supreme Court of the United States. See articles by Professor Maitland in the Law Quarterly Review, vols 1, 2, and 4; Holmes, Common Law, p 244; Prof J B Ames in 3 Harv Law Rev 324 n. 174 [3.85]

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Perry v Clissold cont. Their Lordships are of the opinion that it is impossible to say that no prima facie case for compensation has been disclosed. They do not think that a case for compensation is necessarily excluded by the circum-stance that under the provisions of the Act of 1900 the Minister acquired not merely the title of the person in possession as owner, but also the title, whatever it may have been, of the rightful owner out of possession, who never came forward to claim the land or the compensation payable in respect of it, and who is, as the Chief Justice says, “unknown to this day”. The Act throughout from the very preamble has it apparently in contemplation that compensation would be payable to every person deprived of the land resumed for public purposes. It could hardly have been intended or contemplated that the Act should have the effect of shaking titles which but for the Act would have been secure, and would in process of time have become absolute and indisputable, or that the Governor, or responsible Ministers acting under his instructions, should take advantage of the infirmity of anybody’s title in order to acquire his land for nothing. Even where the true owner, after diligent inquiry, cannot be found the Act contemplates payment of the compensation into Court to be dealt with by a Court of Equity. It only remains for their Lordships to express their opinion that the valuation to be made should be a valuation of the land as at the date of the notification of resumption. When the valuation is made it will be for the claimants to take such proceedings as they may be advised to recover the amount, unless the Minister thinks fitto pay them or to pay the money into Court. For these reasons their Lordships humbly advised His Majesty that the appeal should be dismissed, and ordered the appellant to pay the costs of the appeal.

[3.90]

Notes and Questions

1. Describe and analyse the argument in Perry v Clissold [1907] AC 73 that the estate of Clissold should not be entitled to compensation. Why was it ultimately unsuccessful? 2. In Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087, Slattery J reviewed the authorities and stated: The authority of Asher v Whitlock (1865) LR 1 QB 1, which was expressly approved in Perry v Clissold [1907] AC 73, has also been established by the High Court in Wheeler v Baldwin (1934) 52 CLR 609 and Allen v Roughley (1955) 94 CLR 98. These authorities which support the claimant’s contentions are binding on me. In the recent Full Court case of Oxford Meat Co Pty Ltd v McDonald [1963] SR (NSW) 423, at p 427; 80 WN 681, at p 684, Brereton J delivering the judgment of the Full Court, said: “Now the rule as I understand it is not that a person in possession is entitled to maintain his possession as against all but the true owner; it is that he is entitled to maintain it against all but a person having a better right to possession: cf Danford v McAnulty (1883) 8 App Cas 456. In Doe d Carter v Barnard (1849) 13 QB 945; 116 ER1524, it had been held that a person merely in possession evicted by another with no title to the land, could not maintain ejectment against that disseisor. This has been said to be based on the existence of a jus tertii in the true owner. In fact it was the result of applying the wrong rule. In Asher v Whitlock (1865) LR 1 QB 1 it was held that the devisee of a prior possessor could evict the disseisor, because the testator’s prior possession gave him a prior right to possession. This in no way affected the availability of the ‘jus tertii’ to a defendant; the decision differed from that in Doe d Carter v Barnard merely because the correct rule was applied.” [3.90]

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Doe d Carter v Barnard was urged on me by Mr Bainton for the company. However, this case was treated by the Full Court in Oxford Meat Co v McDonald as being improperly decided and 1 am bound by and respectfully follow this decision of the Full Court. Holdsworth, History of English Law, vol 7, upon which Mr Bainton relied strongly for his submission in refutation of the claimant’s contention, did not find favour with members of the High Court (with the possible exception of Williams J) in Allen v Roughley (1955) 94 CLR 98, and I respectfully put it aside.

Mabo v Queensland (No 2) [3.95] Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia [In the course of considering the relevance of possession to the claim of the Meriam people, Toohey J discussed the nature of possessory rights.] TOOHEY J: … Common law aboriginal title (i) The plaintiffs’ case The plaintiffs did not argue for an adverse title against the Crown but for a possessory title by reason of long possession. Such a title must, of course, be shown to exist at the present time to be of use to the plaintiffs. But the inquiry focuses on the point of annexation. It must, as was clear from the plaintiffs’ written submissions, be shown that such a possessory title arose immediately after annexation and continues today. To succeed, the plaintiffs must show that the Crown never had title to the Islands; that issue concerns the law at the time of annexation. The plaintiffs’ submissions with respect to possessory title may be summarized in this way. The common and statute law of England applied in a settled colony, where applicable to local conditions. English land law applied in the Colony of Queensland. According to common law then, as now, possession of land gives rise to a title which is good against all the world except a person with a better claim. Such a possessor is “seised” of the land so that he or she acquires an estate in the land which is an estate in fee simple. It is a fee simple because the interest acquired is presumed to be such until shown otherwise. Therefore, even a wrongful possessor acquires a fee simple (sometimes called a “tortious fee simple”) (See Pollock and Wright, An Essay on Possession in the Common Law (1888) (hereafter “Pollock and Wright”), p 94.) effective against all the world except a person with a better right. But, in addition, the title arising from possession is presumed to be lawful and by right (that is, it is presumed to be the best right to possession) unless the contrary is proved. According to the plaintiffs’ submissions, the Crown could not show that, on acquisition of New South Wales or Queensland, it had a better claim to possession of occupied land and so the presumption of a fee simple title in the indigenous possessors of land was left undisturbed. Such a title would have been held of the Crown, however, which held a radical title to all acquired territory. In order to establish such a possessory title, the indigenous inhabitants would have to prove occupation by their ancestors at the time of settlement, such that it amounted in law to possession of particular areas of land. This, they said, could be proved by reference to the findings of Moynihan J. In the absence of argument to the contrary, it may be accepted that New South Wales and subsequently Queensland were settled colonies. It may also be accepted that English land law and its two fundamental doctrines, estates and tenures, applied in these colonies. (Attorney-General (NSW) v Brown (1847), 1 Legge, at p 318, though, as we have seen, Stephen CJ understood its application to have a different effect.) The issues which arise for consideration, therefore, are: (a) the validity of the proposition that possession gives rise to a presumption of a fee simple title against all but a better 176 [3.95]

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Mabo v Queensland (No 2) cont. claimant; (b) the validity of the claim that the Crown was not, at the time of annexation, a better claimant to possession; and (c) the question of what, as a matter of law, amounts to possession of land. As the plaintiffs put their case, there would be no more favourable consequences flowing from acceptance of their submissions as to possessory title than from acceptance of their submissions as to traditional title. After contending for the existence of a possessory title, the plaintiffs relied on the same line of argument as they did for traditional title. Significantly, they conceded that a possessory title is extinguishable by “clear and plain” legislation. And the argument as to fiduciary duty and trust did not focus on the existence of a possessory title. It may have been too great a concession that a fee simple arising from possession is “extinguishable” in the same way as traditional title. But, given my conclusions as to traditional title and, especially, those as to the existence of a fiduciary obligation on the Crown arising from it and given what follows concerning the Racial Discrimination Act, there is no need to express a firm opinion on the plaintiffs’ arguments concerning possessory title. Nevertheless, those arguments raised important issues which have not been examined before in this area of the law, and something should be said about the principles of law on which they rested. The plaintiffs’ case in this regard owed much to McNeil; so too does this portion of my judgment. (ii) The relationship between possession and title: Does possession give rise to a presumptive title? “Possession” is notoriously difficult to define (see Pollock and Wright, pp 1-42; Tay, “The Concept of Possession in the Common Law: Foundations for a New Approach” (1964) 4 MULR 476) but for present purposes it may be said to be a conclusion of law defining the nature and status of a particular relationship of control by a person over land. “Title” is, in the present case, the abstract bundle of rights associated with that relationship of possession. Significantly, it is also used to describe the group of rights which result from possession but which survive its loss; this includes the right to possession. In the thirteenth century Bracton wrote (Bracton on the Laws and Customs of England (Thorne Tr, 1977), vol III, p 134): [E]veryone who is in possession, though he has no right, has a greater right [than] one who is out of possession and has no right. It is said that possession is the root of title: (Asher v Whitlock (1865) 1 QB 1; Perry v Clissold [1907] AC 73; Calder [1973] SCR, 368; (1973) 34 DLR (3d), 185; Megarry and Wade, Law of Real Property, 5th ed (1984) (hereafter “Megarry and Wade”), pp 105-106; Pollock and Wright, pp 22, 94-95. Cf Holdsworth, A History of English Law, 2nd ed (1937), vol VII, (hereafter “Holdsworth, vol VII”), pp 64-65, but see analysis of Holdsworth, vol VII, in Allen v Roughley (1955) 94 CLR 98, 134 ff.) To understand this statement it is necessary to have regard to the history and development of actions for the recovery of land. In the present context, it is enough to recall that through the seventeenth, eighteenth and nineteenth centuries ejectment became the most popular action for the recovery of interests in land – both leasehold and freehold (Holdsworth, vol VII, p 9). And despite its abolition in 1852, its principles remain the basis of present actions for the recovery of land (Bristow v Cormican (1878) 3 App Cas 641, 661; Megarry and Wade, pp 105, 1158-1159). It is therefore the focus of the present inquiry, the principles on which it is based being relevant both at the time of the acquisition of the Islands and now. Ejectment was a response to the growing cumber-someness and inefficiency of the old real actions. The real actions, so named because they provided specific recovery of interests in land, not merely damages (Holdsworth, A History of English Law, 5th ed (1942), vol III (hereafter “Holdsworth, vol III”), pp 3-4; Holdsworth, vol VII, p 4), emerged in the twelfth and thirteenth centuries. The nature and history of these forms of action are canvassed by Holdsworth (Holdsworth, vol III, pp 3-29) and by Pollock and Maitland (The History of English Law (2nd ed, 1898, vol II) (hereafter “Pollock and Maitland”), pp 46-80); it is unnecessary to repeat what is said by those writers. (iii) Ejectment: The relationship between possession and title [3.95]

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Mabo v Queensland (No 2) cont. One view (see Holdsworth, vol VII, pp 62-64) is that the advent of ejectment represented a fundamental change in the concept of ownership in English law, involving the idea of absolute title divorced from its radical attribute, possession. But the other view (see Hargreaves, “Terminology and Title in Ejectment”, (1940) 56 Law Quarterly Review 376; Pollock and Wright, pp 93- 97; Megarry and Wade, pp 104-105; Asher v Whitlock (1865) 1 QB 1), which is more persuasive, is that the basic relationship between possession and ownership of land established by the earlier real actions, involving the idea of relative claims to possession, was maintained or even emphasised in the action of ejectment. A successful claim to an interest in land comprised the better claim to possession and its associated rights as between the parties. In order to show a title which would defeat the defendant in possession, the plaintiff in ejectment had to prove a right of entry; the defendant could rely on possession. Therefore, the plaintiff was put to proof of the strength of his or her title and could not rely on the weakness of the defendant’s title (Roe d Haldane v Harvey (1769) 4 Burr 2484 at 2487 [98 ER 302 at 304]; Goodtitle d Parker v Baldwin (1809) 11 East 488 at 495 [103 ER 1092 at 1095]). The central issue, therefore, in an action for ejectment, and on which opinions have differed, was what circumstances gave a right of entry. Was proof by the plaintiff of mere prior possession sufficient to found a right of entry against the defendant, indicating that possession gave rise to an enforceable “title”, or was more required? Did possession give rise to a title which survived the loss of possession? The relevance of this question is that it points up the nature of the entitlements arising from the mere possession which would, subject to proof, have existed immediately on annexation. So long as it is enjoyed, possession gives rise to rights, including the right to defend possession or to sell or to devise the interest (Asher v Whitlock; Ex parte Winder (1877) 6 Ch D 696; Rosenberg v Cook (1881) 8 QBD 162). A defendant in possession acquires seisin even if possession is tortiously acquired. That is, a person in possession has an estate in fee simple in the land; it is this interest on which a defendant in an action for ejectment could rely. The disseisee loses seisin and acquires a right of entry in its stead (Wheeler v Baldwin (1934) 52 CLR 609, 631-633; Elvis v Archbishop of York (1619) Hob 315, 322 [80 ER 458, 464]; Pollock and Wright, pp 93-94; Maitland “The Mystery of Seisin” (1886) 2 Law Quarterly Review 481, esp pp 482-486). A possessor acquires a fee simple estate because the fullest estate known to the law is presumed until a lesser estate is proved (Wheeler v Baldwin (1934) 52 CLR, 632). And, in the circumstances under consideration, there is no possibility of a leasehold estate at the time of annexation or of some other lesser estate. Applied to these circumstances, prima facie all indigenous inhabitants in possession of their land on annexation are presumed to have a fee simple estate. But what does English land law have to say if possession of land is lost? The seisin and fee simple enjoyed as a result of possession would also be lost because each successive possessor must enjoy the rights directly associated with possession. According to this analysis, the last possessor only in any succession would enjoy the entitlements. If the Crown dispossessed an indigenous people, its title arising from possession would be the best claim. This was the effect of Holdsworth’s analysis of land law. He concluded that proof of prior possession was insufficient in itself to provide a right of entry in the plaintiff against a defendant who was a mere possessor (Holdsworth, vol VII, pp 61-68; Stokes v Berry (1699) 2 Salk 421 (91 ER 366); Doe d Wilkins v Marquis of Cleveland (1829) 9 B and C 864 [109 ER 321]). That is, possession of itself gives rise to no title which survives dispossession. The better understanding is, I think, that if no other factors come into play, then, regardless of the length of time, as between mere possessors prior possession is a better right (Allen v Rivington (1670) 2 Wms Saund 111 [85 ER 813]; Doe d Smith and Payne v Webber (1834) 1 AD and E 119 [110 ER 1152]; Doe d Hughes v Dyeball (1829) M & M 346 [173 ER 1184]; Asher v Whitlock; Perry v Clissold; Oxford Meat Co Pty Ltd v McDonald (1963) 63 SR (NSW) 423; Spark v Whale Three Minute Car Wash (1970) 92 WN 178

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Mabo v Queensland (No 2) cont. (NSW) 1087; Allen v Roughley; Wheeler v Baldwin (1934) 52 CLR 609, 624, 632-633; Pollock and Maitland, p 46). Possession is protected against subsequent possession by a prima facie right of entry. The proposition that possession of itself gives rise to a right in the plaintiff to recover possession, if lost, is supported by principle. In losing possession, a plaintiff has lost the rights associated with possession, including the right to defend possession as well as an estate in the land. But nothing has upset the presumption that the plaintiff’s possession, and therefore his or her fee simple, was lawfully acquired and hence good against all the world. “Possession is prima facie evidence of seisin in fee simple” (Peaceable d Uncle v Watson (1811) 4 Taunt 16, 17 [128 ER 232, 232]; Wheeler v Baldwin (1934) 52 CLR 609, 632; see also Doe d Stansbury v Arkwright (1833) 5 Car and P 575 [172 ER 1105]; Denn d Tarzwell v Barnard (1777) 2 Cowp 595 (98 ER 1259); Asher v Whitlock (1865) 1 QB 1, 6; Allen v Roughley (1955) 94 CLR, 108). Without evidence to the contrary, nothing has displaced the presumption arising from proof of the plaintiff’s possession that he or she had lawful title amounting to a fee simple. Thus, although a dispossessed plaintiff in ejectment must prove the strength of his or her own title and cannot rely on the weakness of the defendant’s title, the presumption of lawfulness arising from prior possession is positive evidence in that regard (cf note (a) in Allen v Rivington (1670) 2 Wms Saund, 111 [85 ER 813, 813]). It follows from this, however, that a person’s title arising from prior possession can be defeated either by a defendant showing that he or she (or another person, in so far as it undermines the plaintiff’s claim) has a better, because older, claim to possession or by a defendant showing adverse possession against the person for the duration of a limitation period. In sum, English land law, in 1879 and now, conferred an estate in fee simple on a person in possession of land enforceable against all the world except a person with a better claim. Therefore, since the Meriam people became British subjects immediately on annexation, they would seem to have then acquired an estate in fee simple. This is subject to the question whether the Meriam people could be said to be in possession. [Toohey J later found that the nature of the occupation “points clearly enough to possession according to English law”] The question then arises – does the Crown have a better title? Put another way, did the defendant have a better claim to possession when it acquired sovereignty in 1879 or 1895? [Toohey J then considered a number of arguments pursuant to which it was claimed that the Crown had a better right to possession. One argument was that in 1882 a reserve was created for the Aborigines and that their occupation was attributable to this from that time. Whilst not making a finding on this matter, Toohey J thought it more likely that the creation of the reserve would not have affected the Meriam people’s common law possession.] … (vi) Possessory title – conclusions It follows from this analysis that the Meriam people may have acquired a possessory title on annexation. However, as I have said, the consequences here are no more beneficial for the plaintiffs and, the argument having been put as an alternative, it is unnecessary to reach a firm conclusion. In any event, it is unlikely that a firm conclusion could be reached since some matters, the creation of the reserve for example, were not fully explored.

The limitation principle: adverse possession [3.100] The cases extracted above demonstrate that a person who has an interest in land,

either by documentary title or possession, and who is unlawfully dispossessed, has a right to bring an action against the wrongdoer to recover possession. Although the common law [3.100]

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recognised this right as subsisting forever, the principle of “limitation” (that is of setting a certain time within which the action may be instituted) has been enshrined by statute in many jurisdictions. There has been much debate as to whether rights to land should be lost in this manner: see, for example, Goodman, “Adverse Possession of Land – Morality and Motive” (1970) 33 Mod LR 281 at 281–283; Dockray, “Why Do We Need Adverse Possession?” [1985] Conv 272; Irving, “Should the Law Recognise the Acquisition of Title by Adverse Possession” (1994) 2 APLJ 112; generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.10]-[3.15]. The limitation statutes in the Australian jurisdictions are the Limitation Act 1969 (NSW); the Limitation of Actions Act 1958 (Vic); Limitation of Actions Act 1974 (Qld); Limitation of Actions Act 1936 (SA); Limitation Act 2005 (WA) (Limitation Act 1935 (WA) with respect to causes of action arising before 15 November 2005 – references are to the 2005 Act); Limitation Act 1974 (Tas); Limitation Act (NT); Limitation Act 1985 (ACT). (Note that in the Northern Territory and the Australian Capital Territory, title to land cannot be lost by adverse possession: see Land Title Act (NT), s 198; Land Titles Act 1925 (ACT); Limitation Act 1985 (ACT), s 5(a).) Most freehold title in Australia is held under the Torrens system of registration of titles and the basis of this system is to provide certainty of title by the Register reflecting the way in which title is held. The concept of a mere possessory interest giving rise to an enforceable right, which may ripen into the best interest in the land pursuant to the statutory principle of limitation, appears at odds with the philosophy of the Torrens system, even more so in the modern era of computerised titles. (See Griggs, “Possessory Titles in a System of Title by Registration” (1999) 21 Adelaide Law Review 157-175; McCrimmon, “Whose Land is it Anyway? Adverse Possession and Torrens Title” in Grinlinton, Torrens in the Twenty-First Century (2003), pp 157-176 and Burns, “Adverse Possession and Title-By-Registration Systems in Australia and England” (2011) 35 Melbourne University Law Review 773). In England its operation in relation to registered land has been significantly curtailed by the introduction of the Land Registration Act 2002 (UK). As Gray and Gray in Elements of Land Law (3rd ed, Butterworths, London, 2001) prophetically stated (at p 241) “… the path of the future certainly involves an historic shift in the philosophical base of English land law from ‘possession’ to ‘title’, from empirically defined fact to state-defined entitlement, from ‘property’ as a reflection of social actuality to ‘property’ as a product of state-ordered or political fact.” Nevertheless, even under land registration systems, there will be situations where uncertainty continues to exist and the limitation principle will need to be retained in some form (as in England). See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.380] ff. At present, in Australia, the approach in relation to adverse possession over Torrens land differs from jurisdiction to jurisdiction: the limitation principle applies in varying degrees. In Victoria and Western Australia, the concept of acquisition of an interest in land pursuant to adverse possession applies fully to Torrens land. First, s 42(2)(b) of the Transfer of Land Act 1958 (Vic) and s 68(1) of the Transfer of Land Act 1893 (WA), provide that the registered proprietor holds the land subject to any rights subsisting under adverse possession of the land. It appears that the provisions include both inchoate possessory rights and possessory rights which have developed with the passing of the limitation period into the best interests in the world. Secondly, ss 60 – 62 of the Transfer of Land Act 1958 (Vic) and ss 222 – 223A of the Transfer of Land Act 1893 (WA) provide for the adverse possessor to obtain registration of 180

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title where the title of the registered proprietor has been extinguished. The Western Australian provisions are discussed in Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163. Similarly, in Tasmania, the limitation principle applies to Torrens land although the provisions are differently structured (see Land Titles Act 1980 (Tas), ss 138T – 138ZA; s 40(3)(h) and see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.395]). In Queensland and South Australia, a lesser protection is provided for the adverse possessor as it appears that it is only the adverse possessor who has been in possession for the statutory period who gains enforceable rights (see Land Title Act 1994 (Qld), s 185(1)(d), ss 98 – 108B; Real Property Act 1886 (SA), s 69(f), ss 80A – 80I, s 251. [In Queensland applications may only be made in respect of whole lots: see Sherrard v Registrar of Titles [2004] 1 Qd R 558.] Discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.400].) In New South Wales, title by adverse possession can be acquired within specific and narrow parameters (see Real Property Act 1900 (NSW), Pt 6A, discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.405]). Commencement of limitation period

Whittlesea City Council v Abbatangelo [3.105] Whittlesea City Council v Abbatangelo (2009) 259 ALR 56 Supreme Court of Victoria – Court of Appeal (Footnotes omitted) Introduction and summary This appeal arises from a decision of a judge of the Trial Division that Laurice Abbatangelo (“Mrs Abbatangelo” or “the respondent”) had acquired title to a parcel of general law land situated at 581 Bridge Inn Road, Mernda (“the land”) by adverse possession against the Whittlesea City Council (“the Council” or “the appellant”), the paper owner of the land. The appellant contends that the judge erred in finding that the respondent had acquired title to the land by adverse possession. It says that the elements of adverse possession were not made out, and seeks to impugn findings of fact and as to credit made by the judge. For the reasons that follow, we have concluded that the judge’s decision was correct and that the appeal should be dismissed. Applicable principles Section 8 of the Limitation of Actions Act 1958 (Vic) (“the Act”) provides that no action shall be brought by any person to recover any land after the expiration of 15 years from the date on which the right of action accrued. Section 18 provides that at the expiration of that period, the person’s title to the land shall be extinguished. As to when the right of action accrues, s 9(1) refers to the date upon which the person whose title stands to be extinguished “has … been dispossessed or discontinued his possession”, whilst s 14(1) provides that “[n]o right of action to recover land shall be deemed to accrue unless the land is in possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as ‘adverse possession’)”. Before us, the parties agreed that the following comments made by Ashley J (as his Honour then was) in Bayport Industries Pty Ltd v Watson aptly summarise the relevant principles: The law is clear enough. A number of the basic principles were summarised by Slade J in Powell v McFarlane. Thus, pertinently: It will be convenient to begin by restating a few basic principles relating to the concept of possession under English law: [3.105]

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Whittlesea City Council v Abbatangelo cont. (1) In the absence of evidence to the contrary, the owner of land with the paper title is deemed to be in possession of the land, as being the person with the prima facie right to possession. The law will thus, without reluctance, ascribe possession either to the paper owner or to persons who can establish a title as claiming through the paper owner. (2) If the law is to attribute possession of land to a person who can establish no paper title to possession, he must be shown to have both factual possession and the requisite intention to possess (animus possidendi). (3) Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, … The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed … It is impossible to generalise with any precision as to what acts will or will not suffice to evidence factual possession … Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so. (4) The animus possidendi, which is also necessary to constitute possession, … involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the processes of the law will allow … the courts will, in my judgment, require clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the [requisite] animus possidendi and consequently as not having dispossessed the owner. To those principles should be added and/or highlighted the following [reproduced, with corrections, from Bayport Industries Pty Ltd v Watson (2006) V Conv R 54-709; [2002] VSC 206 at [39]-[40]]: • When the law speaks of an intention to exclude the world at large, including the true owner, it does not mean that there must be a conscious intention to exclude the true owner. What is required is an intention to exercise exclusive control: see Ocean Estates v Pinder [1969] 2 AC 19. And on that basis an intention to control the land, the adverse possessor actually believing himself or herself to be the true owner, is quite sufficient: see Bligh v Martin [1968] 1 WLR 804. • As a number of authorities indicate, enclosure by itself prima facie indicates the requisite animus possidendi. As Cockburn C.J. said in Seddon v. Smith (1877) 36 L.T. 168, 1609: “Enclosure is the strongest possible evidence of adverse possession.” Russell L.J. in George Wimpey & Co. Ltd. v. Sohn [1967] Ch. 487, 511A, similarly observed: “Ordinarily, of course, enclosure is the most cogent evidence of adverse possession and of dispossession of the true owner”. • It is well established that it is no use for an alleged adverse possessor to rely on acts which are merely equivocal as regards the intention to exclude the true owner: see for example Tecbild Ltd. v. Chamberlain, 20 P. & C.R. 633, 642, per Sachs L.J. • A person asserting a claim to adverse possession may do so in reliance upon possession and intention to possess on the part of predecessors in title. Periods of possession may be aggregated, so long as there is no gap in possession. 182 [3.105]

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Whittlesea City Council v Abbatangelo cont. • Acts of possession with respect to only part of land claimed by way of adverse possession may in all the circumstances constitute acts of possession with respect to all the land claimed. … • Where a claimant originally enters upon land as a trespasser, authority and principle are consistent in saying that the claimant should be required to produce compelling evidence of intention to possess; in which circumstances acts said to indicate an intention to possess might readily be regarded as equivocal. … • At least probably, once the limitation period has expired the interest of the adverse possessor, or of a person claiming through him, cannot be abandoned. For the purposes of this appeal, the following additional principles are also relevant: (a)

The reference to “adverse possession” in s 14(1) of the Act is to possession by a person in whose favour time can run and not to the nature of the possession. The question is simply whether the putative adverse possessor has dispossessed the paper owner by going into possession of the land for the requisite period without the consent of the owner, with the word “possession” being given its ordinary meaning. Whether or not the paper owner realises that dispossession has taken place is irrelevant.

(b)

Factual possession requires a sufficient degree of physical custody and control. Intention to possess requires an intention to exercise such custody and control on one’s own behalf and for one’s own benefit. Both elements must be satisfied by a putative adverse possessor, although the intention to possess may be, and frequently is, deduced from the objective acts of physical possession.

(c)

In considering whether the putative adverse possessor has factual possession, a court has regard to all the facts and circumstances of the case, including the nature, position and characteristics of the land, the uses that are available and the course of conduct which an owner might be expected to follow. Each case must be decided on its own particular facts. Whilst previous cases can provide guidance as to the relevant principles which are to be applied, they should be treated with caution in terms of seeking factual analogies by reference to particular features of a person’s dealings with land. Acts that evidence factual possession in one case may be wholly inadequate to prove it in another. For example, acts done by a putative adverse possessor who lives next to the relevant property may sufficiently evidence a taking of possession, whereas those same acts may be insufficient if done by a person who lives some distance from the property.

(d)

The intention required by law is not an intention to own or even an intention to acquire ownership of the land, but an intention to possess it. The putative adverse possessor need not establish that he or she believes himself or herself to be the owner of the land.

(e)

A number of acts which, considered separately, might appear equivocal may, considered collectively, unequivocally evidence the requisite intention.

(f)

Statements about intention by a putative adverse possessor should be treated cautiously, as they may be self-serving. But whilst a statement by a person that he or she intended to possess land will not be enough in itself to establish such an intention, it may be relevant when taken in combination with other evidence suggesting an intention to possess.

(g)

Mere use falling short of possession will not suffice. In some circumstances, a person’s use of land may amount to enjoyment of a special benefit from the land by casual acts of trespass and will neither constitute factual possession nor demonstrate the requisite intention to possess. For example, where vacant land abutted a putative adverse possessor’s land, occasional tethering of the claimant’s ponies on the vacant land, and grazing them there, and occasional [3.105]

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Whittlesea City Council v Abbatangelo cont. playing on the vacant land by her children were held not to suffice. Use and enjoyment of a special benefit and exclusive possession are not, however, necessarily mutually exclusive, for exclusive possession will usually entail use and special benefit. Use and enjoyment of a special benefit, on the other hand, will not necessarily amount to exclusive possession. (h)

There is no separate requirement that the use to which the land is put by the putative adverse possessor be inconsistent with the paper owner’s present or future intended use of the land, as suggested by Leigh v Jack. In Monash City Council v Melville, Eames J reviewed the history of the rule in Leigh v Jack and said the following: To the limited extent that the rule still applies its effect, now, is as follows. Where the trespasser’s acts had not been inconsistent with the future planned use, not therefore manifesting the requisite intention of dispossessing the owner, one might conclude that the requisite elements for adverse possession had not been established; [l]ikewise it may more readily be concluded that the requisite elements to constitute adverse possession had not been established where the land is waste land and the possessor had not done any acts to manifest an intention to dispossess the owner. However, where the trespasser had done acts which plainly manifested an intention to dispossess the owner, and where the acts would otherwise lead to the conclusion that adverse possession had been established, the fact that the land was waste land or was set aside for some future public purpose, did not introduce any special rule which gainsaid that conclusion.

It was not suggested before us that Eames J incorrectly stated the law in relation to the present limited effect of the rule in Leigh v Jack. We would therefore proceed on the basis that his Honour correctly stated the law even if it was not for the subsequent decision of the House of Lords in J A Pye (Oxford) Ltd v Graham, where Lord Browne-Wilkinson (with whom the other Law Lords agreed) said this in relation to the rule in Leigh v Jack: The suggestion that the sufficiency of the possession can depend on the intention not of the squatter but of the true owner is heretical and wrong. … The highest it can be put is that, if the squatter is aware of a special purpose for which the paper owner uses or intends to use the land and the use made by the squatter does not conflict with that use, that may provide some support for a finding as a question of fact that the squatter had no intention to possess the land in the ordinary sense but only an intention to occupy it until needed by the paper owner. For myself I think there will be few occasions in which such an inference could be properly drawn in cases where the title owner has been physically excluded from the land. But it remains a possible, if improbable, inference in some cases. (i)

Whilst inconsistent use is not required, it may be a factor, where it is present, which is indicative of factual possession and of an intention to possess to the exclusion of the paper owner.

Facts We turn to the relevant facts. Unless otherwise indicated, these facts were either agreed by the parties, or found by the trial judge, and were not in issue on the appeal. The land and the pre-1958 position The land is vacant general law land, is rectangular in shape, and is approximately half an acre in size. Its southern boundary fronts Bridge Inn Road, Mernda. Its long boundaries are its southern frontage to Bridge Inn Road and its northern boundary. The land was a gift to the Council’s predecessor, the Shire of Whittlesea, in July 1908, for the construction of a shire hall. The hall was never built because the Council offices were relocated from 184 [3.105]

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Whittlesea City Council v Abbatangelo cont. Mernda to Epping. The Shire retained the land for municipal purposes. Some time prior to 1950 it planted a mixture of poplar trees along the southern boundary of the land, and gum trees throughout the block. In 1939, according to survey field notes prepared at the time, there were post and wire fences on all the boundaries of the land. [The property and the position between Nov 1958 - Oct 1970] Mrs Abbatangelo and her late husband had four sons, Alfred (born in 1957), Joseph (born in 1959), Robert (born in 1962) and Richard (born in 1967) (“Abbatangelos”). In November 1958, Mrs Abbatangelo and her husband bought the property abutting the western, northern and eastern boundaries of the land. That is, the respondent’s property enclosed the land on three of its four sides, the exception being the southern boundary which abutted Bridge Inn Road. To the east and west of the land, the respondent’s property also fronted that road. The respondent’s property, which was under the Torrens system, comprised just under five acres. Mrs Abbatangelo has been the sole registered proprietor of the respondent’s property since her husband’s death in 1991. The title to the respondent’s property initially included a parcel to the west of its current western boundary. Mrs Abbatangelo and her late husband constructed a house on that parcel in 1959 and lived there until approximately 10 October 1970. It was subsequently subdivided from the respondent’s property and sold. At the time when the Abbatangelos acquired their property, the boundary fencing of the land, except for the southern fence, was situate on its title boundaries. The last-mentioned fence was misaligned from the title boundary by about half a metre. We pause to note that the Abbatangelos never removed or shifted the position of the fences along the northern and western boundaries of the land, and that at all times from 1958 a southern boundary fence existed. On the other hand, the Abbatangelos did work on the boundary fencing from time to time, just as they constructed and repaired internal fencing on their property. With respect to the boundary fencing of the land, there were two areas of dispute at trial. The first was whether the Abbatangelos had constructed the southern boundary fence which was observed by a surveyor, Mr Peter Mulcahy, in 1969. The second was whether the eastern boundary fence, as the judge found, effectively ceased to exist in the latter 1980s. These areas of dispute were re-agitated before us. At some point, the Abbatangelos installed a gate in the northern boundary fence of the land, close to its western boundary. The gate was sufficiently wide to permit access by a vehicle. Mrs Abbatangelo gave oral evidence that the gate was installed in 1959 or 1960 and the trial judge appears to have accepted that evidence. Two expert photogrammetrists gave evidence, however, that no gate was discernible in the 1960s from available aerial photographs. They agreed, on the other hand, that an aerial photograph taken on 16 March 1987 depicted a possible gate (or at least a gap) in the northern boundary fence. Each of those witnesses gave evidence that none of the aerial photographs were of a quality which allowed them to see any fencing wires. The Abbatangelos kept a variety of animals on their property from about 1960 onwards. Apart from their pet dogs, the types and numbers of animals which they kept on the property changed over time. The land was used by the family’s livestock for grazing and for shade, shelter and at times enclosure. From about 1962 to about 1967, the Abbatangelos operated a free range poultry farm on their property and the land, selling eggs. This venture ultimately failed, but some domestic free range chickens remained on the respondent’s property and the land. [3.105]

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Whittlesea City Council v Abbatangelo cont. Throughout the period 1960 to 1980, the Abbatangelos always ran some cattle, including a few milking cows and one or two bulls, on their property. This included the period 1970 to 1975, when the Abbatangelos lived in Geelong during the week. The evidence was not altogether clear precisely how many cattle were run on the property at any one time. As we have said, use was made of the land by whatever stock were on hand from time to time. According to Mrs Abbatangelo, over a period which ended by the time that the family moved to Geelong, they ran one or more sheep on their property; likewise, one or two goats. These animals, so long as they were on hand, also made use of the land for the purposes which we have earlier described. The Abbatangelos and family friends held occasional barbeques and social gatherings on the land in the 1960s, 1970s, 1980s and 1990s. Mrs Abbatangelo’s children, grandchildren and extended family played on the land. She described the land as a secure place for the children to play. The Abbatangelos placed a bathtub for use as a water trough for livestock towards the north-western boundary of the land. The judge did not make a finding about when the bathtub was installed, and the date of installation was not specifically agreed by the parties. Before us, argument proceeded on the tacit basis that the bathtub was installed relatively early in the Abbatangelos’ occupation of the respondent’s property. The Abbatangelos maintained the trees and vegetation on the land, and removed noxious weeds and pests. They kept the land clear of fallen timber. They expended money for materials, and laboured, in doing those works. Mrs Abbatangelo’s sons gave evidence that fallen branches were collected for firewood, that the grass was mowed as a fire break and to keep the snakes down, and that rabbits were caught to be eaten. It appears that these activities took place throughout the period in which the Abbatangelos lived on the property - this including, to a lesser extent, the period when they lived in Geelong and visited the property at weekends. The state of the fences in 1969 In 1969, a licensed surveyor, Peter Mulcahy, was engaged by the Abbatangelos to carry out a survey of the respondent’s property to support a planning subdivisional application in relation to the respondent’s property. Mr Mulcahy was called by the Council at trial. He concluded that the fence on the southern boundary of the land was a different fence from the fence that had been in place in 1939, and that it was in a slightly different position. In 1969, the fence was of post and wire construction on one side and a “picket fence” on the other side. Mr Mulcahy explained that by “picket fence” he meant wooden slats rather than steel pickets. Mr Mulcahy further observed that in 1969 there was no fence along the southern boundary of the respondent’s property to the east of the land. The 1969 survey field notes prepared by Mr Mulcahy also showed that the post and wire fences on the east, north and west boundaries of the land, as noted in the 1939 survey field notes, were still in place in 1969. Mr Mulcahy described those fences in his survey field notes as “old” post and wire fences (that is, at least 20 years old). As we have said, it was in dispute at trial whether the Abbatangelos put the southern boundary fence, as it stood at 1969, in place. The judge found that they did so. That finding was challenged before us. The position between October 1970 and February 1975 From about October 1970 until about February 1975, the Abbatangelos lived in Geelong. They returned to Mernda to live in a house which had been built whilst their principal place of residence was Geelong. As at trial, that house was still the Abbatangelo home. The Abbatangelos visited their property and the land at weekends whilst they lived in Geelong. They did so in order to feed and water the stock which they had left behind on both properties and in order to maintain those properties. There was a factual dispute at trial about the frequency of those visits. 186 [3.105]

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Whittlesea City Council v Abbatangelo cont. Mrs Abbatangelo and members of her family gave evidence, which the trial judge accepted, that the family visited virtually every weekend. The judge’s finding was not directly challenged in this Court. There was also dispute as to the number of stock which were grazed on the two properties during that period in question. Mrs Abbatangelo’s evidence was particularly inconsistent in this connection. The position between February 1975 and trial As at trial, Mrs Abbatangelo’s residence and outbuildings lay to the west of the land, but more of her property lay to the north and east of that land. The driveway leading to her residence was a short distance west of the western boundary of the land, and ran parallel to the western boundary fence of the land. A post and rail fence and a narrow row of trees separated the driveway from the land. The respondent’s property to the north and east of the land was unimproved land on which was conducted family or domestic farming. There is a dam at the eastern end of the respondent’s property, which lies east of the land. One of Mrs Abbatangelo’s sons gave evidence that, prior to the last ten years, it had held a lot of water. He said that livestock kept on the respondent’s property during the period that the family lived in Geelong drank from that dam and from troughs placed on the land and the respondent’s property by the Abbatangelos. Some time after 1975, a white post and rail fence was built along the southern boundary of the respondent’s property, between the western boundary of the land and the eastern side of the respondent’s driveway. This fence did not extend east along the southern boundary of the land – a matter upon which the appellant sought to rely. In about 1975, a family member purchased a horse. Thereafter the family ran horses on their property, and occasionally bred foals. Between 1975 and 2007, there were not less than two and up to about eight horses on the property at any one time. Use was made of the land by the horses for the purposes which we have described in respect of other Abbatangelo stock. Horses were also ridden on the land. Mrs Abbatangelo and other members of her family gave evidence at trial that the family had removed the post and wire fence along the eastern boundary of the land in 1986. The Council disputed that evidence. In essence, as will be seen, the judge accepted it. The Council complained about that finding in this Court. The 1978 planning application On 5 October 1978, the Abbatangelos lodged a planning application with the Melbourne and Metropolitan Board of Works. They sought a permit to subdivide their land. The Board refused to grant a permit, and on 20 December 1978 the Abbatangelos appealed to the Town Planning Appeals Tribunal. Both the planning application and the appeal documents included plans which showed the respondent’s property and the land and their dimensions, with the latter marked “NIT” - that is, “Not in Title”. The Council argued that this notation told against the Abbatangelos having taken possession of the land with the requisite intent. In a written statement to the Tribunal dated 28 March 1979, prepared by Claire Stephenson on behalf of the Shire of Whittlesea in respect of the appeal, Ms Stephenson stated (referring to the land): “Directly adjoining the proposed allotment to the east, is a vacant allotment owned by the Shire of Whittlesea, which has been set aside for proposed Municipal purposes”. The Council sought to rely upon this statement as an assertion of ownership that was not questioned by the Abbatangelos at that time. Mr Draper’s visit In 1992, a Council employee, John Draper, attended the respondent’s property to inspect it in connection with the flooding of a spoon drain. He spoke with Mrs Abbatangelo and asked if she knew [3.105]

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Whittlesea City Council v Abbatangelo cont. who owned the land, because he needed permission to enter privately owned land. Mrs Abbatangelo told Mr Draper that the land was owned by the Council. There was evidence that Mr Draper was shocked and surprised by this revelation. The Council sought to characterise Mr Draper’s entry upon the land as entry by the owner without requiring permission; and to rely upon what Mrs Abbatangelo told him as a contraindication that the Abbatangelos had taken possession of the land with the requisite intent. … The path to litigation In 2004, Mrs Abbatangelo learned that the Victorian Government planned to introduce legislation to abolish adverse possession claims against land owned by municipal councils. At her request, her solicitors wrote to the Council on 14 September 2004 giving notice that she would be making an adverse possession claim in respect of the land. The Council’s solicitors replied by letter dated 24 September 2004. They stated that the Council would vigorously oppose any application to acquire the land by adverse possession. They also requested that a horse that was grazing on the land be removed. In October 2004, the Council erected a star picket and wire fence on the eastern boundary of the land and installed a chain and padlock on the gate in the northern boundary fence. Mrs Abbatangelo removed the fence. These events occurred against the backdrop of amendments to the Whittlesea Planning Scheme which were approved in 2004 and resulted in a proposed town centre being located in close proximity to the respondent’s property and the land. Unsurprisingly, the value of both properties increased dramatically. In December 2004, Mrs Abbatangelo commenced this proceeding against the Council, seeking a declaration that she had acquired title to the land by adverse possession. Summary of acts of adverse possession relied on by Mrs Abbatangelo At trial, Mrs Abbatangelo relied upon the following acts as establishing adverse possession of the land from the time her family commenced residing on the respondent’s property in 1958: (a)

installation of the gate;

(b)

maintenance of fences on the boundaries of the land, including the southern boundary fence, without seeking financial contribution from the Council;

(c)

use of the land for grazing, shade, shelter and at times enclosure of the variety of animals kept by the Abbatangelos from approximately 1960;

(d)

installation of the bathtub trough;

(e)

maintenance of trees and vegetation, including mowing of grass, and removal of noxious weeds and pests - foxes, snakes and rabbits;

(f)

the clearing of fallen timber and maintenance of a fire break;

(g)

the expending of money, and the provision of labour, to carry out the various kinds of work on the land;

(h)

the holding, from the 1960s, of occasional barbeques and social gatherings on the land;

(i)

the playing by Mrs Abbatangelo’s children, grandchildren and extended family on the land;

(j)

the construction of children’s swings and a rudimentary cubbyhouse-like structure on the land;

(k)

the removal of the fence on the eastern boundary of the land in approximately 1986; and

(l)

use of the land for sporting and recreational activities such as horse riding, archery, football, horse training, rabbit shooting, bike riding, “paddock bomb” driving and cricket.

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Whittlesea City Council v Abbatangelo cont. … The decision below should be affirmed In our opinion, the trial judge was correct to hold that the appellant’s title to the land had been extinguished by the respondent’s adverse possession. For the reasons which follow, the respondent demonstrated both sufficient acts of factual possession and a manifest intention to exclusively possess the land for the necessary period. On a tenable view of the evidence, actual possession with requisite intent was continuous from the early 1960s until 2004. But even if the better view was that possession was broken during the period when the Abbatangelos resided in Geelong - that is, between about October 1970 and February 1975 - there was, we consider, continuous possession with requisite intent for more than 15 years from the time that they returned to Mernda. From that time, the Abbatangelos engaged in a process of reinforcing and building upon what they had previously done in relation to the land. On the basis that time began to run no later than the end of February 1975, the appellant’s title was extinguished at the end of February 1990 at the latest. In arriving at our conclusions, we have rejected a number of submissions advanced for the Council. Those submissions can be grouped into five general categories: (1) submissions about factual possession; (2) submissions about intention to possess; (3) submissions about particular aspects of the legal principles which inform adverse possession …. We will deal with the submissions in that order. As intention to possess is usually inferred from acts of possession, the appellant understandably relied upon similar evidence and submissions in attacking the judge’s findings with respect to both elements. Except where necessary, we will deal with overlapping submissions and evidence in respect of one or other element on the basis that our conclusions will apply to both. Finally before embarking upon our analysis of the Council’s submissions, we pause to note that in this Court senior counsel for the appellant conceded that the Abbatangelos had not acted surreptitiously or stealthily in the manner in which they used the land. Factual possession It was submitted for the Council that the respondent had not shown sufficient acts of possession to establish that she had factual possession. Reliance was placed upon the language of one American case, it being submitted that the respondent did not unfurl her flag and keep it flying on the land, because none of her dealings with the land would have arrested the appellant’s attention. The Abbatangelos’ acts, it was submitted, were not sufficiently obvious to give the Council the means of knowledge that the respondent had entered into possession of the land adversely to its title and with the intention of taking possession. The appellant relied upon the following circumstances: (a)

The respondent did nothing to change the pre-existing distinctive – that is, the treed appearance of the land.

(b)

The respondent constructed a post and rail fence along the western boundary of the land in 1975. The same style of fence was constructed by the respondent along the Bridge Inn Road boundary of the respondent’s property to the west and, some time later, to the east of the land. But that style of fence was never extended across the southern boundary of the land. The current fence along that boundary was a post and wire fence, essentially in its original condition. It was not relevant who had constructed that fence. What was relevant was that the fence was distinctively different from the more impressive style of the southern boundary fences to the east and west of the land. Anyone looking at the properties from the road would not gain the impression that the owner of the property on either side of the land was asserting exclusive possession over the land.

(c)

The presence of one or two animals grazing or sheltering under the trees, or the sight of children playing on the land, were not circumstances that would arrest attention. [3.105]

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Whittlesea City Council v Abbatangelo cont. (d)

The respondent did not make any improvements to the land.

In response to questions from the Bench about what further acts could have been done by the respondent and her family in order to establish possession, senior counsel for the appellant said that the land might have been cleared and a rotunda, a tennis court, a meshed enclosure for chickens or a holding pen for pigs constructed, or a steel mesh or paling fence might have been built along the boundary of the land. In our view, for the reasons discussed below, none of these examples were apt having regard to the circumstances of the Abbatangelo family, the nature, position and characteristics of the land and the respondent’s property, and the uses to which the Abbatangelos chose to put the land. The answer to the question what acts of possession are sufficient to show factual possession always depends upon the particular facts and circumstances of the instant case. These include the circumstances of the putative adverse possessor. In this case, those circumstances included the fact that the respondent’s property effectively enclosed the land on three of its four sides, whilst its fourth side faced the road. It is rare for there to be something so clear as a literal unfurling of a flag or the erection of a “keep out” sign. Nor is there any general requirement that structures be erected on the land, although the erection of structures may assist in establishing factual possession. Similarly, it cannot be said that grazing stock on land, of itself, will never be sufficient to establish possession. Whether it is sufficient of itself, or in combination with other matters, invites consideration of all the circumstances of the case. In this case, the respondent’s failure to change the appearance of the land, particularly in relation to the trees, did not in our opinion betoken an absence of sufficient acts of possession. It was explicable in terms of the amenity provided by the treed land, which provided shade and shelter for stock and facilitated its use and enjoyment by children and for social occasions. Supposing that there had been a single owner of the respondent’s property and the land, we consider it quite likely that such owner would have made the same use of the land as did the Abbatangelos. We next consider that maintenance of the southern boundary fence by the Abbatangelos was, in combination with the other circumstances, indicative of an exercise of control and exclusive possession in the requisite sense. This is so despite the difference in appearance between that fence and the southern boundary fences of the respondent’s property on either side of it. Joseph Abbatangelo gave evidence that no post and rail fence was ever constructed along the southern boundary of the land “[m]ostly because there was a lot of trees lined up along that fence line there and we had a lot of trouble trying to dig holes for posts because of the roots. We would always encounter roots just below the surface”. The witness said that no post and rail fence was ever constructed along the eastern boundary of the land for the same reason. It was not suggested before us, when senior counsel for the respondent drew that evidence to our attention, that what the witness said was contested below. Additionally, the judge commented that “the choice of fence for the disputed land may be explained by any visual impact which it might have on what might otherwise appear from the road as featured parkland”. So, for more than one reason, nothing was to be made of the particular style of fence along the road frontage of the land. … The appellant submitted that the placing of the bathtub stock trough on the land should not be given great weight because there was no piped water connected to it. All that the Abbatangelos did was hand-fill it from time to time. In our view, that submission failed to take account of the Abbatangelos’ position. They resided on the adjacent property. The trough was positioned close to the boundary of the land, and so could be observed, and filled as required. There was no need for a piping system. The arrangements for filling the trough were rudimentary, adequate, and we think not unusual. In our opinion, the placing of the trough on the land was a circumstance which, viewed in context, considerably aided the respondent’s case. 190 [3.105]

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Whittlesea City Council v Abbatangelo cont. The appellant also submitted that the respondent had not established exclusive possession because nothing that the Abbatangelos had done on the land had ever prevented the appellant or anyone else from entering it without going into the respondent’s property. The appellant argued that the land could at all times have been accessed by climbing through the wire strands of its southern boundary fence. We accept, for sake of argument, that a person could have gained access to the land in the manner described. But we do not accept that this carried the consequence for which the Council contended. It is unremarkable, and says little to resolve the real issue in the case - that is, whether the respondent had exclusive possession of the land for a continuous period of 15 years without the appellant’s consent - that a person would have been able to access the land by climbing through a fence of essentially rural construction. It may be observed, moreover, that vehicular access was only possible through the gate on the respondent’s property. The Council also submitted that his Honour did not make a direct finding, as it was contended he was required to make, that the appellant had been dispossessed, or had discontinued possession. The criticism was unfounded. As Pye makes clear, dispossession of the paper owner is established by the putative adverse possessor going into possession of the land for the requisite period without the consent of the owner. His Honour held that the Abbatangelos had exclusive possession and control of the land without the Council’s consent for continuous period of 15 years. That was sufficient to establish factual possession. Another argument advanced for the Council was that there was no use of the land by the Abbatangelos which was inconsistent with the appellant’s rights as the paper owner. Senior counsel for the appellant conceded that inconsistency may not be strictly necessary, but maintained that there will be very few cases where adverse possession is established without inconsistent use. In our view, inconsistent use need not be proved in order to establish factual possession. What is important is whether the requisite degree of control and exclusivity was present. In this case, for the reasons we have already given, there was such control and exclusivity. A still further submission advanced for the Council was that the judge had erred in relying on the respondent’s “integration” of the land and treating it as synonymous with factual possession. The judge also erred, it was said, by equating use with control, non-use with dispossession or discontinuance of possession, integration with exclusion, and mere use with possession. In our view, there was no substance to these submissions. On a fair reading of the judge’s reasons, his Honour understood what the law required to establish factual possession and applied the appropriate principles in making his findings. For the reasons we have already given, those findings were correct in relation to factual possession. Intention to possess The Council submitted that the trial judge misstated the law on intention to possess because he failed to refer in full to what Ashley J said in Bayport. In particular, the appellant criticised the trial judge for not referring to the following passage in Powell v McFarlane, which was quoted in Bayport: If his acts are open to more than one interpretation and he had not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner. The appellant submitted that the consequence of the alleged error was that the judge gave undue primacy to his findings about the respondent’s subjective intention and failed to give sufficient consideration to whether her acts indicated a manifest unequivocal intention to exercise exclusive control. In our opinion, the appellant’s criticisms of the trial judge’s analysis were unfounded. A fair reading of his Honour’s judgment indicates he understood what the law required in relation to the intention to [3.105]

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Whittlesea City Council v Abbatangelo cont. possess and that he correctly applied the relevant law to the facts. In particular, contrary to the appellant’s submission, his Honour did not err in finding that ease of access through the fence on the southern boundary of the land did not detract from the nature of a fence as a sign to all who saw it not to enter. As we have said already, the fact that a person, including an employee of the Council, could have physically entered the land on foot by stepping through the wire strands was neither determinative nor necessarily of central importance. The question was not whether the respondent had not done her best to exclude the appellant – because, for example, a different type of fence would have been more effective for this purpose – but whether it could be inferred from all of her acts that she intended to exercise custody and control of the land on her own behalf and for her own benefit. The trial judge, in substance, asked himself that question and answered it in favour of the respondent, as he was entitled to do on the evidence. The appellant submitted that the respondent and her sons had admitted that many of the acts of use were undertaken for the purpose of providing special benefits to the respondent rather than being conducted with an intention of taking exclusive possession of the land. The examples given by the appellant were the grazing of livestock and the acts of maintaining trees and vegetation, removing noxious weeds, shooting rabbits and keeping down snakes. It was said that the Abbatangelos used the firewood, consumed the rabbits, and removed snakes and noxious weeds to protect their livestock and for the safety of the family; and that these acts were not accompanied by an unequivocal intention to exclusively possess the land. In our view, those submissions significantly understated the nature and extent of the Abbatangelos’ use of the land, misunderstood the references to “special benefit” in the authorities and misstated the evidence of the respondent and her sons. The very fact that a putative adverse possessor lives next to the disputed land means that he or she will be able to put that land to a greater variety of uses, and derive a greater range of benefits, than a person living further away. It may be that the best form of use by a person living next to the disputed land, consistent with treating that land as being in his or her exclusive possession, is to take advantage of its existing physical characteristics insofar as they complement the characteristics of the land upon which he or she is living. As we have stated above, use and special benefit and exclusive possession are not necessarily mutually exclusive. Where the use of the disputed land amounts to no more than casual acts of trespass – such as occasional grazing of cattle, occasional sporting activities, occasional picking of fruit or gathering of wood or hay – those acts will be insufficient to establish either factual possession or manifest an intention to exclusively possess. But that was not this case. We need not recapitulate the nature and extent of the uses to which the Abbatangelos put the land over an extended period. It is enough to say that in our view such nature and extent amounted to more than mere use, mere casual acts of trespass or mere extraction of special benefits. They constituted the taking of exclusive possession and manifested an intention to do so. Another submission advanced for the Council was that the restoration, construction and maintenance of fences was established by the evidence to be for a purpose other than excluding the paper owner namely, to prevent stock from straying onto the road. In light of this, the appellant submitted, it could not be said that the repairs to the fencing were done with the intention of asserting control and to exclude the appellant. These submissions proceeded on the misconceived premise that a person who desires to possess land exclusively builds and maintains fences on the land solely for the purpose of keeping others out. Plainly, fences serve multiple purposes. Some delineate title boundaries. Others are internal. Some are ornate. Others are minimalist and purely functional. The nature and purpose of a fence will be affected by the nature, location and characteristics of the land and the uses to which it is put. Given that the use to which the Abbatangelos put the land over an extended period included grazing of livestock, it is entirely unsurprising that one purpose of maintaining the fences on the land was to prevent animals 192 [3.105]

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Whittlesea City Council v Abbatangelo cont. from straying on to the road. The existence of that purpose, however, did not prevent the maintenance of the fences from being included in the factual matrix from which findings could be made about factual possession and an intention to exclusively possess. In a still further submission, the Council sought to rely upon notations made by the Abbatangelos in a series of planning applications lodged between 1969 and 1979 concerning the respondent’s property. Documents which they filed depicted the land and used the acronym “NIT” (“Not in Title”) to describe it. The appellant submitted that the statements were clear acknowledgments by the respondent that the appellant, rather than she, owned the land. In our view, the notations were nothing to the point. The intention that the putative adverse possessor must have, and must manifest, is an intention to possess exclusively, not an intention to own. An acknowledgement as to who is the paper owner is not inconsistent with the requisite intent. The acronym “NIT” accurately represented the title position and said nothing about who was in possession of the land and with what intention. The appellant next relied upon Ms Stephenson’s 28 March 1979 statement. It submitted that the respondent’s failure to object to the statement weighed against her having manifested the requisite intention to possess to the exclusion of all others. In our view, this submission also confused an intention to own with an intention to exclusively possess. The respondent’s failure to object did not detract from the impression that was conveyed by her acts of possession manifesting her intent. Tacit acknowledgement of paper ownership was not demonstrative of the absence of an intent to exclusively possess the land. The Council also sought to rely, a propos intention, upon the respondent’s statement to Mr Draper in 1992 that the land was owned by the appellant. Once again, the appellant’s submission confused an intention to exclusively possess with an intention to own. As we have said, the respondent’s acknowledgements of the Council’s ownership were not inconsistent with the former intention and were accurate in relation to paper ownership. In any event, whatever relevance Mrs Abbatangelo’s conversation with Mr Draper might otherwise have had, in our view the appellant’s title had already been extinguished by 1992. The appellant submitted that the trial judge was bound to, but did not, find that Mrs Abbatangelo was aware of the use to which the appellant intended to put the land and so more was required to manifest an intention to possess the land adversely than was done by her. For the reasons set out at [6](h) above, the submission should be rejected. This case was not one where an inference – which Lord Browne-Wilkinson described in Pye as “improbable” – could be drawn that Mrs Abbatangelo’s presumed awareness of the Council’s intended use of the land, and the lack of inconsistency between her use of the land and the Council’s intended use, justified a finding of fact that Mrs Abbatangelo had no intention to possess the land but only an intention to occupy it until needed by the Council. In relation to the trial judge’s use of Mrs Abbatangelo’s evidence about her own subjective intention, the appellant submitted that such evidence was ambiguous, inadequate and in any event self-serving. It submitted that the evidence of her intention apparent from her statement to Mr Draper should be preferred. We have already dealt with the 1992 conversation. With respect to the respondent’s evidence of her subjective intention, whilst statements of intention must be treated with caution, they may nonetheless be of use in conjunction with other circumstances. In this case, the trial judge was alive to the potentially self-serving nature of Mrs Abbatangelo’s statements of her intention and evaluated her evidence in the context of the evidence as a whole. In our opinion, he was entitled to accept Mrs Abbatangelo’s stated intention in the context of all the evidence. The appellant also relied on the Abbatangelos not having paid rates for the land. Although payment of rates may be evidence of an intention to possess, there is no requirement that they be paid for intention to be established. As the Council was the paper owner of the land, it was not rated. In the circumstances, it was not to be expected that Mrs Abbatangelo would request the Council to issue rate [3.105]

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Whittlesea City Council v Abbatangelo cont. notices to her. Again there is an element of confusion with recognition of ownership. It cannot tell against Mrs Abbatangelo having the requisite intention to possess the land that she did not volunteer to pay rates. The appellant contended that the trial judge erred in not having regard to evidence that the value of the land increased by almost 500 per cent between 2004 and 2006, that in 2006 developers had offered the respondent’s children $6.9 million for the respondent’s property, and to evidence pertaining to the state of development of the land in the area generally in recent years. In our view, evidence of the value of the respondent’s property and the making of offers to buy it was irrelevant. Evidence about the state of development of land in the area generally could be relevant in some cases, but not in this case because it related to a period well after the extinguishment of the appellant’s title. Other issues relating to the principles of adverse possession We come to the third category of submissions advanced for the Council … The judge found that the period spent by the Abbatangelos in Geelong did not constitute an interruption to their continuous possession. The appellant challenged this finding. In our view, it was open to the judge on the evidence before him to find that the Geelong period did not interrupt the Abbatangelos’ possession. But even if such a finding was not open to the judge, in our view there was a continuous period of possession for 15 years from the time the Abbatangelos returned to Mernda in February 1975. … Conclusion For the reasons stated, and as we said earlier, the appeal should be dismissed.

[3.110]

Notes and Questions

1. In Whittlesea City Council v Abbatangelo (2009) 259 ALR 56 several of the “additional principles” listed by the court early in its judgment derived from the decision of the House of Lords in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419. Following that decision, a first instance ruling of the European Court of Human Rights held that the loss through adverse possession of the documentary owner’s title in JA Pye constituted an unauthorised deprivation of property contrary to Art 1 of the European Convention on Human Rights 1950 Protocol 1. However, on appeal, the Grand Chamber of the European Court of Human Rights held that the principles of the English law of adverse possession as articulated in JA Pye were not contrary to the provisions of the Convention: JA Pye (Oxford) Ltd v United Kingdom [2008] 46 EHRR 45. For a discussion of possible human rights implications of the law of adverse possession, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.25] – [3.30]. 2. For the various Australian statutory provisions setting out when the limitation period commences, see Limitation Act 1969 (NSW), ss 28, 38; Limitation of Actions Act 1958 (Vic), ss 9(1), 14(1); Limitation of Actions Act 1974 (Qld), ss 13, 19; Limitation of Actions Act 1936 (SA), s 6; Limitation Act 2005 (WA), ss 65, 66; Limitation Act 1974 (Tas), ss 11, 16. The South Australian legislation is drawn directly from the Real Property Limitation Act 1833 (UK) and states simply that the cause of action accrues upon dispossession or discontinuance of possession. In Smith v Lloyd (1854) 9 Exch 562; 156 ER 240, the Court 194 [3.110]

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had to consider this legislation and it was held “that the statute applies not to cases of want of actual possession by the plaintiff, but to cases where he had been out of and another in possession for the prescribed time”. In New South Wales, Queensland, Western Australia and Tasmania, the limitation period with respect to an action to recover land is 12 years (Limitation Act 1969 (NSW), s 27(2); Limitation of Actions Act 1974 (Qld), s 13; Limitation Act 2005 (WA), s 19; Limitation Act 1974 (Tas), s 10(2)). In Victoria and South Australia, the relevant period is 15 years (Limitation of Actions Act 1958 (Vic), s 8; Limitation of Actions Act 1936 (SA), s 4). 3. In a number of earlier Australian and English decisions on adverse possession (see Leigh v Jack (1879) 5 Ex D 264; Williams Bros Direct Supply Ltd v Raftery [1958] 1 QB 159; Riley v Penttila [1974] VR 547; Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd [1975] QB 94; Treloar v Nute [1976] 1 WLR 1295, acts of user inconsistent with the purpose to which the true owner intends to put the land, is set out as a criterion for adverse possession. Thus where the true owner had no particular use for the land or had only a future intended purpose, satisfaction of such a criterion would be difficult. It appears clear now that this is not a separate test. “Where the land is waste land and the true owner cannot and does not for the being use it for the purpose for which he acquired it, one may more readily conclude that the acts done on the waste land do not amount to dispossession of the owner. But I find it impossible to regard those cases as establishing that so long as the true owner cannot use his land for the purpose for which he acquired it the acts done by the squatter do not amount to possession of the land.” Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd [1975] 1 QB 94 at 109-110 per Stamp LJ in dissent and quoted with approval in Buckinghamshire County Council v Moran [1990] Ch 623 by Slade LJ and by Lord Browne-Wilkinson in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419. See also Re Johnson [1973] 2 Qd R 502; Monash City Council v Melville (2000) V ConvR 54-261; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; Cervi v Letcher (2011) 33 VR 320. Further, the use of this criterion to imply a licence from the true owner to the possessor has been discredited: Buckinghamshire County Council v Moran [1990] Ch 623; Woodward v Wesley Hazell Pty Ltd (1994) 3 Tas SR (NC) N4 discussed in (1994) ANZ ConvR 624 and Skapinker “Adverse Possession” [1994] LSJ 32.). Nevertheless, it is important to note as a general principle that permission given by the true owner to the user of the land does prevent the use from constituting adverse possession. Such permission may sometimes be implied. See Ghilarducci v Ghilarducci [1993] ANZ ConvR 331 decision of Full Court, Supreme Court of Western Australia, 15 July 1992 where the Full Court of the Supreme Court of Western Australia held on the facts that the particular use of the land was consistent with an implied licence to use the land. 4. What is the nature of the intention which the alleged possessor must have? How is it to be proved? A mistaken belief that the alleged possessor thought he or she was the true owner of the disputed land, or a mistaken belief that he or she was a lessee from the documentary title holder, does not preclude the existence of the relevant animus possidendi: Bligh v Martin [1968] 1 WLR 804; Williams v Usherwood (1981) 45 P CR 235; Pulleyn v Hall Aggregates (Thames Valley) Ltd (1992) 65 P & CR 276; Hughes v Cork [1994] EGCS 25; Buckinghamshire County Council v Moran [1990] Ch 623; Malter v Procopets (2000) V ConvR 54-624 (Supreme Court of Victoria; Court of Appeal); Woodward v Wesley Hazell Pty Ltd (1994) 3 Tas SR (NC) N4; Ghilarducci v Ghilarducci [1993] ANZ ConvR 331; [3.110]

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Lambeth London Borough Council v Blackburn (2001) 82 P & CR 494; JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; Sunny Corporation Pty Ltd v Elkayess Nominees Pty Ltd [2006] VSC 314. The modern view appears to be that the intention needs only to be an intention to possess (rather than own) and an intention to exclude the whole world, including the true owner insofar as this is possible: JA Pye (Oxford) v Graham [2003] 1 AC 419; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; Cervi v Letcher (2011) 33 VR 320. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.115]-[3.150]. 5. Consider the relevance of fencing or enclosure to a claim of adverse possession. See Clement v Jones (1909) 8 CLR 133; Santucci v Barnes (1992) V ConvR 54-434; Mulcahy v Curramore Pty Ltd (1974) 2 NSWLR 464 at 475; Riley v Penttila [1974] VR 547; Monash City Council v Melville (2000) V ConvR 54-261; Malter v Procopets (2000) V ConvR 54-624; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; KY Enterprises Pty Ltd v Darby [2013] VSC 484. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.160]. Enclosure provides strong evidence of adverse possession (going to both the criteria of factual possession and intention). Where the fencing has been in position for less than the statutory period, there must be other evidence of intention to possess and of factual possession during the time when there was no fencing, in order for adverse possession to be made out: Tennant v Adamczyk [2006] 1 P & CR 28. Fencing must always be considered in light of all the circumstances, and there have been a number of cases where the disputed land has been fenced and yet the claim for adverse possession has failed: see, for example, Clement v Jones (1909) 8 CLR 133 (enclosure of disputed land and own land within one ring fence insufficient in circumstances (grazing land)); Riley v Penttila [1974] VR 547 (fence erected to better enjoy an existing right(an easement)); Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709 (poorly maintained fence erected originally for farming purposes). 6. Consider the relevance of the intentional payment of rates in respect of the disputed land by the adverse possessor or the documentary title holder: Bank of Victoria v Forbes (1877) 13 VLR 760 (payment of rates by squatter constituted strong evidence to show that the claimant had a deliberate purpose to create a title in himself); Bree v Scott (1903) 29 VLR 692 (strong inference in favour of adverse possession when the person in occupation pays the rates; but the payment of rates by a true owner who is out of possession, provides only very slight evidence in her or his favour that the occupier of the land is not holding in adverse possession for her or himself); Quach v Marrickville Municipal Council (1990) 22 NSWLR 55 (acquiescence in true owner of the payment of rates by the claimant is “very strong evidence of adverse possession by the claimant”); Shaw v Garbutt (1996) 7 BPR 14,816 (fact that a squatter has not paid the rates does not necessarily eliminate his or her claim); Guggenheimer v Registrar of Titles (2002) V ConvR 54-658 (payment of rates together with enclosure but minimal use in the first years – adverse possession); Cervi v Letcher (2011) 33 VR 320 (no animus possidendi where the putative adverse possessor was not aware that he was paying rates for the land over which he later claimed adverse possession). See also Kirby v Cowderoy [1912] AC 599; O’Neil v Hart [1905] VLR 107; Cooke v Dunn (1998) 9 BPR 16,489. See Land Titles Act 1980 (Tas), s 138U which provides that the payment of rates by the true owner prevents time from running. 196 [3.110]

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7. Adverse possession of part of a piece of land may be taken and this may be done on a horizontal or vertical basis; see for example, Quach v Marrickville Municipal Council (No 2) (1990) 22 NSWLR 55; Rains v Buxton (1880) 14 Ch D 537; Williams v Usherwood (1981) 45 P & CR 235; Marengo Cave Co v Ross 7 NE (2d) 59 (1937). See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.100]. 8. There are specific provisions in the limitation statutes applicable as to when a cause of action arises when adverse possession is taken in land over which there is a future interest, a leasehold estate or an equitable interest and in relation to adverse possession as between co-owners. A detailed discussion of these matters can be found in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.185]-[3.275]. See also Fairwather v St Marylebone Property Co Ltd [1963] AC 510; Hayward v Chaloner [1968] 1 QB 107; Eckford v Stanbroke Pastoral Co Pty Ltd [2012] 2 Qd R 324. Further, there are specific statutory provisions relating to the situations where actions are brought to recover land of a deceased person or land assured other than by will. See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.170]-[3.180]. Running of the limitation period

Mulcahy v Curramore Pty Ltd [3.115] Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 New South Wales Court of Appeal [In a claim by the plaintiff for a declaration that he was the owner of the disputed land by reason of adverse possession, Bowen CJ commented on the requirements for the commencement and running of the limitation period.] BOWEN CJ in Eq: … Possession which will cause time to run under the Act is possession which is open, not secret; peaceful, not by force; and adverse, not by consent of the true owner. Lord Shaw of Dunfermline, giving the opinion of the Privy Council in Kirby v Cowderoy [1912] AC 599, discussed the nature and incidents of adverse possession. Adopting earlier judicial observations, he said [1912] AC 599, at p 603: “Possession ‘must be considered in every case with reference to the peculiar circumstances … the character and value of the property, the suitable and natural mode of using it, the course of conduct which the proprietor might reasonably be expected to follow with a due regard to his own interests; all these things, greatly varying as they must under various conditions, are to be taken into account in determining the sufficiency of a possession’.” Fencing may be useful evidence of occupation to the exclusion of others: absence of fencing does not necessarily prove lack of possession. It depends upon the circumstances. In Kirby v Cowderoy [1912] AC 599 a possessory title was upheld notwithstanding the land was unfenced, the possessor having paid rates and visited the land from time to time. Use of the land by planting crops or running livestock upon it or occupation by residence upon the land may be useful evidence of adverse possession: absence of use or breaks in residence do not necessarily prove lack of possession. The possessor, acting as would a true owner, may consider it more appropriate to behave in some other way. He may, as might a true owner, pay rates and taxes on the property; lease it to others; allow agistment of cattle upon it; build, upon it; or visit it occasionally for his own purposes: see Kirby v Cowderoy [1912] AC 599; Lord Advocate v Lord Lovat (1880) 5 App Cas 273; Nicholas v Andrew (1920) 20 SR (NSW) 178, at p 184; 37 WN 36, at p 38; Re Riley and the Real Property Act (1964) 82 WN (Pt 1) (NSW) 373. [3.115]

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Mulcahy v Curramore Pty Ltd cont. The effect of s 34 is to extinguish the title of the true owner completely, not merely to render his right of re-entry unenforceable: Allen v Roughley (1955) 94 CLR 98; cf Fairweather v St Marylebone Property Co Ltd [1963] AC 510. To cause s 34 to have this effect the adverse possession must be continuous for the period of twenty years, or any extended period which may be required by the operation of other provisions of the Act. If a person, A, is in adverse possession for a period of less than twenty years, say, ten years, and then abandons the property, he leaves no cloud on the true owner’s title, which is then restored to its pristine force, and another person, B, who later enters into adverse possession of the property, cannot add the period of A’s possession to his own so as to extinguish the title of the true owner when the period of twenty years from A’s first entry into possession is reached: Trustees Executors and Agency Co Ltd v Short (1888) 13 App Cas 793, at pp 798, 799; Allen v Roughley (1955) 94 CLR 98, at pp 114, 115, 131; cf Solling v Broughton [1893] AC 556; 1893) 14 LR (NSW) 412. When a person enters into adverse possession, and so long as he continues in possession before the expiry of the statutory period, he has title to the land in the nature of a fee simple, good against all the world except the true owner, and his title may be conveyed or devised to or devolve upon, another person: Asher v Whitlock (1865) LR 1 QB 1; Perry v Clissold [1907] AC 73; (1907) 4 CLR 374; Wheeler v Baldwin (1934) 52 CLR 609; Allen v Roughley (1955) 94 CLR 98. Where there has been a series of persons in adverse possession by virtue of successive transmissions of the inchoate possessory title for a total period of twenty years or any extended period required by the Act, s 34 will operate to extinguish the true owner’s title. At that point of time the last successor being then in possession will acquire a title in fee simple to the land good against all the world including the true owner: Allen v Roughley (1955) 94 CLR 98; see generally Lightwood, The Time Limit on Actions (1909) p 118; Voumard, The Sale of Land, 2nd ed, p 431. Where there is a series of trespassers, not deriving title from each other, who have been in adverse possession for a continuous period of twenty years or any extended period required by the Act, s 34 will operate to extinguish the true owner’s title: Willis v Earl Howe [1893] 2 Ch 545, at pp 553, 554; Allen v Roughley (1955) 94 CLR 98; Salter v Clarke (1904) 4 SR (NSW) 280; 21 WN 71. It is emphasised that possession by successive trespassers must be continuous to have this effect. An abandonment by one adverse possessor followed by a break in time when the land is not in possession of some person adversely to the true owner will, as we have seen, restore the true owner’s title to its pristine force. Upon the extinguishment of the true owner’s title by successive trespassers, say A, B, C, D and E, who have been in adverse possession continuously for the necessary period, the question arises as to the person in whom the title in fee simple exists at that time. The better view appears to be that it exists in the first of the successive trespassers, A: see Allen v Roughley (1955) 94 CLR 98, at pp 131, 132; and see generally Halsbury’s Laws of England, 3rd ed, vol 24, p 255; Lightwood, op cit, at pp 125-126. E, the final trespasser, who is in possession at the time when the true owner’s title is extinguished, would, by virtue of his possession, have a title in fee simple good against all the world except A, B, C, and D. The last statement needs qualification. If A brought proceedings to eject E, and E could prove that A had abandoned possession, then, in my view, E could successfully resist A. On the same ground he might be able to resist B, C and D. Accordingly, if the departure of A, B, C and D in each case took place in circumstances constituting an abandonment by each of them, E would indeed have a title in fee simple good against all the world: see Allen v Roughley (1955) 94 CLR 98, at pp 114, 115, 131; and see generally Voumard, op cit, at pp 431-432. It is, perhaps, unlikely this would occur without a break in possession, which would restore the true owner’s title and prevent aggregation. To determine the matter in a particular case of successive trespassers it is necessary to know whether a succeeding trespasser is in possession wrongfully as against his predecessor, in which case his predecessor will retain a higher right than the successor, or whether, on the other hand, the succeeding trespasser has entered immediately following an abandonment by his predecessor. 198 [3.115]

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Mulcahy v Curramore Pty Ltd cont. [In their judgments, Moffitt P and Hope JA expressed agreement with the views of Bowen CJ in Eq on the applicable principles concerning the running of the limitation period.]

[3.120]

Notes and Questions

1. As in Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464, it has similarly been held in a number of other cases that periods of possession of successive intruders can be aggregated, provided there is no gap in the periods of adverse possession: see Murphy v Michel (1867) 4 WW & A’B (L)13, Shelmerdine v Ringen Pty Ltd [1993] I VR 315; Shaw v Garbutt (1996) 7 BPR 14,816; Site Developments (Ferndown) Ltd v Cuthbury Ltd [2011] Ch 226. See also Limitation Act 1969 (NSW), s 38(2); Limitation Act 2005 (WA), s 65(2). 2. Is it possible to convey or devise possessory interests? When would the presence or absence of formal documentation concerning such a conveyance of a possessory interest be relevant? See Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 at 471 and 479 per Bowen CJ in Eq and Kirk v Sutherland [1949] VLR 33 discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.300]. 3. Section 50(2) of the Conveyancing Act 1919 (NSW) provides: Any conveyance of a present right of entry in any land, other than a conveyance to the person in possession thereof, and any covenant or agreement for, or promise of a conveyance (other than as aforesaid) of the same shall be void as against the person in possession or those claiming under him or her unless the person conveying or covenanting, agreeing or promising to convey, or the person through whom he or she claims has been in possession of the land within twelve months from the date of the conveyance covenant, agreement or promise.

How might this provision affect a dispute concerning possessory title? 4. The limitation period may be stopped from running first, if the true owner asserts his or her right or, secondly, the possessor acknowledges the true owner has a superior right. An owner may assert his or her right by instituting an action to recover the land or by making a peaceable but effective entry (Limitation Act 1969 (NSW), s 39; Limitation of Actions Act 1958 (Vic), s 16; Limitation of Actions Act 1974 (Qld), s 21; Limitation of Actions Act 1936 (SA), s 18; Limitation Act 2005 (WA), s 84(a); Limitation Act 1974 (Tas), s 19.) Effectively the owner must demonstrate that he or she has divested the adverse possessor of possession. In Robertson v Butler [1915] VLR 31 at 37, A’Beckett A-CJ stated: The legal effect of acts relied upon as disturbances of possession must in every case depend upon the character of the possession which they are said to disturb. That which would be an interruption of possession evidenced by continuous acts done upon a small area might be no interruption of possession evidenced by intermittent acts of ownership done at different places over a wide area. Having regard to the extent of the land in the possession of the defendant when the plaintiff [the registered proprietor] made his visits to the land in dispute, and to the use which the defendant was then making of it, I think that what was done was not at any time enough to divest the possession out of the defendant.

Acknowledgement of the owner’s title by the possessor stops time running (Limitation Act 1969 (NSW), s 54(1); Limitation of Actions Act 1958 (Vic), s 24(1)(a); Limitation of Actions Act 1974 (Qld), s 35(1)(a); Limitation of Actions Act 1936 (SA), s 21(b); [3.120]

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Limitation Act 2005 (WA), s 47; Limitation Act 1974 (Tas), s 29). For example s 24(1)(a) of the Limitation of Actions Act 1958 (Vic) provides: Where there has accrued any right of action (including a foreclosure action) to recover land or any right of a mortgagee of personal property to bring a foreclosure action in respect of the property, and-(a) the person in possession of the land or personal property acknowledges the title of the person to whom the right of action has accrued; … the right shall be deemed to have accrued on and not before the date of the acknowledgment or payment.

The limitation statutes contain specific requirements as to the form of the acknowledgement. It must be in writing and signed by the person making the acknowledgement (Limitation Act 1969 (NSW), s 54(4); Limitation of Actions Act 1958 (Vic), s 25 (1), (2); Limitation of Actions Act 1974 (Qld), s 36(1); Limitation of Actions Act 1936 (SA), s 21; Limitation Act 2005 (WA), s 48; Limitation Act 1974 (Tas), s 30(1). See Phillips v Marrickville Municipal Council (2002) 11 BPR 20,135. As to acknowledgements and part payments where, for example, a right to recover land has accrued to a mortgagee and the person liable makes a payment, see the Limitation Act 1969 (NSW), s 54; Limitation of Actions Act 1958 (Vic), ss 24 – 26; Limitation of Actions Act 1974 (Qld), ss 35 – 37; Limitation of Actions Act 1936 (SA), s 21; Limitation Act 2005 (WA), ss 46 – 51; Limitation Act 1974 (Tas), ss 29 – 31). Acknowledgment is discussed in further detail in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [3.365]-[3.375]. 5. There are various provisions pursuant to which there can be a postponement of the commencement of the limitation period or an extension or suspension of the limitation period. (Disability, fraud, fraudulent concealment and mistake may give rise to circumstances which lead to a longer limitation period.) If these provisions are applicable, the effective result is that the adverse possessor has to maintain possession for a longer period before the right of action of the true owner or a prior possessor is lost. (Limitation Act 1969 (NSW), ss 11(3), 52 – 53, 55 – 56; Limitation of Actions Act 1958 (Vic), ss 23, 27; Limitation of Actions Act 1974 (Qld), ss 29, 38; Limitation of Actions Act 1936 (SA), ss 45, 47, 48; Limitation Act 2005 (WA), ss 30 – 54; Limitation Act 1974 (Tas), 26 – 28.)

200 [3.120]

CHAPTER 4 Title to Personal Property [4.05]

INTERESTS IN GOODS .......................................................................................... 202 [4.07]

Estates and Trusts ................................................................................ 202 [4.07]

[4.15]

Security Interests ................................................................................. 206 [4.15]

[4.30]

The basic principle .............................................................................. 209

DISENTITLING CONDUCT BY OWNER ............................................................... 212 [4.35] [4.45] [4.55] [4.60]

[4.70]

Farquharson Bros & Co v C King & Co .................................... Lloyds & Scottish Finance Ltd v Williamson ............................. Universal Guarantee Pty Ltd v Metters Ltd .............................. Leonard v Ielasi .....................................................................

212 214 215 218

SALES BY A MERCANTILE AGENT ......................................................................... 225 [4.70] [4.80]

[4.90]

Palgo Holdings Pty Ltd v Gowans ........................................... 206

ESTABLISHING TITLE TO GOODS ........................................................................ 209 [4.30]

[4.35]

Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy ....................................................................... 202

The Astley Industrial Trust Ltd v Miller .................................... 225 Associated Midland Corporation v Sanderson Motors Pty Ltd ................................................................................. 228

SALES BY PERSONS WITH A VOIDABLE TITLE ..................................................... 231 [4.90]

Car and Universal Finance Co Ltd v Caldwell ........................... 231

[4.100]

OTHER EXCEPTIONS TO THE NEMO DAT RULE ................................................. 235

[4.120]

PROTECTION FOR REPUTATION .......................................................................... 236 [4.120]

Protection for reputation .................................................................... 236 [4.125] [4.135]

[4.140]

Honey v Australian Airlines Ltd ............................................... 236 Targetts Pty Ltd v Target Australia Pty Ltd ............................... 239

CONFIDENTIAL INFORMATION ........................................................................... 243 [4.145] [4.155]

Oxford v Moss ...................................................................... 244 Breen v Williams .................................................................... 246

[4.165]

PROTECTION FOR INTELLECTUAL PROPERTY .................................................... 247

[4.170]

RIGHTS IN MONEY AND FINANCIAL INSTRUMENTS ........................................ 249 [4.170]

Nature of money ................................................................................. 249 [4.170]

[4.180]

Banco de Portugal v Waterlow and Sons Ltd ........................... 249

FINANCIAL INSTRUMENTS ................................................................................... 253 [4.185]

Arab Bank Ltd v Ross ............................................................. 253

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INTERESTS IN GOODS [4.05] The technical definitions of the common law make the choice of title to this chapter difficult. The description “personal property” is used to exclude interests in land but leasehold interests are also excluded although they are personal and not real property. The chapter title is intended to include (correctly by common law definitions) intangible interests or things in action. The word “goods” is generally used with the meaning adopted in s 5 of the Sale of Goods Act 1923 (NSW) of all chattels personal other than things in action and money. The chapter does include analysis of title to things in action and money.

Estates and Trusts

Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy [4.07] Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy (1972) 20 FLR 147 Court of Insolvency of South Australia WHITE J: The applicant Associated Securities (SA) Ltd (thereinafter called “the company”) seeks a declaratory other that it is the owner of a certain Holden Premier motor car registered no RAP-424. The Official Receiver in Bankruptcy (hereinafter called “the official receiver”), the trustee of the bankrupt estate of Neil MacKay, has given notice of opposition and asks for a declaration that the car is an asset in the bankrupt’s estate. Long before his bankruptcy (commencing on the presentation of his own petition on 6th October, 1971), MacKay had agreed to buy the car from the company under a peculiar agreement of sale and purchase and the car was still in his possession at the time he became a bankrupt. The power to make such a declaratory order is conferred on this Court by s 30 of the Bankruptcy Act 1966 as amended, and the propriety of this Court (rather than the ordinary civil court) making the order is based on the fact that the company itself has made the application to this Court and submits to its jurisdiction – “a stranger to the bankruptcy availing himself of the bankruptcy jurisdiction has to submit to it in all respects”. See McDonald Henry and Meek Australian Bankruptcy Law and Practice, 4th ed, par 80, and cases there cited. Throughout the judgment I will be referring to the property rights of the bankrupt MacKay; whatever rights he had, the official receiver now has, no more and no less. “The trustee stands in the shoes of the bankrupt and takes the title, no better or worse that the bankrupt’s … the trustee in bankruptcy takes the property of the bankrupt subject to all the liabilities and equities which affect it in the bankrupt’s hands” (ibid, at pp 5 34-535). And see s 58(1) of the Bankruptcy Act. The question of title to the car turns upon the true construction and legal effect of the document (exhibit A1), an agreement in writing between MacKay and the company dated 15th May, 1969, to which I will have to refer in some detail. Briefly described, it purports to be an agreement of sale and purchase by instalments, but in fact it is not a true agreement of sale and purchase under which property passes to the purchaser once and for all. It is rather a novel type of document which engrafts upon the usual straight-out transfer of ownership certain stipulations repugnant to the enjoyment of the original ownership rights conferred. These later stipulations purport to impose fetters upon MacKay’s expected enjoyment of the normal incidents of ownership of the car. It also appears to give rise to a future legal interest in a chattel which I think is not permitted by law. By his written offer dated 14th May, 1969, “Neil MacKay offers to purchase from you (the company) the goods described in the schedule hereto upon and subject to the terms and conditions 202 [4.05]

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Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy cont. set out hereunder and on the back hereof”. There follows a detailed description of the car and a calculation of “the total balance payable by the purchaser to the vendor at the vendor’s above address in 42 cash payments of $41.95 each payable calendar monthly”. MacKay then discloses the usual credit information including “previous or current hire purchase agreements or bills of sale”. The eleven clauses which follow are, in the main, the usual “hire purchase clauses” regarding repair, insurance, settlement of claims, non-creation of liens, non-prejudice of the company’s rights, etc, while other clauses are adapted to accommodate the peculiar requirements of this arrangement. Clause 1 is a preliminary condition and provides that the offer will be irrevocable for twenty-one days while MacKay’s suitability as a “purchaser” is investigated. Since cl 1 affects the flow of title to the company before the company sells to MacKay, I will mention it in part – “If you (the company) acquire the goods in or over which I (MacKay) acknowledge that I have no proprietary interest or contractual right as at the date of my offer the goods shall be your property and you shall be under no obligation to dispose of them to me”. There was some oral evidence as to the time when the car was acquired by the company from a dealer and handed over to MacKay. The evidence was not disputed and in any event as between MacKay and the company there is an estoppel. I find there was a point of time before the company accepted MacKay’s offer when the title to the goods was in the company before the title passed on from the company to MacKay. Upon acceptance of MacKay’s offer on 15th May, 1969, the company already owned the car, having purchased it from the dealer, McGowan Motors. Upon acceptance, the title thereto flowed out from the company to MacKay, who took possession of the car about the time of acceptance. As will be seen later, a car is “capable of complete transfer by delivery”. By virtue of the first part of cl 7 of the agreement, the company transferred the title to MacKay. I set out the whole of cl 7 which included (a) the initial agreement as to the passing of title from the company to MacKay and, in the second part (b) an agreement as to the passing of title back (in certain events) from MacKay to the company: “7. On the date of our acceptance of this offer which shall be deemed to be the date of this agreement the property in the goods shall pass to me but on determination of this agreement by you pursuant to clause 4 hereof the property in the goods shall pass from me to you and you shall again become the owner thereof and I shall have no right title or interest in the goods as purchaser or as a person who has agreed to buy the same but shall merely be the bailee thereof”. (The italics in the above and other extracts from the agreement are mine.) Since I will be referring repeatedly to the first and second parts of cl 7, I will refer to the first part whereby title flows from the company to MacKay as “cl 7 (1)” and the second part whereby the title flows back upon determination as “cl 7(2)”. While it is permissible for the company to enter into an agreement with MacKay which successfully steers a safe course between the Scylia of the Hire-Purchase Agreements Act, 1931 (SA) and the Charybdis of The Bills of Sale Act, 1886-1935 (SA) and also avoids any other legislative or common law rocks, nevertheless: It must be borne in mind that the courts have always leaned against a restraint on alienation, and for this very obvious reason, that to give property to a person involves giving him the power to alienate that incident to it, must always be construed strictly (per Fry LJ in Stogdon v Lee [1891] 1 QB 661, at 670). As Guest, The Law of Hire Purchase (pp 30 et seq.) comments, commercial credit transactions are largely divided into those cases where property remains in the “vendor” or “lender” (conditional sales and hire purchases) and those where property passes to the purchaser immediately. The present agreement is one of the latter kind. Guest comments that the rights of the “seller” in the latter type of case are considerably less substantial than under the former class. It seems clear enough that cl 7(2) and other clauses attempt to bolster up those otherwise insubstantial rights. [4.07]

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Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy cont. I pause to make two comments. Hall v Busst (1960) 104 CLR 206 was a case relating to covenants under an indenture. Here I am dealing with a promise under a simple contract. Dixon CJ distinguished between “a bond or covenant or contract” and eventually reached a decision that the same principles applied to covenants as applied to conditions. He was not called upon to consider simple contracts but I see no reason why the same principles should not apply. Secondly, he distinguished between wholly and substantially restricting the power of alienation. The learned Chief Justice seemed to be laying some stress upon the long duration of the fetter. In the present case the restriction does not last indefinitely. The longest time that the restriction could last would be three and a half years, if instalments were paid regularly-perhaps longer if instalments became in arrears and no prompt action was taken about determination. So the clause is not a “perpetual fetter” on the rights of ownership of the car in MacKay’s hands; nevertheless it is a substantial fetter having regard to the life of this second-hand car. It seems that temporary restraint upon alienation is sufficient to amount to substantial restraint so as to render a condition void (see Re Goode; Spiller v Kennedy [1960] VR 117 where property was given to an RSL branch and then purported to attach a proviso that the RSL retain the premises for ten years). Also substantial partial restraint is sufficient to render the restraint void (see In re Brown (Deceased); District Bank Ltd v Brown [1954] 1 Ch 39, at p 48 and Re Rosher (1884) 26 Ch D 801 where a partial restraint substantially reduced the number of potential purchasers). Here there is substantial partial restraint of the use and enjoyment of the car in MacKay’s hands for some years. As I said, I do not see why the principle should be restricted to covenants in deeds; I apply it to simple contract. It seems to be clearly established that the above principles which apply to real estate also apply to personal estate. If that were not enough, there is another principle, quite independent of the above, which seems to indicate that cl 7(2) cannot take effect, namely, the principle that a future executory interest in a chattel cannot be created without interposing a trustee. The only exception is a gift of a chattel by will direct to one person and then to another without a trustee. I refer for convenience to a summary of the matter by Vaines Personal Property, 2nd ed, pp 4 1-42: The strict and ancient doctrine of indivisibility of a chattel at common law appears to be subject to an exception in the case where there is a gift by will of a chattel … A bequest of a chattel to A for life and then to B can be treated as operating so as to make A the legal owner of the chattel (upon delivery to him by the executor), that during A’s lifetime B has no ownership, but an executory interest ie a future legal interest, and that upon the death of A, the legal ownership in him determines and shifts to B … If B has an executory interest (pursuant to a gift under a will) during A’s lifetime, that interest is but a chose in action and dealings with it will not require registration under the Bills of Sale Act. Of course, Vaines was there dealing with B’s future interest in a chattel under a will that interest is analogous to the company’s future interest under cl 7(2). In so far as cl 7(2) purports to create a future legal interest (ie a right of ownership to succeed MacKay’s present right of ownership) it is of no effect. As Vaines continues (p 43) this “little explored backwater” applies only to bequests by will in direct form to persons in succession. “It has no application … to gifts or other dispositions inter rivos, for ‘the gift of a chattel for an hour is a gift of it for ever’.” (And I add, the sale of a chattel for an hour is the sale of it for ever, but contra bailment, hiring, etc.) Vaines continues, “Chattels are the subject of absolute ownership and you are either an owner or you are not”. What the company was trying to achieve was temporary or defeasible vesting of ownership in MacKay. Retention of title by the company would not, I think, have served the company’s purposes. It had to divest itself of its complete ownership of the car and in doing so, to achieve whatever object it had in mind, I think it has also fallen foul of this principle against the creation of future legal interests in chattels as well as the principle against restraint of use and enjoyment of ownership rights. 204 [4.07]

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Re Mackay, Associated Securities Ltd v Official Receiver in Bankruptcy cont. If the restrictive or future stipulations are void, I think that a pen can be struck through them and the balance of the agreement can stand as a straight agreement of sale and purchase, so that the company can prove in the bankruptcy for the balance of the debt. It would be a harsh result if the operation of the above principles resulted in the whole agreement falling to the ground while the title remain in MacKay and the company had no claim to the balance purchase price. That is a result which I would avoid if I could. Nevertheless, it is a risk which was taken when this kind of agreement was made. While I do not have to decide the point, I have indicated my opinion in case a proof of debt is lodged. On either view, whether the stipulations are simply void and struck out or void because illegal, the title remains with MacKay. On each of the above quite separate grounds, I dismiss the application by the company and declare that the car is vested in the official receiver.

[4.10]

Notes and Questions

1. This case arose at a time when credit providers were seeking alternatives to the hire purchase transaction which had been used as the form of transaction for the supply of goods on credit. Under a hire purchase transaction the intended buyer obtained possession of the goods for a specified period of time and at the end of that time had an option to purchase the goods for a nominal amount. By the mid-twentieth century detailed regulation applied to hire purchase transactions and various devices were tried whereby the credit provider could obtain proprietary rights with respect to the goods which could be enforced upon default by the borrowers. The case is illustrative of the pitfalls lurking in the untested territory. A similar development to the artificiality of the supposed option to purchase under a hire-purchase agreement seems to be provided by the “Rent to Keep” transactions. Since the consumer is paying the amount necessary to keep the goods, in what sense is the consumer agreeing to rent rather than agreeing to buy the goods? 2. New regulation applies to security interests in personal property. Today the national credit legislation regulating the rights and obligations of lenders and borrowers (National Consumer Credit Protection Act 2009 (Cth)) and that governing priority disputes between holders of security interests in goods (Personal Property Securities Act 2009 (Cth)) generally allows the parties to choose the form of their security interest, but rules governing priority of interests apply whatever form is chosen for the transaction. Further analysis of this legislation is set out at [4.30]ff and [8.76]ff. 3. As Judge White recognises, the principle of restraints upon alienation has been applied much more in relation to transactions over land than over goods; see Hall v Busst (1960) 104 CLR 206 and Bondi Beach Astra Retirement Village Pty Ltd v Gora (2010) 14 BPR 27,743. The principle is discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [2.245]–[2.255]. 4. Goods are generally regarded as including animals. Although they are not expressly mentioned in the sale of goods legislative definitions, the Competition and Consumer Act 2010 (Cth) defines goods in s 4(1) to include: (a) ships, aircraft and other vehicles; (b) animals, including fish; (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity. Consequently humans are legally able to own animals and have control over them: see generally Harvey, The Law of Animals (1967) [4.10]

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Ch 1. Taking animals from the wild has been substantially restricted and often State and Territory legislation vests property in all wild animals in the state, see Yanner v Eaton (1999) 201 CLR 357 (reproduced at [7.85]). It seems that newborn domestic animals are the property of the owner of the mother. Property rights are restricted by animal cruelty legislation but the basic proposition is that owners have control subject to any restrictions. In recent times, many common commercial practices have come under scrutiny, including caging of fowls, intensive piggeries, use of hooks by fish-catchers and conduct of horse jump races. Other conduct, such as the separation of offspring at birth may be harmful to mother and child. Would a more limited concept of custody of at least domestic animals with a duty of responsible care be more appropriate? Security Interests

Palgo Holdings Pty Ltd v Gowans [4.15] Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; 215 ALR 253; 79 ALJR 1121; [2005] HCA 28 High Court of Australia McHUGH, GUMMOW, HAYNE AND HEYDON JJ (footnotes omitted) Palgo Holdings Pty Ltd (which we refer to as “the lender”) carried on business in Byron Bay, New South Wales, under the name “Cash Counters Byron”. It was charged in the Local Court of New South Wales at Lismore with carrying on, between 16 October 2000 and 1 March 2001, the business of lending money on the security of pawned goods within the meaning of the Pawnbrokers and Second-hand Dealers Act 1996 (NSW) (“the 1996 Pawnbrokers Act”) whilst not being the holder of a licence under that Act. The lender was convicted in the Local Court, and fined. Its appeal to the Supreme Court of New South Wales against conviction and sentence was dismissed. Its appeal to the Court of Appeal against those orders (by leave, because the appeal was instituted out of time) was dismissed. By special leave the lender now appeals to this Court. The central issue debated in the courts below, and the only issue in the appeal to this Court, is whether the lender’s business was the business of lending money on the security of pawned goods. In particular, were the loans which it made to its customers loans on the security of “pawned goods”? The facts There was little controversy about the facts. The lender made short-term loans of small amounts. Typically, the loans were for a term of seven days. The loans were secured. Each borrower signed a document, the first part of which bore the heading “Secured Loan Agreement”, and the second part the heading “Bill of Sale/Goods Mortgage”. The first part of the document (“the Secured Loan Agreement”) recorded the amount of the loan and the date on which the principal and an agreed amount for interest were due for repayment. (In the example contained in the Appeal Book, and drawn from the evidence given at the hearing in the Local Court, the amount lent was $70 and the amount due, one week later, was $77.) The second part of the document (“the Bill of Sale/Goods Mortgage”) was made as a deed between the borrower as mortgagor and the lender as mortgagee and recorded that the parties agreed “that the terms of the bill of sale are set out in the schedule of terms attached”. The document identified certain goods as the “Mortgaged Property” and recorded the “Location of Goods” as being “In storage at mortgagors request”. More significant indications of the meaning to be attributed to “pawned”, in the expression “lending money on the security of pawned goods”, come elsewhere in the 1996 Pawnbrokers Act, particularly 206 [4.15]

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Palgo Holdings Pty Ltd v Gowans cont. Pts 3 and 4. Part 3 (ss 14-27) contained provisions for the regulation of all businesses authorised by licence granted under the Act. That is, those provisions applied to both pawnbrokers and second-hand dealers licensed under the Act. Part 4 (ss 28-32) made special provisions relating to pawnbrokers. Provisions of both Parts made frequent use of the word “pawn”, or cognate terms. For example, s 15 made repeated reference to “goods offered for sale or pawn”, s 28 spoke of “an agreement by which the goods are pawned” and “the person pawning the goods”, and ss 29, 30 and 31 took the expression “pawned goods” or “pawned article” as the hinge about which their operation turned. These uses of the word “pawn”, or cognate terms, must be understood in the light of the Act’s use, elsewhere, of the expressions “pawned” or “pawned goods” in conjunction with “pledge”. That reveals that “pawn” and “pledge” were used interchangeably to describe the transaction of lending money on the security of pawned goods. It is sufficient to point to some examples of this usage. Section 28 required a pawnbroker to make certain records. That obligation was to make a record of the agreement “[a]t the time possession of goods is taken under an agreement by which the goods are pawned”. Among other things, the record had to include “the date of the pledge”, and no pledge was “validly made unless the person pawning the goods” signed the record. Sections 29 and 30 regulated the redemption of pawned goods and the sale of forfeited pledges and, apart from the heading to s 30 (“Sale of forfeited pledges”), spoke only of “pawned goods”. But s 16(1)(b) required licensees to keep records, including records of all transactions “for the redemption of any pawned goods, or the disposal of any forfeit pledge”. “Pawn” (and its cognate expressions) and “pledge” can thus be seen to have been used interchangeably Both “pawn” and “pledge” are words having a long-established legal meaning. That is hardly surprising when the ancient origins of such transactions are recalled. For centuries, pawn or pledge (the terms are used interchangeably) has been recognised as one class of bailment of goods. It was treated as such in Roman law. This understanding of pawn or pledge was established very early in the common law and was reflected in the writings of the great commentators. It underpinned the way in which legislation regulating the activities of pawnbrokers was framed in Great Britain, in the Australian colonies and later in the Australian States. Commentators and the courts have long recognised that pawn or pledge is “a bailment of personal property, as a security for some debt or engagement”. They have identified such a transaction as distinct and different from mortgage where “the whole legal title passes conditionally to the mortgagee”. This distinction was sometimes expressed in terms of the difference between the “special property” of the pledgee and the “general property” which remained in the pledgor. The “special property” of the pledgee was described as the right to detain the goods for the pledgee’s security and “is in truth no property at all”. That “special property” depends upon delivery of possession, whereas in the case of a mortgage of personal property the right of property passes by the conveyance and possession is not essential to create or support the title. It has also long been recognised that pawn and pledge must also be distinguished from lien. “One who has a lien has only a right of detaining the res until the money owing is paid: a lien disappears if possession is lost, and there is no right of sale”. A lien is merely a personal right and cannot be taken in execution; a pledge creates an interest in the pledgee that can be seized in execution. Nothing in the text of the 1996 Pawnbrokers Act provides a foothold for arguing that “pawned goods” include goods that are the subject of other forms of security transaction. On the contrary, the text of the legislation, read in the context provided by the history of this kind of legislation, reveals that those who drafted the 1996 Pawnbrokers Act used one of the known “building blocks of the law of property” when using the expression “pawned goods”. “Pawn” and “pledge” refer to a bailment of personal property as security for a debt. That is a transaction which is distinct from a chattel mortgage and the distinction is not to be elided by treating one kind of transaction as being subsumed in the other. [4.15]

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Palgo Holdings Pty Ltd v Gowans cont. None of the courts below found the transactions which the lender made with borrowers to be shams. As five members of the Court pointed out in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd: “Sham” is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences. While the word “sham” appears to have been used in submissions in the Local Court, it was not, and never has been, suggested that the transactions now in question were without any legal effect. It is not to the point to ask whether the statement that goods were stored at the borrower’s request was accurate. What is important is whether the transactions were pledges or were mortgages of chattels. All of the courts below found that the transactions which the lender made with borrowers were mortgages of chattels. Because the transactions were mortgages of chattels they were “bills of sale” as defined in the Bills of Sale Act 1898 (NSW). Section 4 of that Act provided that if not registered within 30 days after its making, the bill of sale should be void against the persons identified in sub-s (2) of that section. No question about the application of those avoiding provisions need be decided in this matter. What is important for present purposes is the observation that the mortgages which the lender took were not unregulated. It is important because the premise for the reasoning adopted in the courts below has been that to give “pawned goods” a meaning that did not embrace all transactions (whether of pawn, mortgage or, presumably, of any other character) in which the appellant, as lender, in fact had possession of the goods offered by a borrower as security would defeat the purposes of the 1996 Pawnbrokers Act. When enacted, the 1996 Pawnbrokers Act took its place as only one of several Acts of New South Wales regulating the provision of credit to borrowers. (The position in other States was not materially different.) Foremost among that other legislation was the Consumer Credit (New South Wales) Act 1995 (NSW), adopting the Consumer Credit Code (“the Code”) set out in the Consumer Credit (Queensland) Act 1994 (Q). The Code commenced operation in the mainland States of Australia on 1 November 1996. The 1996 Pawnbrokers Act commenced operation on 30 April 1997. Section 7(1) of the Code provided that it did not apply to the provision of credit limited by the contract to a total period not exceeding 62 days. Section 7(7) provided that (apart from certain provisions dealing with reopening unjust transactions) the Code did not apply to the provision of credit by a pawnbroker in the ordinary course of a pawnbroker’s business which was being lawfully conducted. The making of those provisions (taken in conjunction with the recasting of the law relating to consumer credit) might suggest that their enactment provoked the revisions made to the law relating to pawnbrokers reflected not only in the 1996 Pawnbrokers Act but also in the pawnbroking legislation of other States enacted at about that time. No express reference, however, to a connection between the enactment of the Code and revision of the law relating to pawnbrokers is to be found in second reading speeches about those laws. Rather, extrinsic material in States other than New South Wales tends to suggest that the revision of pawnbroking legislation may have been undertaken as part of a general review of occupational regulation.

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Palgo Holdings Pty Ltd v Gowans cont. Subject to the express extensions made by the 1996 Pawnbrokers Act (at the time, only s 5), lending money on the security of pawned goods referred to lending money on the security of pledges of goods - bailments of goods as security for debts. That was not shown to be the appellant’s business. It lent money on the security of chattel mortgages.

Notes and Questions

[4.20]

1. The case indicates a broad division between security interests by way of taking possession (the pawn or pledge) and security interests where possession is granted to the borrower (a mortgage). In the later situation the borrower sometimes uses the fact of possession to support a claim of ownership when seeking illegally to sell the goods. In view of the wide spread of secured borrowing do you consider that possession gives some appearance of ownership? What checks do you make when buying second-hand goods on line? 2. The court refers to arguments that the agreement was a sham, at least in part. The characterisation that the lender was not taking the goods on pawn depends on acceptance of the clause that the lender was storing the borrower’s goods. Do you think that the borrower could have refused the offer to store the goods? 3. A security interest by way of a lien is granted most commonly to persons who have done work on goods.Thus in the absence of agreed credit terms a repairer of a motor vehicle is entitled to retain possession until paid for the work.

ESTABLISHING TITLE TO GOODS The basic principle [4.30] The starting point in relation to title to goods is that a person gets no better title than the transferor to that person had (nemo dat quod non habet). Consequently title must be traced from the original manufacturer or reaper (the taker of plants or fruit from the land). Generally there have been no records as to the title to goods with an exception in relation to motor vehicles. The principles as to title to land or goods reveal two conflicting policies.

(a)

A policy protecting ownership or title: Nemo Dat Quod Non Habet – No one can give (transfer) what they have not got. This principle means that a person cannot transfer an estate or interest that belongs to someone else; a title binds all the world. Also, it means that a person cannot transfer an estate or interest free of subsidiary rights which bind it. For example, a registered proprietor in fee simple who has created a registered lease in favour of a tenant for, say, five years cannot sell the fee simple free of the five year lease. The subsequent purchaser is bound by it and this fact will be accommodated in negotiations as to the price paid for the fee simple.

(b)

A policy protecting the security of transactions: that a person should get what they pay for. Principally, this policy is met in two ways. First, by a guarantee of registered titles: the principle of indefeasibility. Secondly, by restricting the priority of earlier interests through the articulation of the priority rule. For example, a bona fide registered proprietor in fee simple for value will take free of unregistered (equitable) interests of [4.30]

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which the registered proprietor has no notice or, even, mere notice. In these ways, a registered proprietor may be able to transfer a title to which that registered proprietor has no other entitlement or to pass a title free of a right which the registered proprietor has created. The balance between these two policies is preserved through a series of specific rules. Attempts, in the past, to preserve the balance in a single rubric have met little success. In Lickbarrow v Mason (1787) 2 TR 63; 100 ER 35, for example, a more general proposition was enunciated that whenever one of two innocent parties must suffer by the acts of a third party, the one who has enabled the third party to occasion the loss must sustain the loss. However this statement has generally been regarded in later cases with suspicion as being too general. In regard to title to goods, the policy protecting ownership prevails. A title to goods is secure: no-one can sell or create interests against the goods who does not own them or is not authorised as agent so to act. Again, lawful interests against the goods will survive a transfer of title to a third party purchaser. However, there are exceptions when a person may transfer a title that they do not have or may sell the goods free of any earlier lawful interests. It is a question of plotting the technical (statutory) rules which preserve the balance between these policies. To begin the analysis of goods, we need to ask how ownership is derived – how do we establish that a person is the owner of certain goods at any one point in time? Unlike land, we cannot say of goods that the Crown is the owner and that the grants of freehold and leasehold interests in particular allotments are recorded in a register. There is no Torrens System. The derivation of title of goods is best illustrated by a retrospective example. Let us say that X “owns” a car; X has “owned” it for 3 years and no-one disputes the proposition. But why is X the owner? X will answer that X was given the car by X’s parents. Therefore, X’s ownership depends upon the parents’ ownership but why did they own the car? They will answer that they bought the car from A. But why did A own the car? A will answer that A bought it from B. But why is B the owner? B will answer that B bought it from a new car dealer. But why did the new car dealer own the car? The dealer will answer that it was purchased from a manufacturer. But why did they own the car? Because they will say: we made it. It follows from this that if anyone in the chain did not derive title from a person with title, then no-one later in the chain has title. To change our retrospective example if T steals the car from X and then sells it to u who sells it to V, then T and U and V have no title. V must sue U and U must sue T (if U can find T). The provisions as to title to goods are set out in the Sale of goods legislation; Sale of Goods Act 1923; Goods Act 1958; Sale of Goods Act 1896; Sale of Goods Act 1895; Sale of Goods Act 1895; Sale of Goods Act 1896; Sale of Goods Act 1954; Sale of Goods Ordinance 1972. The key provision as to title in the Sale of Goods Acts is “ where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had” ie, none at all. Another way of stating this proposition is that an owner’s legal title to goods is good against all the world (except where a lawfully authorised agent deals with the goods). As a result of the preferred policy, the ownership of goods appears very secure. If a person has stolen goods or borrows them or finds another’s goods, then any dealing by that person (ie gift, sale or raising money against the goods as security) will be of no effect against the owner. Few might disagree with this proposition as a matter of law but, in turn, it renders transactions 210 [4.30]

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with that person very insecure. In some situations, it might be more appropriate to protect the transaction rather than the title and to ameliorate the priority rule that a legal title is good against all the world. Bearing in mind the number and types of goods in circulation, the law has chosen to ameliorate the basic priority rule by one general proposition and in a range of specified situations. The general proposition is contained in the qualifying words “unless the owner is by the owner’s conduct precluded from denying the seller’s authority to sell”. However the courts have been very reluctant to find that conduct will preclude an owner from asserting the owner’s title. In all but one of the specified situations, the denial of ownership is because the conduct of the owner has contributed to the sale by a non-owner to a buyer. This should be borne in mind as a general guide to analysing the situations. The situations are all defined by statute and may collectively be termed “Exceptions to Nemo Dat”. The exceptions provide for those cases where the seller of goods will be able to pass a title the seller has not got to the buyer or a title free from any rights against the goods owned by a third party. The exceptions have to be examined one by one in each case to see if the owner has retained title or the buyer has gained title. The case law in the area demonstrates a technical approach to the wording of particular statutory rules rather than a policy approach to whether, in this situation, it is appropriate (or unconscionable) for the owner to retain title. The security of ownership of goods resolves into the proposition that ownership is secure except where one of the statutory exceptions applies. A majority of the exceptions are to be found in the sale of goods legislations but a minority are found in other statutes which are derived from the English Factors Acts of the nineteenth century. Apart from the sale of goods legislation set out above, the current legislation relates to factors or mercantile agents; that legislation is: Factors (Mercantile Agents) Act 1923; Goods Act 1938, Pt II; Factors Act 1892; Mercantile Law 1936; in Western Australia the English Factors Act 1823; Factors Act 1825, Factors Act 1842, Factors Act 1847 and Factors Act Amendment Act 1878 (WA); Factors Act 1891; Mercantile Law Act 1962. The only exception which is based on the circumstances in which the purchaser obtained title rather than conduct by the original owner is that of sales in a market overt. This exception does not survive in some jurisdictions. Beyond the market overt situation, a buyer with a voidable title is able to pass title to a subsequent buyer in good faith and without notice in much the same way a registered proprietor of land subject to a right to set aside for fraud can pass good title to a subsequent registered proprietor. In prescribed circumstances where possession of goods is entrusted to a mercantile agent or a seller or a buyer that person may pass good title to a third party. Today entry of security interests in goods onto a public register and rules governing priority amongst such security interests is regulated by the Personal Property Securities Act 2009 (Cth). It treats as security interests a range of existing property interests where those interests were taken as security for a debt, the interests include mortgages, charges and property retention clauses. In addition some rights of possession of goods are regarded as security (and proprietary) interests. The key rule with respect to motor vehicles is that a buyer will obtain good title if the security interest is not registered or if a search of the register does not disclose the security interest (s 45). In the case of goods generally (including motor vehicles) good title in precedence to a security interest is conferred on a buyer who buys in the ordinary course of [4.30]

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business from a dealer without knowledge of the security interest (s 46). Otherwise priority depends on the fact of possession or recording of a security interest. Priority of security interests is discussed further at [8.76]. This work will concentrate on the provisions relating to disentitling conduct, sales by a mercantile agent and persons with a voidable title. These provisions reflect general principles which can be carried over to land and have not been significantly affected by the personal property securities legislation.

DISENTITLING CONDUCT BY OWNER Farquharson Bros & Co v C King & Co [4.35] Farquharson Bros & Co v C King & Co [1902] AC 325 House of Lords LORD MACNAGHTEN: Messrs Farquharson Brothers & Co were timber merchants in a large way of business with a turnover exceeding 200,000l a year. They had a confidential clerk called Capon, whom they trusted implicitly. A short time ago they discovered that this man had been robbing them for years, stealing small lots of their timber from time to time, passing the timber out of their names in the docks by means of a written authority they had given him, and disposing of it for his own benefit. They trace the stolen timber to the hands of Messrs King & Co. They demand restitution or compensation. The demand is refused; and then this action is brought. What is the defence? Not that the goods were bought in market overt, though that would be no defence now after the conviction of the thief. Not that Messrs Farquharson led them to believe that Capon had their authority to sell what they supposed they bought or misled them in any way. That defence is out of the question. They never imagined that they were dealing with Messrs Farquharson or buying Messrs Farquharson’s goods. They never even dealt with Capon to their knowledge. They never dealt with him in his own name and in his proper person. They dealt with a phantom broker, an imaginary being created, animated, and worked by Capon for his own purposes under the plain and unpretentious name of Brown. And from this Brown, whom they never saw in the flesh, about whom they never made a single inquiry, they supposed they bought this timber. Whether Capon, who has apparently been convicted of forgery, could have been convicted of larceny or not in this case, it seems to me absurd to suppose that by this juggle of Capon’s, all sham and pretence so far as he was concerned, the property in the stolen timber passed to Messrs King & Co. If it were permissible it would be interesting to inquire which of the two firms parties to this litigation was the more blameworthy in a moral point of view. The plaintiffs trusted a man whom they had long known and whom they believed to be honest. The defendants trusted a man they had never seen, whom a breath of suspicion and the most ordinary inquiries would have unmasked. But we have nothing to do with this matter, though it does seem to have entered to the consideration of the Court of Appeal. The real defence is a singular one. It comes to this: The defendants say to the plaintiffs, You, Messrs Farquharson, have conducted your business in such an unbusinesslike way that you ought not to have your own goods back again. This misfortune common to you and to us is all your fault. By your foolish confidence in Capon, and by the written authority you gave him, you “enabled” him to commit this fraud upon us. And so Ashhurst J’s famous dictum comes in and you must sustain the loss. This defence, in my opinion, has no foundation in principle or authority. To try the principle, take a common case – a case which everybody understands. Nothing is better settled than this, that if a person buys a chattel and it turns out that the chattel was found by the person who professed to sell it, 212 [4.35]

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Farquharson Bros & Co v C King & Co cont. the true owner can recover his property, unless there has been a sale in market overt. The right of the true owner is not prejudiced or affected by his carelessness in losing the chattel, however gross it may have been. If a person leaves a watch or a ring on a seat in the park or on a table at a cafe and it ultimately gets into the hands of a bona fide purchaser, it is no answer to the true owner to say that it was his carelessness and nothing else that enabled the finder to pass it off as his own. If that be so, how can carelessness, however extreme, in the conduct of a man’s own business preclude him from recovering his own property which has been stolen from him? Nor is the case without authority. In the Bank of Ireland v Evans’ Trustees (1835) 5 HLC 389 in this House, the trustees, who were a corporate body, called upon the bank to replace stock sold under a forged power of attorney bearing the genuine impression of their corporate seal. The defence was that the carelessness of the trustees in the custody of their seal enabled their clerk to impose on the bank, and disentitled them to relief. The judges were consulted. Their unanimous opinion, which this House adopted, was delivered by Parke B. He thought that the negligence, if there was negligence, in the custody of the seal was only remotely connected with the transfer which the bank set up as good against the trustees; and then he proceeds in these words: 5 HLC at p 410: If such negligence could disentitle the plaintiffs, to what extent is it to go? If a man should lose his cheque-book, or neglect to lock the desk in which it is kept, and a servant or stranger should take it up, it is impossible, in our opinion, to contend that a banker paying his forged cheques would be entitled to charge his customer with that payment. Would it be contended that if he kept his goods so negligently that a servant took them and sold them, he must be considered as having concurred in the sale, and so be disentitled to sue for their conversion on a demand and refusal? My Lords, the rules of law applicable to this case are in my opinion well settled. And I would only venture to remind your Lordships of an observation made by Lord Cairns in this House, Cundy v Lindsay (1878) 3 App Cas 459, at p 463, to the effect that in cases of this sort, where your Lordships have to perform the disagreeable duty of determining which of two innocent parties is to suffer by the fraud of a third, all your Lordships have to do is to apply the settled and well-known rules of law and apply them rigorously. [Lords Halsbury, Shand, Robertson and Lindley JJ agreed.]

[4.40]

Notes and Questions

1. This case represents a prima facie protection for the original owner against later buyers. The true owner will only lose title if the conduct amounts to a breach of a duty of care to the later buyer. A duty of care must be established and the courts have shown great reluctance to find such a duty exists. The alternative approach would have been to consider the conduct of both parties and make an evaluation of whose conduct was the less deserving – the approach suggested by Lickbarrow v Mason (1787) 2 TR 63; 100 ER 35. 2. Although the provision that an owner is not entitled to assert title where the owner is prevented by the owner’s conduct from doing so is commonly described as a principle of estoppel, it is clear that the provision is one for the passing of title in a full sense without the limitations that the principle of estoppel would otherwise entail. The matter is clearly resolved by the decision of Devlin J in Eastern Distributors Ltd v Goldring [1957] 3 WLR 237 and of the Supreme Court of Western Australia in Big Rock Pty Ltd v Esanda Finance Corporation Ltd (1992) 10 WAR 259. What difficulties would a lesser operation lead to? [4.40]

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Lloyds & Scottish Finance Ltd v Williamson [4.45] Lloyds & Scottish Finance Ltd v Williamson [1965] 1 WLR 404 English Court of Appeal SALMON LJ: When Mr Marshall expressly authorised Peerless to sell the motor car he knew that they might (and indeed probably would) sell as principals and implicitly authorised them to do so. Acting on his mandate, they clearly held themselves out as principals to the defendant Mr Lunt and sold to him as apparent principals. The plaintiffs, who authorised Peerless to sell the motor car as apparent principals, and put them in a position to do so, cannot now be heard to say that Peerless were in reality only agents and had no authority to act as they did, or that the defendant Mr Lunt acquired no title from them. This to my mind is well settled. In Eastern Distributors Ltd v Goldring (Murphy, Third Party) [1957] 2 All ER 525 at 531; [1957] 2 QB 600 at 609, 610, Devlin J, who delivered the judgment of this court, said [1957] 3 QB 600 at 609, 610: The Factors Act 1889, and the examples given by Willes J, in Fuentes v Montis (1868), LR 3 CP 268 at p 277 [a case much relied on by the counsel for the plaintiffs] apply to an agent who is entrusted with goods. No doubt cases in which the only evidence of apparent authority is the possession of the goods must now be treated as being governed by the Factors Act 1889, which in this respect codifies as well as amplifies the common law … But there are other ways besides the possession of the goods in which a man can be clothed with apparent ownership … The common law principle is, as it has always been, wide enough to govern this … Because the factor was not held out merely by virtue of his position as having apparent authority to pledge, the doctrine of apparent authority did not apply at common law if nothing more than possession could be shown. It was otherwise if there was other evidence of holding out. Thus in Martini v Coles (1813), 1 M & S 140 at 150, Bayley J, said: “A factor has authority to sell, but not to pledge; and therefore a person who takes a pawn of a factor takes it at his peril. If the principal does anything to induce the person to believe the factor really the principal, that would be a different case.” This must mean if the principal does something more than merely put the factor in possession of the goods. In the present case the principal did much more than merely put Peerless in possession of the motor car. He did what he could to induce any person buying the car from Peerless to believe that Peerless were the owners of the motor car by authorising Peerless to sell it as owners. As a result, the defendant Mr Lunt obtained a good title at common law. This is not because of the operation of a true estoppel, for the defendant Mr Lunt obtained a real title which he could properly transfer. The plaintiffs are not merely estopped as between themselves and the defendant Mr Lunt from calling evidence to show that they are the true owners of the grey Jaguar. Counsel for the defendants relied on the line of cases culminating in Montagu v Forwood [1893] 2 QB 350 in which it was held that if A authorises B to sell A’s goods as their apparent owner, C, the buyer, if sued for the price by A (as an undisclosed principal) may set off against the price any debt due to C from B. Counsel for the plaintiffs rightly points out that there is a real distinction between that class of case and the present in as much as there the plaintiff was seeking to affirm and enforce the contract, whereas here the plaintiffs are repudiating the contract entered into by their agent. Counsel for the plaintiffs accordingly argued that the true basis of the decisions in the cases on which the defendants rely is the doctrine that no one can at the same time approbate and reprobate a contract. This may be so, but it does not appear to have been so stated or understood by any of the judges who decided them. In Montagu v Forwood, Bowen LJ, says [1893] 2 QB at 355, 356: If A employs B as his agent to make any contract for him … and B makes a contract with C … if B is a person who would be reasonably supposed to be acting as a principal, and is not known or suspected by C to be acting as an agent … A cannot make a demand against C 214 [4.45]

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Lloyds & Scottish Finance Ltd v Williamson cont. without the latter being entitled to stand in the same position as if B had in fact been a principal. If A has allowed his agent B to appear in the character of a principal, he must take the consequences. This is certainly so if A has expressly authorised B to sell as principal. Bowen LJ, says that this is not only a rule of law but of justice and common sense. I respectfully agree. In cases in which the true principal not only puts an agent in possession of the goods and the indicia of title, but also expressly authorises him to sell as principal, the question whether the factor sold in the ordinary course of business can, in my judgment, be relevant only in so far as it throws light on the bona fides of the buyer. In the present case there is no suggestion against the defendant Mr Lunt’s bona fides, nor is it suggested that he ought to have suspected that Peerless were selling as agents. The transaction in question was one which Peerless, had they been principals, could properly have made. In these circumstances, the fact that the transaction between Peerless and the defendant Mr Lunt was an unusual transaction and may not have been in the ordinary course of an agent’s business is, in my view, irrelevant. The defendants are amply protected by the common law, and no question arises under the Factors Acts which, whilst they codified and amplified the common law so far as it applied to mercantile agents, certainly did not derogate from it; see s 13 of the Factors Act, 1889. If the same authority as was given to Peerless had been given to a person who was not in business at all, the plaintiffs’ case would not have been even apparently arguable. In such a case no question of the agent’s ordinary course of business could have arisen, yet he would undoubtedly have passed a good title to anyone buying in good faith from him as the apparent owner of the motor car. I would accordingly dismiss the appeal. [Danckwerts and Harman LJJ agreed.]

[4.50]

Note and Question

This case is often portrayed as one of estoppel by representation rather than estoppel by conduct. Nonetheless it is a case where the original owner is precluded from asserting title as against a later buyer. The case falls outside the mercantile agent exception because the sale is not in the normal course of business. Even if the estoppel by representation characterisation is accepted, the representation was not given directly by the owner. The owner’s representation is allowing the dealer to claim to be the owner. Is actual knowledge of the dealer’s claim needed?

Universal Guarantee Pty Ltd v Metters Ltd [4.55] Universal Guarantee Pty Ltd v Metters Ltd [1966] WAR 74 Full Court of the Supreme Court of Western Australia JACKSON J: This is an appeal from the Local Court at Perth by the plaintiff whose claim against the defendant for damages for the conversion of a refrigerator was dismissed in that court. The refrigerator in question was one which was manufactured by and belonged to the defendant. On 28 September 1962 it was delivered by the defendant to a firm named Stewart Appliances, which carried on business in East Fremantle as a retailer of electrical goods. I will consider later the terms on which the refrigerator was placed with that firm. Stewart Appliances had an arrangement with the plaintiff, a finance company, by which the plaintiff would finance sales on terms made by that firm to a retail customer. The procedure was that the plaintiff would buy the goods from the firm and would then hire them to the customer under a hire purchase agreement. On or about 16 October the plaintiff, [4.55]

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Universal Guarantee Pty Ltd v Metters Ltd cont. pursuant to this arrangement, purported to buy from Stewart Appliances the refrigerator the subject of this action. This transaction was induced by the fraud of an employee of Stewart Appliances, who caused a forged hire-purchase agreement to be submitted to the plaintiff, together with an invoice referring to this refrigerator, both of which referred to a purported sale to a customer named Hammer. No such sale had been made. There is no evidence that the refrigerator was then in Stewart Appliances’ shop or where it was, but some time later it was located at Rivervale and the defendant took possession of it, and thereafter refused to deliver it to the plaintiff. By s 21 of the Sale of Goods Act 1895, which restates the common law, “where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”. This section however, is not to affect the provisions of the Factors Acts 1823 to 1878. The plaintiff’s case is put on two grounds. The first is that by permitting the refrigerator to be held by Stewart Appliances in its shop on display, the defendant is estopped from denying that firm’s authority to sell it to the plaintiff. The second is that the Factors Acts enable the plaintiff to acquire a good title to the refrigerator as a bona fide purchaser from Stewart Appliances without notice of the defendant’s rights. The first ground can be disposed of briefly. Assuming (although there is no evidence on this) that between 28 September and 16 October the refrigerator was on display in Stewart’s shop in such manner that an intending customer visiting the shop would conclude that it was Stewart’s to sell, this cannot assist the plaintiff who had no knowledge of the particular refrigerator, had not seen it in the shop, and did not purport to buy it in reliance upon Stewart’s possession of it. There was thus no ostensible authority, so far as the plaintiff was concerned, conferred on Stewart’s to sell the refrigerator, nor was the plaintiff in any way misled by any conduct on the part of the defendant. The appeal should, accordingly, be dismissed. NEVILLE J: The evidence as to the conditions under which this particular refrigerator was originally delivered by the respondent to Stewart Appliances is rather vague and equivocal. The delivery note after quoting an “Entry 120368” and the date the refrigerator was despatched “28/9/62” bears the words, “ON CONSIGNMENT FOR DISPLAY OR RETURN”, and then the description and serial number of the refrigerator. The evidence of the respondent’s accountant, Boxall, was to the effect that “Stewart Appliances” were electrical traders, who had been purchasing (respondent’s) goods on COD but who then approached him (Boxall) with a request that they be permitted to open an account and trade on a credit basis, which was agreed to by the respondent. Subsequently it was agreed that certain stocks should be put on consignment. Boxall said: The intention was to make sure we [Metters] had a variety of goods on display to obtain sales of refrigerators, stoves, etc. If a customer wanted to buy, a similar model would be delivered … On that evidence I would have thought that the operative words on the “delivery note” were “on consignment”, as Metters’ accountant, Boxall seemed to give to the words “on display” or “for display”, the meaning of “on display for sale” or “for display for sale” as he said that Stewart’s might have had “on display” goods they had purchased COD, goods they had purchased on credit, and goods they had received on consignment. He also said the last method under which goods were delivered to Stewart’s was “on consignment, but goods sale suffered on credit”. I would, therefore, have inferred that Stewart’s had the respondent’s express authority to sell goods, such as the refrigerator in question, delivered “on consignment for display or return” on the understanding that if any such goods were sold, Stewart’s would be liable to pay to the respondent their wholesale price but that if they were not sold they could be returned to the respondent. This is consistent with the ordinary meaning of the term “on consignment” and it seems to me that any other interpretation would mean 216 [4.55]

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Universal Guarantee Pty Ltd v Metters Ltd cont. that except for the initial delivery of a sample model of each appliance, the arrangement made in September 1962 between the respondent and the retailer, whereby the terms of delivery were changed from “COD” and “on credit” to “on consignment”, would have been rendered quite meaningless. But even if one adopts the magistrate’s construction of the arrangement between the respondent and Stewart Appliances, viz that the latter had no authority sell the goods delivered “on consignment for display or return” but only to display such goods as not being for sale but only as samples of what goods could be purchased if desired, it is an inescapable inference from the evidence that the respondent knew that such goods would be displayed as if for sale, with nothing to distinguish them from other goods, the property of Stewart Appliances, which were at the same time being displayed for sale by that firm in the ordinary course of its business. In those circumstances it seems to me that Metters stood by and permitted the retailer to hold itself out to all intending purchasers as being the ostensible owner of all such goods on display or at least of having authority to sell such goods as owner. Here the respondent had delivered to Stewart Appliances, which was a retailer of refrigerators, a refrigerator to be placed among its stock of other refrigerators which were displayed for sale, a refrigerator which bore no notice or other warning to distinguish it from those other refrigerators displayed for sale of which the retailed was the owner or at least had authority to sell. In those circumstances, I think it quite clear that the respondent is estopped from denying the retailer’s authority to sell to any person who bought that refrigerator from the retailer by reason of the retailer having possession of it. But it is submitted on behalf of the respondent that even were the respondent to be estopped from denying the retailer’s authority to sell as against a purchaser who had visited the retailer’s premises, and selected and purchased, either on case or terms, the refrigerator in question from the refrigerators on display in those premises, no such estoppel could arise as against the appellant who, as far as the evidence showed, had never seen this particular refrigerator in the possession of the retailer but had acted entirely on the faith of the forged hire-purchase agreement. It seems to me, however, that the appellant only bought the refrigerator in reliance on Stewart Appliances’ possession of it. The hire-purchase agreement purported to cover a “Metters 13 Fridge Serial No 1861” – particulars which could only be ascertained by someone having possession of the appliance. Had a fictitious number been inserted in the agreement then, of course, there would have been no goods in the retailer’s possession complying with the description and no sale would have taken place. But it appears to me that the appellant relied as much on the retailer’s possession of the refrigerator as if one of its officers had, immediately before the appellant agreed to purchase it under the dealer’s finance arrangement, visited the retailer’s premises to ascertain its serial number. It seems to me that the appellant was justified in assuming that a refrigerator which was described by its make and serial number in a hire-purchase agreement was then in the possession of the retailer and I am inclined to think that the appellant relied on such possession by the retailer just as much as if it had actually seen the appliance in the retailer’s premises. If the hire-purchase agreement had not been a forgery but a genuine transaction with a real customer who had entered into the hiring after selecting the refrigerator from those in the retailer’s premises, the respondent would, in my opinion, have been estopped from denying, as against the hirer, the retailer’s authority to sell the goods to the finance company, in order that they should be hired to the customer and, I am inclined to think, similarly estopped as against the finance company, the appellant, from denying the retailer’s authority to enter into the transaction. If that be so, I cannot see that the fact that the hire-purchase agreement was a forgery affects the position as between the appellant and the respondent as the presentation of the forged hire-purchase agreement to the appellant still constituted an offer by the retailer to sell the refrigerator to the appellant. [4.55]

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Universal Guarantee Pty Ltd v Metters Ltd cont. However, I can appreciate the force of my brothers’ reasoning that the appellant relied not on the actual possession by Stewart’s of the refrigerator but on representations made by that firm, which representations in all probability were only possible because of that possession and I am, therefore, not prepared to disagree with their conclusion that the respondent is not estopped as against the appellant from disputing the retailer’s ownership of the refrigerator. However, in my opinion, the appeal should nevertheless be allowed on the ground that the only reasonable inference from the evidence is that Stewart Appliances had express authority from the respondent to sell the refrigerator. [Wolff CJ agreed with Jackson J.]

Leonard v Ielasi [4.60] Leonard v Ielasi (1987) 46 SASR 495 Full Court of the Supreme Court of South Australia JOHNSTON J: In view of the uncertainty which has surrounded the factual situation on which this case falls to be decided, I set out the basis on which I proceed to deal with it. 1

The plaintiffs were the owners of the vehicle in question (the vehicle).

2

The female plaintiff lent the vehicle to Christianos.

3

The registration had expired or thereafter expired; Christianos registered the vehicle in his own name without the knowledge or consent of the plaintiffs; Christianos informed the female plaintiff that he had done so; she objected; he reassured her; she took no further relevant step; the vehicle remained with Christianos, registered as above.

4

At some stage thereafter, Christianos sold the vehicle to a dealer; Christianos was subsequently charged over that transaction and pleaded guilty to false pretences in relation to the transaction, the particulars being that “on the 7th July, 1984 at Prospect, [he] obtained from Thomas Gordon Holland a valuable security namely a cheque drawn for $2,200 by falsely pretending that he was the sole owner of” the vehicle. (Holland was the dealer, trading as Prospect Motors.)

5

The dealer sold to the defendant who purchased in good faith and for valuable consider-ation without any knowledge of the circumstances.

I pause to mention the following. The evidence was that the two plaintiffs, Vincenzo and Terina Ielasi, had purchased the car. There was no evidence as to anything having been done whatsoever by the male. It appears to have been accepted that the female plaintiff had the authority of the male to act as she did; there is no evidence to this effect; but as this seems to be one of the assumed matters of fact in this case, I will deal with the matter on that basis. Before the learned trial judge (who decided the matter in favour of the plaintiffs) and before this Court, the counsel for the appellant relied upon s 21(1) of the Sale of Goods Act 1895. … In the course of the hearings before this Court, Jacobs J drew attention to the provisions of s 24 of the Act which read as follows: 24(1) Where goods have been stolen and the offender is prosecuted to conviction, the property in the goods so stolen re-vests in the person who was the owner of the goods, or his personal representative, notwithstanding any intermediate dealing with them, whether by sale in market overt or otherwise. (2) Notwithstanding any enactment to the contrary, where goods have been obtained by fraud or other wrongful means not amounting to larceny, the property in such goods shall not re-vest in the person who was the owner of the goods, or his personal representative, by reason only of the conviction of the offender. 218 [4.60]

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Leonard v Ielasi cont. Counsel’s point on s 21 was that the conduct of the plaintiffs in permitting Christianos to retain possession of the car knowing that he had without authority caused it to be registered in his name, was such conduct as precluded the plaintiffs “from denying the seller’s authority to sell”. Since s 21 is “subject to the provisions of this Act” and since the operation of s 24 would be, if it had application, to destroy the appellant’s case based on s 21, it appears appropriate to me to look first at s 24. An examination of s 24(1) shows that there are two pre-conditions to the operation of the re-vesting provision which is the heart of that section. Those two pre-conditions are expressed thus: (a)

“where goods have been stolen”; and

(b)

“the offender is prosecuted to conviction”.

Both of those pre-conditions must be established. The section does not explicitly say that the fact of the conviction shall be decisive of the fact of stealing, although obviously some argument could be mounted that that is implicit in the section. However, as Jacobs J has pointed out in his draft reasons for judgment, which I have had the advantage of reading, Wright J (as he then was) held that it was open to him in subsequent civil proceedings to find that the goods had not been stolen (but had been obtained by false pretences) albeit that the jury had convicted of larceny; and that decision was followed in Clouston v Bragg [1949] NZLR 1073. That approach is arguable because the words of the section, “where goods have been stolen and the offender is prosecuted to conviction”, are capable of being construed to mean that in the civil proceedings both the fact of stealing and the fact of prosecution to conviction must be proved. It is, however, in my view, not arguable that the section can apply where the offender has not been prosecuted to conviction in respect of the stealing. In this case Christianos was charged on one information with two counts; with larceny as a bailee and with the false pretences charge, the particulars of which I have mentioned above. He pleaded guilty to the false pretences (the victim of which offence was the car dealer) and the Crown entered a nolle prosequi in respect of the larceny. Of course we do not know what Christianos’ account of this was. He may have maintained to the police that he had authority to sell but that in order to avoid having to go to the trouble of explaining the registration to the dealer and providing proof of ownership by the plaintiffs and then proof of the fact that they had authorised him to sell, he proceeded by alleging that he was the owner and relying on whatever he did rely on to establish his ownership, presumably the fact of registration inter alia. In short, I make no comment about the propriety of the Crown authorities in entering a nolle prosequi on the first count, although one may take leave to doubt whether the civil consequences of doing so were adverted to. However, the fact of the matter is that Christianos has been convicted of a false pretence in relation to the dealer and has not been “prosecuted to conviction” in respect of stealing the car. In my view s 24 can have no application to the facts of this case as they have been established. Even if the first pre-condition to the operation of s 24 (that is the larceny) is assumed, it has been positively proved that the second precondition is absent. It may well be that on a proper construction of s 24(1), its operation is not limited to acts of simple larceny and convictions for simple larceny. Historically, stealing or larceny was beset with many technicalities. I apprehend that the section might well apply if the wrong-doer committed larceny as a servant or as a bailee and was convicted of such or if the offence committed was embezzlement or fraudulent conversion and the conviction was for such. The question is whether the goods have been stolen and the offender has been prosecuted to conviction for stealing. It follows, accordingly, that in my opinion, the matter falls to be determined pursuant to the provisions of s 21. The point raised is, in my view, a very important point because it has significance for title to chattels which can and do pass from hand to hand. [4.60]

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Leonard v Ielasi cont. This is an area of such common and everyday occurrence that it is manifestly of very great importance that the law should be clear. The general principle, of course, is that nobody can give a better title than he or she has. Plainly, s 21 was intended to recognise a qualification on that principle. It is argued that the section is very clear – the simple question, it is said, is, has the owner’s conduct been such as to preclude the owner from denying the authority of the unauthorised seller? It is said that the section does not set any pre-conditions for the operation of the proviso; there is nothing in the section to indicate a requirement of any special relationship between owner and purchaser; any duty of care; it is just a question of whether the conduct of the owner is such as to preclude denial of the seller’s authority. But this of course raises the question of what sort of conduct it is which will preclude an owner from denying the unauthorised seller’s authority. The learned trial judge who decided this matter in favour of the original owners, correctly pointed out that here the owners were not estopped by the representation of ownership made by the seller because they had not authorised the representation or consented to its being made: Pickard v Sears (1837) 6 Ad and E 469; 112 ER 179. The purchaser, in the particulars given in response to the interpleader summons, had relied on the principle of that case as well as referring to s 21 of the Sale of Goods Act 1895. But the principle of that case clearly has no application to the situation here. The learned trial judge rightly held that those cases where, in some particular circumstances, the act of the true owner in arming the seller with documents of title to the goods in question works an estoppel against the owner, do not apply here. Since even if the particular circumstances which attract the principle had been present, the certificate of registration of a motor vehicle is simply not a certificate of ownership. Section 20 of the Motor Vehicles Act 1959 (SA) as amended requires that an application to register a motor vehicle: “(a) must state correctly – (i) the full name of the owner of the vehicle”. By s 4 of the Act, “owner” is defined to include a person who takes a motor vehicle on hire. I do not stop to consider whether in this context “owner”, in its primary sense, is limited to the legal owner as opposed to the beneficial owner. But in the extended sense it clearly means persons who do not own the vehicle but hire it. Finally, his Honour pointed to the doctrine of estoppel by negligence which has developed around this aspect of the law. J P Benjamin and A G Guest, Benjamin’s Sale of Goods (1st ed, 1974), p 218, par 470 puts the matter this way: It would also seem that the true owner of goods may by his conduct be “precluded from denying the seller’s authority to sell” within s 21(1) of the Act where he has been negligent in allowing the seller to create an appearance of ownership of the goods. But the circumstances in which negligence on the part of the true owner can raise such an estoppel are narrowly circumscribed. It is necessary for the buyer to show, first, that the true owner owed him a duty to be careful; secondly, that in breach of that duty the true owner was negligent; and, thirdly, that this negligence was the proximate or real cause of the buyer being induced to part with the purchase price of the goods to the seller. The necessity for the duty of care was accepted by all the members of the House of Lords who decided Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890. But in that case there was a division amongst the Law Lords as to whether in the circumstances of that case the owner owed a duty to the party who purchased as a consequence of the fraud of the party in whose hands the owner had placed the goods in question (a vehicle). Lord Wilberforce was in the minority but his statement as to the circumstances which will give rise to a duty has been quoted in many places. He suggested (and the trial judge in this matter accepted his statement of the law) that the existence of a duty is to be determined by asking (at 903): Whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the “acquirer” of the property, would 220 [4.60]

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Leonard v Ielasi cont. expect the “owner” acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the “acquirer” and whether, in the face of an omission to do so, the “acquirer” could reasonably assume that no such title was claimed. Whether s 21 does require for its operation the existence of a relationship between “owner” and “purchaser” such as to give rise to a duty, has been the subject of a recent and acute difference of legal opinion in New South Wales. In Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 (a decision of the Court of Appeal), Kirby P said (at 458): The result of the line of authority which I have reviewed is that a gloss has been placed upon the language of the statute. There is nothing in the Sale of Goods Act 1923 (NSW), s 26(1), (which is in the same terms as s 21 of the South Australian Act) which pre-conditions the disentitling conduct (by which the owner will be precluded from denying the seller’s authority to sell) to the existence of a duty relationship between the owner and the innocent purchaser. That duty relationship has been read into the legislation by a long series of decisions which, in my view, reflect a fascination with the law of estoppel which preceded the enactment of the Sale of Goods Act 1893 (UK), s 21. He suggested that the plain intention of the legislation had been frustrated to the disadvantage of “the just resolution of the claims of innocent purchasers who will otherwise suffer by virtue of careless conduct on the part of the owner”. I am unclear (with great respect) as to why Kirby P should find the basis for his argument in what he asserts to be a fascination with notions of estoppel. Estoppel by no means always requires for its operation the pre-existence of a duty owed by the party estopped to the party who claims the benefit of the estoppel; and of course the very formula of “careless conduct” on the part of the owner, raises a big issue as to what is “careless” for this purpose. McHugh JA, however, held strongly to the opinion that there is no gloss, and maintained that it has always been understood by judges and text writers alike, to have been the intention of those who drafted the Sale of Goods Act 1893 that the section would apply only in a duty situation. And for this view he placed some particular emphasis on Moorgate’s case (supra) and on the fact that both those in the majority and those in the minority recognized that the existence of a duty was necessary. Glass JA supported the same position. It is true that Lord Wilberforce said (at 903) that the necessity for a duty was too well known to need complete citation. But there have been some voices to the contrary and indeed in Moorgate’s case itself, Lord Edmund Davies said (at 921): The present litigation from the county court to this House has throughout been conducted by both parties on the basis that the existence of such a legal duty was a sine qua non of negligence for the purposes both of estoppel by conduct and as affording a set-off to the claim. This is accordingly not a suitable case in which to explore the suggestion of Professor Sir Rupert Cross, On Evidence (4th ed, 1974), p 305 that: “It is possible that when the cases and underlying principles come to be authoritatively reviewed it will be found that the requirements of duty of care and proof of carelessness can be dispensed with.” But the case may yet arise when such a review will be both relevant and permissible. The passage to which Lord Edmund Davies refers in Cross is now to be found in DM Byrne and JA Heydon, Cross on Evidence (3rd Aust ed, 1986), p 159, par [3.57]. Additionally, Benjamin’s Sale of Goods from which I have already quoted par 470 in support of the requirement of a duty expressed in par 473 “Doubts as to principle”. The learned editors write: It is therefore possible that the true principle embodied in the subsection is one of estoppel by representation (whether by words or conduct) and nothing else. The question whether or not the true owner was negligent, whether he owed the buyer a duty of care, and whether his negligence was the proximate cause of the purchase of the goods, may therefore be irrelevant. [4.60]

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Leonard v Ielasi cont. However, whether or not the true view be that s 21 requires a duty of care associated with negligence and a breach of that duty, it seems to me, that this case should be decided against the owners. In my view, the decisive issue of fact is not that the owners permitted Christianos to remain in possession of the owners’ vehicle which was registered in his name, but that the owners did so well knowing that Christianos had acted dishonestly in relation to this very vehicle. The owners well knew that Christianos had misrepresented his position in relation to this vehicle to the Registrar of Motor Vehicles. He was not the owner of the vehicle in the primary sense of that term (whatever that term may mean) and he was not the hirer of the vehicle. In doing so, he had acted dishonestly towards the Registrar, without any authority from the owners and dishonestly towards the owners, at least to this extent-namely, that his acts had precluded them from registering themselves as the registered owners of the vehicle, at least until they had cleared the position with the Registrar and convinced him that the registration effected by Christianos was a nullity. The owners therefore were in the position of persons who, owning this vehicle and knowing that Christianos had acted without their authority and dishonestly in relation to the vehicle, knowing that his dishonesty in relation to the vehicle took the form of misrepresenting to the Registrar his relationship to the vehicle, permitted him to retain possession of the vehicle, knowing that the registration indicated that he had some interest in the vehicle which he did not. If Kirby P is right in his view that no duty is necessary to found the operation of s 21, the question remains as to what conduct will preclude the owners from denying the authority of Christianos to sell. It is clear that the mere fact of the true owner allowing his goods to be in the possession of another party will not suffice; it is obvious that the mere fact of the owner of a motor vehicle permitting the vehicle to be in the possession of and registered in the name of a hirer will not suffice. I would find that what precludes the owners in this case from denying the authority to sell the vehicle is their conduct in allowing him to retain possession of the vehicle registered in his name after becoming aware of his dishonest dealing with the vehicle. I would so hold whether the section requires for its operation a duty or otherwise; since I would hold that this knowledge of his dishonest dealing puts them under a duty, albeit that no duty would arise on the test propounded by Lord Wilberforce. I do not think that this court is bound by that test, since he was in the minority and the majority did not formulate such a test. And it is to be borne in mind that Lord Wilberforce in that case issued a cautionary note about the use of the word “duty” in this context (at 903): My Lords, I think that the test of duty is one which can safely be applied so long as it is understood what we mean. I have no wish to denigrate a word which, to modern lawyers, has become so talismanic, so much a universal solvent of all problems, as the word “duty”, but I think that there is a danger in some contexts, of which this may be one, of bringing in with it some of the accretions which it has gained – proximity, propinquity, foreseeability – which may be useful, or at least unavoidable in other contexts. And Lord Wilberforce then went on to set out the passage which was earlier quoted as to the circumstances which give rise to the duty. In that case he held, contrary to the majority, that a hire-purchase company, a member of HP Information Ltd (HPI) which conducted a central register recording about 98 per cent of all hire-purchase agreements relating to motor vehicles, owed a duty of care to a member dealer of HPI who purchased a motor vehicle, the property of the finance company, from a person to whom the financier had let it on hire, having first made inquiries from HPI and having been informed that “their files contain no recorded hire purchase agreement in respect of that car” (as in fact was found to be the case, the explanation for that fact lying in some undiscovered slip on the part of some employee at the finance company). 222 [4.60]

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Leonard v Ielasi cont. McHugh JA, who strongly supported the concept of the duty in Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (supra) wrote (at 473): None of the foregoing means that I think that the conception of duty in this context is a limited one. I agree with the remarks of Lord Wilberforce (at 903) in Moorgate Mercantile Co Ltd v Twitchings that the tests for duty in other fields are not wholly appropriate. No doubt the area of duty in this field is one where it is still open to the courts to develop the law, bearing in mind as Lord Wilberforce said (at 903-904), “that the duty of care should not be stretched so widely as to make it a universal duty on the part of property owners to safeguard others against loss”. And McHugh JA then quoted the passage from Lord Wilberforce’s judgment, previously quoted, as to the circumstances which give rise to the duty. In my respectful view, the description of the circumstances which will give rise to the duty as set out by Lord Wilberforce, although very appropriate to the circumstances of the case which fell to be decided, is too narrow. It is postulated by reference as to: whether having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the “acquirer” of the property, would expect the “owner” acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the “acquirer” … The emphasised words were said by McHugh JA in the judgment cited above to be “of critical importance” (at 474). In my view the requirement of knowledge or understanding common to both parties is inconsistent with the reasoning in some of the decided cases which proceed on the basis of knowledge special to the owner. In the context of this case, the critical transaction is of course the sale from Christianos to Prospect Motors. If by the words “having regard to the situation in which the relevant transaction occurred, as known to both parties”, is meant (and I think it must be) having regard to information which was common to both, then in this case, it is limited to the following, namely, that Christianos was in the possession of the vehicle, that the vehicle was registered and that he was shown as the registered owner. That was known to the true owners and known to Prospect Motors. Nothing else was within their common knowledge. Millhouse J, whose reasons I have had the advantage of reading in draft, has proceeded by way of adopting Lord Wilberforce’s test and by concluding that the owner acting “honestly and responsibly” within the meaning of that test would have taken action to get the car back. But I respectfully suggest that Lord Wilberforce’s test does not allow of this approach because the matters which could lead the “responsible” owner to get the car back are not “known to both parties”. As I suggested, and with great respect, the test is too narrow. The duty should arise in cases where there are special facts known to the true owner, which relate to the seller, but which cannot, in the nature of things, be within the compass of the knowledge of the acquirer if the seller acts fraudulently. I take an example away from the area of motor vehicles where concepts of registration and the meaning of registration may tend to obscure issues. Suppose that A owns a rather valuable textbook, now out of print and not readily available. A lends the book to B; A and B are both interested in the discipline to which the book relates and they are known to each other as fellow members of groups interested in that discipline. There is no book plate or other indication in the book of the fact that A is the owner. B is in financial difficulties; he pawns the book with a second-hand dealer who acts in good faith; B intends to redeem the pawn and return the book to A; he is unable to do so and in due course the book is sold. [4.60]

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Leonard v Ielasi cont. The circumstances in which the relevant transaction occurred (that is, the pawning) “as known to both parties” (the owner and the pawn broker), are that B has possession of the book and that the book is rather a valuable book, difficult to obtain. On Lord Wilberforce’s test, as I understand it, the question would be whether: a reasonable man, in the position of the “acquirer” of the property, would expect the “owner” acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the “acquirer” and whether, in the face of an omission to do so, the “acquirer” could reasonably assume that no such title was claimed. It would be a question of fact for the Tribunal. If the book in question was an ordinary book, clearly the answer would be “no”. Depending on how valuable and rare the book was, it may be that the acquirer could reasonably anticipate that an owner acting honestly and responsibly would mark the book as his property in a way which would be difficult to eliminate. That would be a question of fact. Suppose, however, the same circumstances, save that A sees the book in the pawn shop, contacts B, learns of B’s financial problems, makes available to B the necessary funds to redeem the book and accompanies B to the pawn broker to do so. But then, being convinced that B has acted quite out of character under the pressure of a pressing financial embarrassment which has now passed, leaves the book with him, still without a name plate or other permanent indication of A’s proprietary interest in the book. It seems to me that A’s knowledge of B’s contemporary dishonesty in relation to the same book creates a situation where A owes a duty to protect others who might be minded to acquire the book from B if B in fact acts dishonestly in relation to it. In my view the owner of goods of some substantial value who permits possession of those goods to remain with a person whom the owner knows to have acted dishonestly in relation to those goods will, except in special circumstances, owe a duty of care to others who might be minded to deal with that person in relation to the goods. The duty arises on the basis of the known dishonesty of the person in relation to those goods. The duty is not negligently to mislead others into acting to their detriment in relation to the goods. I have put the proposition in very narrow terms (goods of substantial value, a person who has acted dishonestly in relation to those goods), since I have no desire to suggest a rule of general application in an area of such diverse factual circumstances. If the view stated is correct, the owners in this case owed a duty of care to the world including Prospect Motors; they acted in breach of that duty by permitting the vehicle to remain with Christianos without taking any steps to check on what he did or to ensure that others were not misled; they are rightly precluded in terms of s 21 of the Sale of Goods Act 1895 from denying the authority of Christianos to sell; the effect of s 21 is to confer a good title on the purchaser as against the world (KCT Sutton, Sales and Consumer Law in Australia and New Zealand (3rd ed, 1983), p 280; JP Benjamin and AG Guest, Benjamin’s Sale of Goods (1st ed, 1974), p 215, par 464; Eastern Distributors v Goldring (supra) and Mercantile Credit Co Ltd v Hamblin (supra) at 270); the dealer purchaser admittedly sold to the defendants who thereby acquired good title. In coming to the conclusion that the owners breached a duty owed by them, I have been concerned as to how long they permitted Christianos to hold the vehicle after they became aware that he had registered the vehicle in his own name. If the facts were that he had immediately sold to the dealer, it might be that it was not reasonably possible for them to do anything effective in the meantime. The evidence is not very clear on this matter but I conclude, on the balance of probability, that some time elapsed. I conclude that the plaintiffs had reasonable time to take effective steps to terminate possession by Christianos. Indeed, I think that it would only have been necessary to warn Christianos that the police would be informed of the situation to secure the return of the vehicle; in any event, a report to the 224 [4.60]

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Leonard v Ielasi cont. police (or possibly to the Registrar of Motor Vehicles) with a request for assistance to recover the vehicle would have been a reasonable step in the circumstances. Had that been done, I would not be prepared to find a breach of duty. For these reasons, I would allow the appeal. [Millhouse J agreed with Johnston J; Jacobs J dissented.]

[4.65]

Notes and Questions

1. Unlike the recently introduced system for the registration of security interests in motor vehicles, the general motor vehicle registration systems have not been concerned with ownership issues but with responsibility towards government. The registered owner is the person liable for taxes with respect to the vehicle, responsible for compliance with vehicle safety requirements and responsible for activities involving the use of the vehicle. 2. The qualification to the principle of preclusion by conduct that there be a breach of a duty of care is accepted in the above case but attributes of such a duty applicable in other areas of the law are rejected. Johnstone J’s statement of the duty is expressed in terms closely related to the case. Can the nature of the duty be expressed more generally? 3. Other Australian cases on preclusion by conduct include Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395; Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452; Advance Investment Finance No 1 Pty Ltd v Commissioner for Consumer Affairs [1992] ASC 57 at 267 (NSW Commercial Tribunal).

SALES BY A MERCANTILE AGENT The Astley Industrial Trust Ltd v Miller [4.70] The Astley Industrial Trust Ltd v Miller [1968] 2 All ER 36 English High Court of Justice CHAPMAN J stated the facts, and continued: The main plank on which the defendant has relied is s 2(1) of the Factors Act, 1889, which provides that: Where a mercantile agent is, with the consent of the owner, in possession of goods … any sale, pledge, or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were expressly authorised by the owner of the goods to make the same subject to a proviso as to the good faith, etc, of the recipient, as to which there is here no question. It is to be noted that this provision is founded on three express primary conditions of a basic character, namely: (a) the goods must be in the possession of someone who is not the true owner; (b) that possession must be with the consent of the true owner; (c) the person who has this possession must be a person who fulfils the requirements of being “a mercantile agent”. A mercantile agent is defined by s 1(1) of the Act of 1889 as being [4.70]

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The Astley Industrial Trust Ltd v Miller cont. a mercantile agent having in the customary course of his business as such agent authority either to sell goods or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods. So far as these conditions are concerned, it is plain on the facts as I have found them: (a) that at the material time the car in question was in the possession of Droylsden, who were not then the true owners; (b) that this possession by Droylsden was with the consent of the true owner, Lomas; (c) that Droylsden were persons who were, albeit as a sideline and as a subsidiary to their main business of hire car operators, trading as motor dealers in the sense that they bought and sold cars, at any rate on the second-hand market. Counsel for the defendant has contended that, if these three conditions are satisfied, the situation is that a person who is in fact a mercantile agent, and who has in fact possession of someone else’s property with the consent of that someone else, is clothed with ostensible or apparent authority to make any sale, pledge or other disposition of it which may appeal to his lust for pecuniary gain or his urge to perpetrate a fraud. Counsel for the plaintiffs, on the other hand, has contended that there is inherent in the statutory language a fourth condition, namely, that the goods must have been entrusted by the true owner or with his permission to the mercantile agent in his capacity as a mercantile agent; unless this is so, there is, he contends, no basis for saying that the true owner has clothed the mercantile agent with authority to act in that capacity. Counsel for the defendant has disputed this interpretation of the statute on the basis that it involves reading into the statute words which are not there. Of course, one must always construe the words of an Act of Parliament strictly; that is, with precision. This is particularly true when questions of title are concerned and especially when the title is that of a completely honest, respectable and blameless person. The meaning of words, however, does not always end at the minimal dictionary content of each word taken as a separate entity, and this is as true of words in a section of an Act of Parliament as of words in a passage of verse or poetry. Counsel for the defendant’s construction would, for example, lead to this result: if I take may car into the local garage to have a puncture repaired, or to be greased, or to have a general check-up before going on holiday, I would be at the risk of the garage not only purporting to sell it, but actually passing good title if, besides carrying out repairs and servicing for customers, they professed the business of buying and selling motor cars (whether second-hand or new). This would seem a startling conclusion. Or to go further to extremes: if my next-door neighbour (being in fact a motor dealer) came to me and said, “My car has to go into dock for a fortnight. You are going on a cruise for your holidays. Would you, as a friend, lend me your car while you are away?” If, as one neighbour to another, I yielded to his importunity, I would, according to counsel’s argument, be at risk of losing my car, merely because he happened to be a motor dealer, if he decided to flog it to some fly-by-night. At such a conclusion one’s commonsense revolts. The authorities seem to be all one way on this point, namely, in favour of counsel for the plaintiff’s argument and against counsel for the defendant. In Oppenheimer v Frazer and Wyatt [1907] 1 KB 519 at 517 Channell J, said: It seems to me that the true rule is that where there is a consent of the owner of the goods to the possession of the goods by the mercantile agent as a mercantile agent and that is the important part of the matter that then the section applies, provided the other conditions are fulfilled … In Pearson v Rose & Young Ltd (Little, Third Party, Marshall, Fourth Party) [1950] 2 All ER 1027 at 1032; [1951] 1 KB 275 at 288, Denning LJ said: (iii) If the true owner consents to the mercantile agent having the goods for repair but not for sale, is that a consent which enables the Factors Act to operate? The answer would seem at first sight to be “Yes”, because it is undoubtedly a consent to the agent having possession, but this 226 [4.70]

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The Astley Industrial Trust Ltd v Miller cont. needs testing. Suppose, for instance, that the owner of furniture leaves it with a repairer for repair and that the repairer happens to be a dealer as well. Does that mean that the repairer can deprive the true owner who did not know the repairer to be a dealer, and, even if he did, why should that incidental knowledge deprive the true owner of his goods? Such considerations have led the courts to the conclusion that the consent, which is to enable the Factors Act to operate, must be a consent to the possession of the goods by a mercantile agent as a mercantile agent: see per Channell J, in Oppenheimer v Frazer and Wyatt [1907] 1 KB at p 527, and per MacKinnon J, in Staffs Motor Guarantee Ltd v British Wagon Co Ltd [1934] All ER Rep at p 324; [1934] 2 KB at p 313. That means that the owner must consent to the agent having them for a purpose which is in some way or another connected with his business as a mercantile agent. It may not actually be for sale. It may be for display or to get offers, or merely to put in his showroom, but there must be a consent to something of that kind before the owner can be deprived of his goods. Counsel for the defendant has contended that this formidable body of authority has all been swept away by Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] 2 All ER 105; [1965] AC 867. That case dealt with s 28(1) of the Sale of Goods Act 1923-1953, of New South Wales, which covers cases where a person, having sold goods, continues in possession of the goods. That is the equivalent of s 25(1) of our Sale of Goods Act, 1893. The Privy Council, in a judgment delivered by Lord Pearce, held that the continuity of possession required by the section was continuity of a physical possession, and that it did not matter if, by a private transaction, there was a change in the legal nature of the possession, eg, from possession of a seller, paid or unpaid, to possession of a bailee under a hire-purchase agreement. In so holding, the Privy Council expressly dissented from the view expressed by MacKinnon J, in Staffs Motor Guarantee Ltd v British Wagon Co Ltd [1934] All ER Rep 322; [1934] 2 KB 305 (and followed without discussion by the Court of Appeal in Eastern Distributors Ltd v Goldring (Murphy, Third Party) [1957] 2 All ER 525; [1957] 2 QB 600). But this view of MacKinnon J, as to the effect of s 25(1) of the Sale of Goods Act 1893, is entirely separate and distinct from the view expressed by the same judge in the same case on the effect of s 2(1) of the Factors Act 1889. On the Sale of Goods Act point, the learned judge has been overruled, but I find nothing in the Pacific Motor Auctions case [1965] 2 All ER 105; [1965] AC 867 to suggest that the learned judge’s point of view on the Factors Act point has been in any way eroded. To achieve that, it would have been necessary to say, not merely that MacKinnon J, was wrong, but also that Channell J, Denning LJ, and Willmer LJ were all wrong – and there is no hint of that at all. Accordingly, I take it to be well settled and unchallenged law that the statutory power to pass title which is vested in a mercantile agent depends on his having possession in his capacity as a mercantile agent and on the true owner having consented to his having possession in that capacity. In the present case, on the facts as I have found them, Droylsden did not have possession of the Vauxhall in their capacity as mercantile agents, nor did Lomas consent to their having possession in that capacity. Droylsden, therefore, had not power to pass title to anybody.

[4.75]

Notes

1. Whilst the decision reaffirms the need for the mercantile agent to be entrusted with the goods in the capacity of a mercantile agent, entrusting does not require the grant of an authority to deal in the goods. As the extract from Pearson v Rose & Young Ltd [1950] 2 All ER 1027; [1951] 1 KB 275 in The Astley Industrial Trust Ltd v Miller [1968] 2 All ER 36 at [4.70] indicates even a display to gain offers is sufficient for this purpose. [4.75]

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2. The basis for the passing of title by a mercantile agent is that an agent has a customary authority and third parties are entitled to assume that this authority exists in any particular case in the absence of anything to the contrary. But the passing of title depends on the entrusting of goods to a mercantile agent by the true owner not merely possession of goods by a mercantile agent. The third party will normally only be aware of the fact of possession. 3. The person dealing with the goods must be a mercantile agent. Such a person is defined as “mercantile agent having in the customary course of his business as such an agent, authority to sell goods or to buy goods or to raise money on the security of goods”: Oppenheimer v Attenborough [1908] 1 KB 221. This definition is based on that in the relevant statutes. Under this definition a mercantile agent is someone who has as a primary business function the buying and selling of goods on behalf of other people. Thus, examples would be (i) an auctioneer; (ii) a purchasing agent, for example, of agricultural and foodstuff products; (iii) second-hand shops operating on a commission basis for selling the goods or others. Seemingly, the definition would not include (i) a person merely operating one-off/ad hoc on behalf of another in any particular sale or purchase if the person was not in business as such an agent; and (ii) more obviously, a person who was in business buying and selling things on their own behalf, for example, buying goods as owner and reselling them at a profit. Thus, the definition would not include car dealers or traders/shopkeepers generally. However both of the extracted cases assume rather than argue that second-hand motor vehicle dealers are mercantile agents. It is not clear that the courts have based this characterisation on the fact that often the motor vehicles are owned by a finance company rather than the dealer. Otherwise dealers do not commonly sell on behalf of third parties. 4. The circularity of the definition of mercantile agent was pointed out by Judge Daughterty in the decision in Monk v Custom Credit Corporation Ltd (1982) 104 LSJS 310. That case involves an interesting series of transactions to which the passing of title provisions are applied.

Associated Midland Corporation v Sanderson Motors Pty Ltd [4.80] Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395 Supreme Court of New South Wales Mr James Francis O’Connor was, in 1981, ostensibly at least, a highly successful and reputable businessman in Melbourne. He headed a group of companies which have been loosely referred to in the case as “the O’Connor Group of Companies”. Included within this group of companies was a company which operated a Mercedes Benz dealership, Kew Star Motors Pty Ltd (herein called “KSM”) and a property development company, Trak Investments Pty Ltd (herein called “Trak”). He was a man who gave all the appearances of being of great substance and was known to, and well regarded by, Mr Frisby, the branch manager of the plaintiff. Mr Sanderson, the managing director of the first defendant, also knew of him by reputation. In August 1981 he decided to acquire a Rolls Royce. He wanted this for his personal use and also for the chauffeuring of potential customers of Trak to some of its property estates. The plaintiff, when approached, agreed to finance the purchase of the Rolls Royce. Consequently on 3rd September, 1981, the plaintiff, as is common in financing arrangements of this nature, purchased a Rolls Royce registered number BEE-111 from the Melbourne Rolls Royce agent, Kellow-Falkiner Motors Pty Ltd. On 228 [4.80]

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Associated Midland Corporation v Sanderson Motors Pty Ltd cont. the same day the plaintiff leased the Rolls Royce to Trak. The agent delivered the vehicle directly to Trak and O’Connor signed an acknowledgment of receipt of the vehicle. It is unnecessary to refer to the terms of the lease in detail but I note that: (1)

It provided for quarterly payments, in advance, of $19,641.10.

(2)

It contained a term whereby the lessee, Trak, agreed, inter alia, not to part with possession of the vehicle.

(3)

It contained an additional special clause which read: Where the goods comprise a motor car, as defined in the Motor Car Act 1958 (as amended) of Victoria, or more than one motor car, the lessee shall forthwith register the motor car, or motor cars, as the case may be, in his name as “owner” and in the lessor’s name as the “proprietor”, in accordance with the registration provisions of the said Act.

Thereafter Trak kept the vehicle and maintained payments (in a not altogether satisfactory fashion) under the lease until its sale for $110,000 on 28th September, 1982, to the first defendant. Since that date possession of the vehicle has remained with the first defendant. The plaintiff became aware of the sale in mid-December 1982 and has brought these proceedings against the first and second defendants to recover the car and for damages. The second defendant, a finance company, is sued because it claims to be the true owner pursuant to “a used vehicle bailment agreement” between it and the first defendant. The basis of the plaintiff’s claim is that it became the owner of the car in September 1981, and is entitled to possession. It claims that the sale to the first defendant was in breach of the lease agreement and was ineffective to pass title to the motor vehicle. The law The defendants have raised defences under the Sale of Goods Act 1923, and the Factors (Mercantile Agents) Act 1923. It is convenient to deal with these defences separately. It is asserted by the defendants that the sale to the first defendant was effected by KSM which was, at the material times, a mercantile agent “entrusted” with the car; that the sale was effected in the ordinary course of business and the first defendant bought in good faith without notice that KSM did not have authority to sell. It is not disputed that KSM was a mercantile agent but the plaintiff denied: (a)

that KSM was entrusted with the car;

(b)

that the sale was in the ordinary course of business; and

(c)

that the first defendant took in good faith and without notice.

The facts – in the ordinary course of business It was said that there was nothing extraordinary about KSM selling through Ward; it had done so before on a number of occasions. O’Connor’s evidence did not support this submission. He said that Ward had previously on, I think, four occasions sold cars for “himself or one of his companies”. Ward said he had acted for KSM but I think this was an assumption by him and does not reflect the real position. The cars concerned in the previous transaction were not of the kind marketed usually by KSM and were all, almost certainly, O’Connor’s own vehicles. I conclude that O’Connor’s statement was most probably accurate and I am not satisfied that Ward had ever acted for KSM on the sale of vehicles in Sydney. [4.80]

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Associated Midland Corporation v Sanderson Motors Pty Ltd cont. Furthermore, neither the evidence of Sanderson nor any other witness suggested that the particular method of sale was normal in the trade. Neither KSM nor the first defendant had adopted the procedure followed in this instance nor was it suggested that it was normal for mercantile agents to retain wholesalers for interstate sales. The evidence tended, in my view, to support the proposition that the sale by an interstate mercantile agent through a wholesaler was a quite unusual event. Not only was KSM adopting an unusual procedure for the disposal of a luxury motor vehicle but, during the course of negotiations, it indicated a readiness to accept a price markedly below that which it initially sought. The new price was, in Sanderson’s opinion, a bargain price. In all these circumstances I have concluded that the defendants have failed to satisfy me that the sale was effected in the ordinary course of business. The facts – good faith and notice The final arguments were directed to good faith and notice. I am quite satisfied that Sanderson (and thus the first defendant) acted in perfectly good faith. The circumstances in which he obtained possession and the entry in the service book would not have caused him disquiet in view of his knowledge that O’Connor was the head of both companies. In addition his inquiry of the Victorian Motor Registry coupled with his belief of O’Connor’s reputation reasonably allayed any fears that O’Connor (or one of his companies) might not have the right to sell. But the issue of notice, is not so simple. What the defendants have to establish is that the first defendant did not have notice, at the time of purchase, of the mercantile agent’s want of authority to sell the vehicle. The entry in the service book and his own reference to Trak as owner in the form he submitted to the second defendant, it is said, proved he did have notice that KSM did not have the requisite authority. In my judgment the fact that Trak and KSM were both “O’Connor” companies answers this submission. One would naturally assume that Trak authorized the sale by KSM or the existence of some innocent inter-company arrangement. The difference between the service book and registration would not, in these circumstances, provide grounds for suspicion, nor require the making of further inquiries. After all the need for inquiry would only arise when information was acquired which would raise a real suspicion of want of authority in the mercantile agent. The difference already adverted to might, in other circumstances, provide such information. But here it was, in my view, not suggestive of anything untoward. The dramatic drop in price could, if coupled with other facts suggesting that something was amiss, call for further inquiry. But in the absence of such material the drop in price is certainly insufficient to support a contention that the purchaser was aware of facts telling of KSM’s want of authority. Accordingly I would hold that the defendants had satisfied the proviso. [Because the sale was held not to be in the ordinary course of business, the defendants did not obtain good title.]

[4.85]

Notes

1. To pass good title the sale by a mercantile agent must be in the ordinary course of business. In one sense it is extraordinary to sell outside the authority given to the agent. The courts have treated the concept as one of observing appearances of normality, of 230 [4.85]

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professional conduct: the mercantile agent must act in a way a mercantile agent would normally act, selling the goods in a way that does not raise any suspicion by dealing openly, in the proper premises during normal business hours and employing suitable documentation. See also Magnussen v Flanagen [1981] 2 NSWLR 926. 2. A person seeking to obtain title through any one of the exceptions to the nemo dat rule must show that the person has acted honestly and without notice of the conflicting interest. It has been consistently held that with respect to dealings in goods, honesty relates to the actual state of mind of the person in question. A clear difference is said to exist between dealings in goods and dealings in land. With respect to land, a person seeking to acquire an interest is under a duty to carry out those inquiries which are deemed to be reasonable in the circumstances. The person is deemed to be aware of any facts which those inquiries would have revealed. This result flows from the doctrine of constructive notice which has been a major equitable principle, although today significantly modified in relation to the Torrens System (see [5.45]–[5.55]). The principles applying to dealings in goods were reviewed by the Full Court of the Federal Court in International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561. In that case the court emphasised the principle that to shut one’s eyes to the truth was the same as being aware of the truth and added that in a civil context honesty is determined in an objective manner.

SALES BY PERSONS WITH A VOIDABLE TITLE Car and Universal Finance Co Ltd v Caldwell [4.90] Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 225 English Court of Appeal The defendant in the interpleader issue, John David Balfour Caldwell, lived at Bosham and was the owner of a Jaguar motor car, which on Saturday, January 9, 1960, he advertised for sale in a local paper. On Sunday, January 10, he was visited by two men calling themselves Norris and Foster; the latter appeared to be the servant or agent of Norris. They wished, they said, to buy the Jaguar car for £975, and paid £10 in cash as a deposit. Caldwell was unwilling to let the car go out of his possession except for cash. On Tuesday, January 12, however, he was induced by Norris to let them take it away, leaving with Caldwell a Hillman car of much less value as security, and also a cheque for £965 drawn on the Midland Bank Ltd, 114, London Road, Brighton, and signed “For and on behalf of Dunn’s Transport, ‘W Foster, F Norris’”. The next morning, January 18, when the bank at Brighton opened at 10 am Caldwell was there to present the cheque. The cheque was not met and the manager told him that it could not be met from that account, that the same thing had happened before, and he advised him to go to the Shoreham police. Caldwell took a taxi at once and went there. The police produced a photograph of a wanted man who was the same man, Norris, who had induced Caldwell to part with his car. The police immediately put out a wireless call to all their police patrols, to try to find the car. They told Caldwell that there was a warrant out for the arrest of Norris in the name of Rowley, and that they had been watching his house for several days and had not found him. In the afternoon of the same day Caldwell telephoned to the offices of the Automobile Association, who in turn sent out a call to all their patrols to try and find the car. It was agreed that the car had been obtained from Caldwell by false pretences and that, the cheque being worthless, Caldwell had been deceived and defrauded. It was further agreed that the Hillman car left as a security was also worthless to him, since Norris had no title to it, and that Norris had obtained a voidable title to the Jaguar car. Sometime on January 13, Norris sold and delivered the Jaguar car to Motobella Co Ltd (hereinafter referred to as “Motobella”), who, it was further agreed, had notice of the defect of title. The previous [4.90]

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Car and Universal Finance Co Ltd v Caldwell cont. week Motobella had had a similar transaction with Norris, and if they did not know the details of the actual fraud they had notice from which they could infer that he had not come by it honestly. On January 15, Motobella sold the car for £950 to G & C Finance Corporation Ltd (Hereinafter called “G & C Finance”) who purported to hire it to one “Alfred Harry Knowles”, who appeared to have been a fictitious hirer. Nothing was known of him either at the private or at the business address named on the hire-purchase form, and when demands were made on him for payment nothing was received. A few weeks later, in March, 1960, Motobella put forward to G & C Finance another transaction in respect of the same Jaguar car, which bore the appearance of their taking back the car from Knowles and proposing another hirer, a Miss P Stockwin. This proposal was also accepted by G & C Finance. According to the documents this hirer (if she existed) also fell into arrear and G & C Finance authorised Motobella to repossess the vehicle. Motobella then, on behalf of G & C Finance, sold it to a dealer in Brighton named David McGhie, trading as Brunswick Car Sales. This dealer, on August 10, 1960, put forward hire-purchase proposals to Car and Universal Finance Co Ltd, the plaintiffs in this interpleader issue (hereinafter referred to as “Car and Universal Finance”), and on August 13, 1960, Car and Universal Finance bought the car in good faith and without notice of any defect in title, paying McGhie £595 in cash, and letting it out on hire purchase. Meanwhile, on January 20, 1960, the car had been found at Bosham, being driven by one Brian Charles Allen, a director of Motobella, who claimed that his company had bought it and that it was their property. On January 20, 1960, Caldwell’s solicitors demanded of Motobella’s solicitors the return of the car, but they claimed to have goodwill. Later Rowley, alias Norris, was arrested and pleaded guilty to obtaining cars (including the Jaguar car) by false pretences. Caldwell sued Motobella for the return of the car. They claimed in their pleadings that they had bought it in good faith, and that it was their property. SELLERS LJ: This appeal raised a primary point in the law of contract. The question has arisen whether a contract which is voidable by one party can in any circumstances be terminated by that party without his rescission being communicated to the other party. Lord Denning MR has held in the circumstances of this case that there can be rescission without communication where the seller of a motor car, who admittedly had the right to rescind the contract of sale on the ground of fraudulent misrepresentation, terminated the contract by an unequivocal act of election which demonstrated clearly that he had elected to rescind it and to be no longer bound by it. The general rule, no doubt, is that where a party is entitled to rescind a contract and wishes to do so the contract subsists until the opposing party is informed that the contract has been terminated. The difficulty of the seller in this case was that, when he learnt of the fraud and, therefore, ascertained his right to terminate the bargain, he could not without considerable delay find either the fraudulent buyer or the car which had been sold. Such circumstances would not appear to be so rare in transactions in motor cars (or horses in earlier days) that they would not, it might be thought, have given rise to litigation and an authoritative decision, but it seems that over the years the point in issue has not been decided in any reported cases in similar or comparable circumstances. The decision of Lord Denning MR that the defendant had established a rescission on January 13, 1960, was strongly attacked before us on the ground that, though interesting, it was contrary to authority and was not supported by the various cases of election which the judge found comparable and where communication was, it was said, not required as an essential prerequisite – and reference was made in the judgment to termination of a lease for forfeiture, ratification, repudiation and affirmation of a contract. Much of the argument before us was an endeavour to show that these illustrations and comparisons were either fallacious or ambiguous. I do not pursue them for, with respect, I do not find them helpful to the decision, except possibly in the case of an affirmation of a contract which is an election to the contrary effect to a disaffirmation. An affirmation of a voidable contract may be established by any conduct which unequivocally manifests an intention to affirm it by 232 [4.90]

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Car and Universal Finance Co Ltd v Caldwell cont. the party who has the right to affirm or disaffirm. Communication of an acceptance of a contract after knowledge of a fundamental breach of it by the other party or of fraud affecting it is, of course, evidence establishing affirmation but it is not essential evidence. A party cannot reject goods sold and delivered if he uses them after knowledge of a right to reject, and the judgment cites a case where an instruction to a broker to re-sell was sufficient affirmation of the contract in question even though that conduct was not communicated. It may be said that a contract may be more readily approved and accepted than it can be terminated where a unilateral right to affirm or disaffirm arises. The disaffirmation or election to avoid a contract changes the relationship of the parties and brings their respective obligations to an end, whereas an affirmation leaves the contract effective though subject to a claim for damages for its breach. Where a contracting party could be communicated with, and modern facilities make communication practically world-wide and almost immediate, it would be unlikely that a party could be held to have disaffirmed a contract unless he went so far as to communicate his decision so to do. It would be what the other contracting party would normally require and unless communication were made the party’s intention to rescind would not have been unequivocally or clearly demonstrated or made manifest. But in circum-stances such as the present case, the other contracting party, a fraudulent rogue who would know that the vendor would want his car back as soon as he knew of the fraud, would not expect to be communicated with as a matter of right or requirement, and would deliberately, as here, do all he could to evade any such communication being made to him. In such exceptional contractual circumstances, it does not seem to me appropriate to hold that a party so acting can claim any right to have a decision to rescind communicated to him before the contract is terminated. To hold that he could would involve that the defrauding party, if skilful enough to keep out of the way, could deprive the other party to the contract of his right to rescind, a right to which he was entitled and which he would wish to exercise, as the defrauding party would well know or at least confidently suspect. The position has to be viewed, as I see it, between the two contracting parties involved in the particular contract in question. That another innocent party or parties may suffer does not in my view of the matter justify imposing on a defrauded seller an impossible task. He has to establish, clearly and unequivocally, that he terminates the contract and is no longer to be bound by it. If he cannot communicate his decision he may still satisfy a judge or jury that he had made a final and irrevocable decision and ended the contract. I am in agreement with Lord Denning MR who asked (Ante, p 531) “How is a man in the position of Caldwell ever to be able to rescind the contract when a fraudulent person absconds as Norris did here?” and answered that he can do so (Ante, p 532) “… if he at once, on discovering the fraud, takes all possible steps to regain the goods even though he cannot find the rogue nor communicate with him”. The plaintiffs contended that in Scarf v Jardine (1882) 7 App Cas 345 Lord Blackburn laid it down that election to avoid a contract is not completed until the decision has been communicated to the other side (7 App Cas 345, 361) “in such a way as to lead the opposite party to believe that he has made that choice”, and they relied on the many works of authority which state that where a right of election exists there has to be communication. Scarf v Jardine (Ibid 345) is a very different case from the present. It is so well known and so often cited that it does not call for analysis. In that case Lord Blackburn and the authors, in the various works referred to, had not in mind, in enunciating a general principle, the circumstances and the arguments which have arisen in the present case. Even in the light of this statement of the law it was conceded – and rightly so – that if the defendant could have found the car and had retaken it without the knowledge of the buyer, but before resale to an innocent purchaser, the contract would have been at an end and the title restored to the defendant. Such an act would have been an unequivocal act of election to disaffirm the contract. In the case of an innocent misrepresentation, in circumstances which would permit the party misled to rescind, the other party would not deliberately avoid communication (for that would seem [4.90]

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Car and Universal Finance Co Ltd v Caldwell cont. to negative innocence) and circumstances would be rare where communication could not be readily made in one way or another. If communication were possible, it is difficult to see how there could be rescission without communication, and the inference would be that the contracting parties required communication of termination. Special circum-stances may arise and call for future consideration but I do not think the comparison made in argument on behalf of the plaintiffs between innocent and fraudulent misrepresentation invalidates the judgment of Lord Denning MR. It has to be recognised that in transactions such as this where fraud intervenes, some innocent party may have to suffer, and it may well be that legislation is overdue to do justice between the victims of fraud and to apportion in some way the loss. In the present case, however, I can see nothing unjust in the loss falling on G & C Finance (against whom the plaintiffs can claim redress), who made the minimum inquiries, who bought a car, which, apparently, they never saw and hired it out to a man, of whose existence and identity they did not know, and who may well have been fictitious, rather than that the loss should fall on the defendant, who acted immediately and did all in his power to retract the transaction. I would dismiss the appeal on this issue and that is sufficient to decide the appeal in the defendant’s favour. The first ground of Lord Denning’s judgment is sufficient for the respondent’s success on this interpleader issue and in my opinion the appeal should be dismissed. [Upjohn and Davies LJ agreed.]

[4.95]

Notes and Questions

1. The normal situation in which a person will obtain a voidable title is where the person induces a sale by fraud. A buyer of goods has one principal contractual obligation which is to pay for the goods and so the most common fraud is payment by a worthless cheque. In an attempt to avoid the operation of the buyer with a voidable title principle, original owners argued that rather a voidable title passing no title at all passed. They argued that the transaction was not merely voidable for fraud but of no effect because the purported buyer was an imposter. The characterisation of imposter was possible because fraudulent parties adopted an alias to make the owner more inclined to accept the worthless cheque. Thus the contractual doctrine of mistake was much canvassed. It now seems fairly well established that where an owner of goods deals with someone before them under a mistaken belief as to the person’s identity there is nonetheless a contract with the person: Lewis v Averay [1992] 1 QB 525. 2. The decision in the above case represented a significant departure from the previously understood position that avoidance requires notification to the other contracting party. Indeed the decision seems only to have been reported because the issue arose again in Newtons of Wembly Ltd v Williams [1965] 1 QB 560. There remains scope for argument in Australia that the strict position as to avoidance should be maintained. 3. A different result was reached in Newtons of Wembly Ltd v Williams [1965] 1 QB 560 on the basis of the buyer in possession exception. Why was that exception was not also relevant in Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 225?

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4. The nemo dat quod non habet principle accepts that a buyer with a voidable title can pass that title (a voidable title) by way of gift or by a sale to an accomplice even though that person is not a buyer in good faith for value without notice. That person has a title until the title is avoided. 5. Was there anything in the conduct of the third buyer which may have swayed the court to find for the original owner? Does this question tell us anything about the nature of notice under these exceptions? 6. To what extent does the seller with a voidable title role correspond with the rule whereby a registered proprietor of land who has obtained title by fraud can pass an absolute title to a subsequent bona fide registered proprietor?

OTHER EXCEPTIONS TO THE NEMO DAT RULE [4.100] Of the remaining rules as to persons acquiring better title to goods than the seller had,

that relating to sales in a market overt is largely obsolete and has been abolished in many jurisdictions; those relating to buyers and sellers in possession have been largely supplanted by the Personal Property Securities Act 2009 (Cth) as the interest of the buyer or seller, who has title but not possession, is likely to constitute a security interest. The case of Ward v Stephens (1886) 12 VLR 378 provides some guide for those jurisdictions in which the market overt exception remains as to what markets in Australia constitute markets overt. A market overt must be a place authoritatively appointed by law and open to all members of the public. It seems that some markets established by local government authorities will be the only such markets in Australia. The market overt exception is thus of very limited application. This position represents a marked change from the situation in England of the 18th century but retail trading as we now know it obviously bears little relationship to trading at that time. Good title for a purchaser in many situations covered by the nemo dat exceptions is lost if the goods have been stolen and the offender is prosecuted and convicted of larceny. Property is said to revest notwithstanding any sale in a market overt or otherwise. Revesting is specifically limited to cases of larceny as opposed to fraud. See Leonard v Ielasi (1987) 46 SASR 495 at [4.60]. A further exception has been that relating to buyers in possession. This exception states that a delivery by the first buyer has the same effect as if the first buyer were a mercantile agent in possession of the goods with the consent of the owner. The first buyer is thus treated as selling as if the buyer were an authorised mercantile agent. Reference to the capacity of a mercantile agent raises the issue of the sale being in the ordinary course of business. However the first buyer is only a notional mercantile agent and it is not easy to conceive of the normal course of a notional business. In Langmead v Thyer Rubber [1947] SASR 29 Reed J largely ignored the concept. He held that the clause means that the first buyer sells as mercantile agent and thus is authorised to pass title. However in Newtons of Wembley Ltd v Williams [1965] 1 QB 560 the Court of Appeal held that the first buyer must act in the way in which a mercantile agent would normally act. In that case although a car was sold on a London street the sale was held to be in the ordinary course of business because there was an established kerbside market for cars in the particular street. The sale was in daylight hours and there was nothing on the surface underhand or unusual about it. [4.100]

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Finally title could be passed by a seller in possession. This exception applies wherever there is “a seller who continues or is in possession”. On its face the second limb seems to include everyone who has obtained possession and then seeks to sell and thus is available to persons buying from anyone subsequent to a thief. The second limb has been confined to situations where the seller first obtains possession after the sale to the first buyer and then maintains possession until the sale to the second buyer Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finances) Ltd [1965] AC 867.This limited construction was developed by the Privy Council to emphasise continuity of physical possession for the exception to apply. In today’s society should failure to collect goods from a retailer who has been paid in full mean that the buyer’s title is susceptible if that retailer enters bankruptcy before the goods are collected?

PROTECTION FOR REPUTATION Protection for reputation [4.120] The common law did little to protect persons from the use of their name or

identifications attached to their business by others seeking to profit from the others reputation. The tort of passing off did offer redress for losses where inferior products were identified with another person or their work. Gradually protection for privacy has allowed to defend aspects of personality; protection for confidential information is considered at [4.140]ff. A number of statutory codes have lead to fundamental concepts including copyright and patents; these codes are briefly outlined at [4.165]. Significant protections for names, product features and presentations have come about indirectly from s 18 of the Australian Consumer Law (ACL). This section prohibits a corporation from engaging in trade or commerce in conduct that is misleading or deceptive or is likely to deceive or mislead see [10.10] - [10.20]. One important result of these cases is that in general it is misleading or deceptive to use a name or symbol of another. Furthermore this protection applies in addition to the statutory codes outlined in the previous section. Thus in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, the High Court concluded that there could be a breach of s 52 of the then Trade Practices Act 1974 (Cth), now s 18 of the ACL, because of the similarity of design of lounge suites even though the original design had not been registered. The action failed only because of labelling which the court considered would alert a purchaser of such an expensive item to the true identity of the manufacturer.

Honey v Australian Airlines Ltd [4.125] Honey v Australian Airlines Ltd (1989) 14 IPR 264 Federal Court of Australia NORTHROP J: This application illustrates how commercialism is pervading all aspects of our society. The applicant is a person professing to be an amateur athlete. He is claiming damages from the respondents for using a photograph of him in the conduct of their business activities. He is seeking also injunctions restraining them from continuing to use the photograph. He is seeking other relief as well. Gary Honey is an outstanding Australian athlete. He is a champion long jumper and has participated in the triple jump and the 4 x 100 metre relay. He won the gold medal for the long jump at the 1982 Commonwealth Games in Brisbane. He won the silver medal at the 1984 Olympic Games at Los Angeles. He won the gold medal at the 1986 Commonwealth Games at Edinburgh. He either 236 [4.120]

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Honey v Australian Airlines Ltd cont. came first, second or third at a number of athletic meetings both within Australia and overseas between the years 1983 and 1988. He is the holder of the Commonwealth long jump record. He has been the Australian record holder nine times and the Victorian champion eleven times. He has represented Australia at the Commonwealth Games and the Olympic Games with great success and distinction with the result that he has received much publicity in the media within Australia. The applicant is, and at all material times was, a well known athlete in each of the States and the Territories of Australia by the reason of his participation and success in the Games. He would be perceived by the public as a champion amateur athlete. Australian Airlines, formerly known as TAA, is engaged in the business of providing domestic air services within Australia. It is a corporation under the Trade Practices Act 1974 (the Act). For many years Australian Airlines has produced posters for the purpose of promoting and encouraging sport within Australia. The posters normally are approximately some 74 cm in length and some 49 cm in width. Some are fixed to a solid backing. The posters are well presented and colourful. Normally they depict persons competing in a sporting activity. The posters are based on photographs. Some depict one person only, some depict members of a team or crew, some contain a number of different photographs. Sometimes the persons competing are not champions, for example one poster in evidence depicted four photographs of children competing in a little athletics competition. Another depicts a man engaged in bocce bowls. The posters are colourful and are ideal for placing on a wall for decorative purposes. At the same time they have the effect of promoting a particular sport as well as sport generally. Normally at the bottom side of the poster are words being either “TAA” or “Australian Airlines” and in the latter case the “logo” of that corporation together with words describing the sport. Australian Airlines publishes a limited number of each poster so prepared, normally about 1000 copies being produced. Copies are distributed throughout Australia through the offices of Australian Airlines at cities where Australian Airlines conducts its business, the offices being referred to as “ports”. They are distributed free to schools, sporting associations, sporting bodies and similar types of groups. Often they are supplied on request. As Mr Cumming, the airlines display manager of Australian Airlines said, the main purpose of providing and distributing the posters is to recognise sportspeople in Australia, to show the achievements of Australian sportspersons, events which take place and to encourage wider participation in sport generally. The posters are not sent to travel agents. Australian Airlines normally provide travel agents with material depicting destinations, package holidays, business services and corporate promotions. In 1987 Australian Airlines decided to produce a series of three posters based on the 1986 Commonwealth Games at Edinburgh. These three posters formed part of 18 posters provided in the year 1987. Two of the Commonwealth Games posters depicted team events namely the women’s relay team and the other was the team pursuit cycling. The third poster was based on a photograph of the applicant. This poster forms the basis of the claim by the applicant. The poster is based on a photograph taken by Tony Feder while the applicant was air-borne in the long jump at the Commonwealth Games. It has been superimposed on a colourful background highlighting different colours. It depicts the applicant clearly and highlights the energy and momentum of a champion striving his utmost to achieve success. His arms are stretched high above his head, one leg is stretching forward and the other is bent back. Concentration, determination and endeavour are shown by the facial features. The muscles are taut illustrating the extreme effort being utilised. It was described, truly, as a dynamic presentation and it is easy to understand how it could inspire others to participate in sporting activities. The photograph depicts the applicant wearing material promoting “Adidas” and “Guinness” presumably sponsors of the Games. The poster can be described as a work of art which would be sought after by many people for decorative and motivational purposes. One can visualise many young people of both sexes being very proud to have the poster fixed to their bedroom or study wall. [4.125]

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Honey v Australian Airlines Ltd cont. On the bottom right side of the poster in small print when compared with the size of the poster and the size of the photograph of the applicant are the words: ATHLETICS Commonwealth Games Edinburgh, Scotland Long Jump Gary Honey, Gold Medal Winner (Photography by: Tony Feder, Melbourne) AUSTRALIAN AIRLINES (Logo) The photo of the applicant dominates the poster. It takes a conscious effort to drag the eyes from the photo to the words. The words are legible and clear but, like the shrinking violet, seem difficult to find. They are there but must be searched for. The poster does not highlight the words “Australian Airlines”. The printed words and logo are white and are placed within an area 11 1/2 cm wide and 7 1/2 cm deep. Australian Airlines obtained the permission of Tony Feder, the photographer, to use the photo but there was no evidence as to the terms of the arrangement by which that permission was obtained. There was no evidence as to how Tony Feder came to be on the field to enable him to take the photo. There was no evidence as to who had the copyright in the photo. Australian Airlines did not seek permission from the Applicant to use the photograph. In fact, Australian Airlines had never sought permission from persons depicted in the other posters prepared by it. Australian Airlines produced 1000 copies of the poster. Of these 30 were mounted on masonite. The posters were distributed to major sporting associations, to schools and similar groups throughout Australia. The distribution commenced in the latter half of the year 1987. Some were distributed direct to associations such as the Australian Institute of Sport at Canberra and at Olympic Park at Melbourne. Others were supplied on request to other groups. Intention is not a necessary ingredient in an action based upon ss 52 and 53(c) and (d). It is for the Court to determine whether the conduct complained about does contravene those provisions. In order to succeed, the applicant has to establish that a significant segment of persons seeing the poster would be likely to associate the applicant with Australian Airlines; see 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1988) 79 ALR 299 and especially per Wilcox J at 301. At the hearing, counsel for the applicant relied strongly on opinions expressed in that case even though the applicant failed in its claim under the Act and in passing off. Nevertheless, the opinions expressed are of assistance for present purposes. On the facts of the present case, I am not satisfied that the applicant has made out a case against Australian Airlines insofar as it was based upon the Act. It is true that the name “Australian Airlines” and its logo appear on the poster and to that extent the poster promotes or advertises Australian Airlines. But regard must be had to the overall effect of the poster and the class of persons to whom the poster was directed. At the same time it must be remembered that any member of the public might see the poster. A full description of the poster has been given. Its overall effect has been stated. It was directed to school children, members of sporting clubs and associations and its purpose was to promote sport. In my opinion, it has that effect and the members of the public seeing the poster would be encouraged by the achievements of the applicant and encouraged to participate in sport and to achieve according to the best of their ability. The groups and members of groups receiving the poster would have been aware that the poster was but one of many published and distributed by Australian Airlines depicting sporting activities in which, mainly, the persons whose photographs appeared were non-celebrities. On a true analysis, the poster should be described as promoting excellence in sport and the desirability of participating in sport. The poster itself does not constitute, in my opinion, a representation that Australian Airlines was connected with the applicant, that it was permitted or licensed by the applicant in respect of the applicant’s name and photograph, that its services were sponsored or approved by the applicant or that it was sponsored by, or approved by or affiliated with the applicant. The poster does not even give rise to a state of wonder as to whether there is any connection between Australian Airlines and the applicant. It is seen as an art work supporting participation and excellence in sport and nothing more. 238 [4.125]

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Honey v Australian Airlines Ltd cont. The name “Australian Airlines” is seen as nothing more than the source of the poster. In this respect, that name is seen as being no different from the naming of the person who took the photograph. The essential aspect is the photo itself and the identification of the name of the athlete and the event in which he was competing. In my opinion, the applicant has not made a case against Australian Airlines based upon a contravention of the Act. Accordingly the declarations sought should not be made against Australian Airlines.

[4.130]

Notes and Questions

The case was decided before product endorsement became as widespread as it is today. The issue whether consumers would be misled into thinking that Gary Honey had agreed to the picture is ultimately one of fact. Do you consider that a different conclusion would be drawn today? Is the case more about financial protection of the athlete rather than misleading consumers?

Targetts Pty Ltd v Target Australia Pty Ltd [4.135] Targetts Pty Ltd v Target Australia Pty Ltd (1993) 26 IPR 51 Federal Court of Australia HEEREY J: As its name might suggest, this case arise from a dispute between two traders using very similar names. The applicant Targetts Pty Ltd (Targetts) has for many years carried on a retail clothing and footwear business in Launceston. The respondent Target Australia Pty Ltd (Target) operates some 82 discount department stores throughout mainland Australia. It is about to commence trading in Launceston. Targetts claim that by so doing Target will contravene s 52 of the Trade Practices Act 1974 (the Act) and also commit the tort of passing off. Section 52 criteria Section 52(1) of the Act provides A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Targetts’ case is that the carrying on of business by Target at its Charles Street premises under the name “Target” and with the use of the Target logo in the sale of clothing and other goods sold by Targetts would be likely to mislead or deceive the public in Launceston and its surrounding areas into believing that there is some connection between Targetts and Target and that the business of Target is associated with the business of Targetts. In assessing the effect of Target’s conduct I have to consider the effect on the relevant section of the public, including the effect on a person, not particularly intelligent or well informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is, for example, quite unusually stupid. The question is not whether the purchaser was deceived but whether the conduct was misleading or deceptive. Annand and Thompson Pty Ltd v Trade Practices Commission (1979) 40 FLR 165 at 176 per Franki J; see Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14 at 17. The relevant section of the public would appear to be retail purchasers of clothing, footwear and manchester products in Launceston and its environs, a section which would include virtually the whole population of that area, except for young children. [4.135]

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Targetts Pty Ltd v Target Australia Pty Ltd cont. It is sometimes said that conduct which creates confusion, puzzlement or wonder in the minds of the public need not necessarily contravene s 52. However such generalisations are perhaps not of great assistance in determining whether, in a given case, the conduct complained of has had, or is likely to have, the proscribed effect. Claims under s 52 based on the use of similar names and other commercial identification call for analysis of the effect, or likely effect, of the conduct complained of on the relevant section of the public and consideration as to whether that effect is caused by misleading or deceptive conduct of the respondent or by some other factor for which the respondent is not responsible. Some leading cases of the genre will be briefly examined. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216 the Sydney Centre complained that the carrying on of business by the Hornsby Centre under its corporate name was likely to mislead or deceive because its use suggested some affiliation of the newly established Hornsby Centre with the long established Sydney Centre. The High Court held that a descriptive name like “Building Information Centre” is equally applicable to any business of a like kind and thus “its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public” (at 229 per Stephen J). In McWilliam’s Wines Pty Ltd v McDonald’s Systems of Australia Ltd (1980) 49 FLR 455, McDonald’s complained of the use of the expression “Big Mac” by McWilliam’s in the advertising for some of its wine. The Full Court of the Federal Court held that McDonald’s had not established a breach of s 52. On the evidence, the expression “Big Mac” certainly identified the McDonald’s hamburger but was not synonymous with the business entity trading as McDonald’s (per Smithers J at 463). Any person who was misled or deceived by the advertisement would only arrive at this state of mind on the erroneous assumption that McWilliam’s could not lawfully use the same name for its wine pack as McDonald’s had used for its hamburger unless this was done in conjunction with McDonald’s (at 464-465). The conclusion that McWilliam’s must have made some arrangement with McDonald’s for the use of the words “Big Mac” (which in fact was not the case) rested on an assumption that the words “Big Mac” belonged to McDonald’s and could not lawfully be used by anyone without McDonald’s consent, even in relation to totally different products (per Northrop J at 474-475 and per Fisher J at 478-479). This was an erroneous assumption. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, the respondent manufactured furniture which was virtually identical in appearance to furniture sold by the applicant. However there was no suggestion of false labelling or false description. The respondent’s furniture was sold to retailers with a label of a kind normally used in the trade which clearly identified the respondent as the manufacturer. The High Court held that there had not been a breach of s 52 because any conclusion by a purchaser that the respondent’s furniture was the applicant’s was necessarily based on an assumption that in itself it was unlawful, without more, to manufacture a product which closely resembled somebody else’s (per Gibbs CJ at 198-200, per Mason J at 202-203 and 210-211). Brennan J remarked (at 225): Section 52 operates in a milieu of the external legal order so that the character of conduct which falls for consideration under s 52 is to be determined by reference to the external legal order as it exists when the conduct is engaged in. Therefore, a manufacturer who exercises his freedom to manufacture goods according to a design which is not protected by valid registration does not engage in conduct which is misleading or deceptive or which is likely to mislead or deceive. If consumers or potential consumers believe that all goods of a particular design are manufactured by him who first establishes a market reputation as a manufacturer of those goods, that belief is or may be erroneous. The error may be attributed to a preconceived belief that the manufacturer who first establishes a market reputation has a monopoly in the manufacture and sale of goods of that kind but, unless the manufacturer has 240 [4.135]

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Targetts Pty Ltd v Target Australia Pty Ltd cont. acquired a statutory monopoly, that belief is also erroneous and the error flows from a misconception of law. A later manufacturer who does no more than exercise his freedom to manufacture and sell goods made in accordance with a design in the public domain does not mislead or deceive; and if a consumer has an erroneous preconceived belief that the first manufacturer has a monopoly, a false assumption by the consumer as to the source of the later manufacturer’s goods is self-induced. That was the approach taken by the Full Court of the Federal Court with respect to trade names in McWilliam’s Wines Pty Ltd v McDonald’s Systems of Australia Pty Ltd, and I respectfully agree with it. Targetts’ case In my opinion Targetts has made out a case that by using the name “Target” and its logo, Target is likely to mislead or deceive members of the public in Launceston in a number of different ways. First, I think it likely that a significant number of potential customers who had in mind dealing with Targetts will end up going to Target. One valuable element of a trader’s reputation is knowledge and recommendation that spread by word of mouth. In the present case the names “Target” and “Targetts” are phonetically very similar. Indeed when “Target” is used in the possessive, or before a word starting with “s”, they sound exactly the same: for example, “Target’s jeans” and “Targetts’ jeans”, “the Target store” and “the Targetts store”, “the Target sale” and the “Targetts sale”. The word “Target” is in no way descriptive of the business of Targetts or Target. Its function is purely one of identification. And for that function it is particularly well suited. The word is short and easy to pronounce and remember. It carries positive connotations of achieving something desirable, something aimed at. Its impact is reinforced by the logo (both Targetts’ and Target’s). The word is the name of the logo and the logo is a picture of the meaning of the word. Take for example a mother giving her daughter money and telling her “Go to Targetts’ store in Charles Street and buy some shoes”. The child goes to Charles Street, sees Target’s store, and buys the shoes there. The conduct of Target in having its store in Charles Street and using a name which is very similar to that of Targetts, and which in many everyday collocations sounds the same, has had the consequence that the mother, acting through her agent the daughter, has been misled into dealing with Target, and not Targetts as she intended. Secondly, I think people seeing the similar name and logo being used in the same business by a new entrant are likely to believe that this could not have happened without some arrangement or connection between the old established business Targetts and the newcomer Target. Such mistaken belief may have very practical consequences which are detrimental to Targetts. For example, a loyal Targetts customer may think that the existence of some arrangement between the two, presumably freely entered into, will mean that Targetts must benefit in some way if he or she shops at Target and that Targetts is quite content for its customers to go to Target. Target’s case Target’s case is based on the difference between its style of retailing operation and that of Targetts. It says that, because Target projects a fundamentally different image from Targetts, there is no significant risk of people being misled. The existence of such a difference is obvious enough. But also obvious is the fact that each method of operation will be seen as having its own particular advantages. A shopper will recognise the convenience of shopping in Target supermarket style with self-service, wide aisles, shopping trolleys and an adjacent car park. There is convenience in being able to buy clothing and footwear at the same time as other household items. The scale of operations may result in cheaper prices, or at least the perception that such is the case. On the other hand a shopper, particularly one looking for a more expensive item, may value help and advice on matters of style, colour and fit. There may be the [4.135]

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Targetts Pty Ltd v Target Australia Pty Ltd cont. attraction of dealing with a familiar assistant who has provided good advice in the past. There may be appeal in buying a nationally advertised garment such as Levi jeans rather than a less well known house brand. But Target’s case rests on an assumption that the customer will conclude that even though two businesses appear to have very similar names and logos and are operating in the same field, the fact that they have different styles of business operation means they must be in different proprietorship and there can be no arrangement between the proprietors as to the use of those names and logos. I do not think that follows at all. To someone within Target, like Mr Coad, it may seem inconceivable that Target should conduct its business in any other way, and in particular that it should run, or be in any way associated with, a “small”, “provincial” or “old-fashioned” kind of operation (as its case variously described Targetts). However for present purposes that is not the relevant perception. What has to be gauged is the effect, or likely effect, on a member of the Launceston public familiar, perhaps for several decades, with the Targetts name and logo. Why should not such a person more readily conclude (this being a topic to which substantial enquiry and analysis is probably unlikely to be given) that the new business of Target is in some way connected with the well established business of Targetts and that this connection has been made to give to the public a choice of two different kinds of business? Why should not this conclusion be reached whether or not the person had previously been aware of Target’s operations on the mainland (given that Target had not previously traded in Tasmania)? The contrary conclusion, which happens to be the truth, is in my opinion much less likely to be drawn. It requires the hypothetical member of the Launceston public to conclude that Target has simply arrived in Launceston and without the agreement of Targetts (indeed, against its vigorous protest) set up business in the same street, selling the same merchandise under a very similar name and logo. (The tender by Target of reports of these proceedings in the Examiner is in my opinion quite insufficient to prevent a finding that a significant number of people in Launceston now and in the future will not reach this conclusion.) I think such a person would assume that there must have been some sort of arrangement between Target and Targetts because without such an arrangement Target could not lawfully do what it had. Such an assumption would not be erroneous. The circumstances of the present case contrast with those discussed above. It would be erroneous to assume that, without more, one trader could not lawfully use the same descriptive name as another (Hornsby) or use the same name in connection with a quite different product (Big Mac) or manufacture goods which were identical in appearance (Parkdale). In all these cases a wrong conclusion that there was some connection or arrangement between applicant and respondent would not flow from any conduct of the respondent but from the erroneous assumption by anyone who drew such a conclusion. But the present case, in my opinion, is on all fours with Taco Bell. In the present case, considering the conduct of Target in the milieu of the external legal order, to use Brennan J’s expression in Parkdale, what Target is proposing to do is not lawful. It is proposing to use a name and logo deceptively similar to those to which the established reputation of Targetts has attached in such a way as to confuse or deceive members of the Launceston public. The fact that Target might honestly believe it can do this, or that it does not have any intention to injure Targetts, or at any rate not beyond such injury as might be inflicted by ordinary competition between traders, is not to the point: Hornsby, 140 CLR at 228. There was some force in the point made by Targetts’ counsel that if Targetts were to establish a business along the lines of its Launceston shops within sight of Target at Camberwell or Malvern it is unlikely that Target would accept there was no risk of the public being misled or deceived and that the two businesses could “peacefully co-exist in the market place”. In my opinion the continued use by Target of the name “Target” and its logo in connection with the retail sale of clothing, footwear and manchester products is likely to mislead or deceive members of 242 [4.135]

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Targetts Pty Ltd v Target Australia Pty Ltd cont. the public in Launceston. An injunction should go to restrain such conduct unless there are countervailing discretionary grounds of sufficient weight. Discretionary factors The only discretionary ground advanced by Target was the argument that “the public interest in stimulating commercial activity and competition in Launceston favours withholding an injunction”. In Parkdale Mason J rejected a similar argument. His Honour said (149 CLR at 204-205) that he found it: difficult to accept the appellant’s notion that the general, yet clear, words of s 52(1) should be read down so as to enable the policy of freedom of competition enshrined in Pt IV (of the Act) to prevail. In a collision between one of two different statutory policies and plain words giving effect to the other statutory policy the plain words will prevail. To my mind the words “misleading” and “deceptive” as applied to conduct in trade and commerce are reasonably plain. And in a collision between the general policy of encouraging freedom of competition and the specific purpose of protecting the consumer from misleading or deceptive conduct it is only right that the latter should prevail. It would be wrong to attribute to the Parliament an intention that the indirect and intangible benefits of unbridled competition are to be preferred to the protection of the consumer from the misleading or deceptive conduct which may be an incidental concomitant of that competition. Given the statutory context here it is more likely that Parliament intended to promote free competition within a regulatory framework that prohibits the trader from engaging in misleading or deceptive conduct, even if it means that one trader cannot in particular cases compete with another trader because the opposite view would give a paramountcy to freedom of competition not accorded to it by the statute. In my respectful opinion there is no public interest in the promotion of competition by means which contravene an express statutory prohibition of misleading and deceptive conduct in trade or commerce. In any case, there is no evidence that the cessation of Target’s business in Launceston, whether in relation to goods of the kind sold by Targetts or generally, would deprive the Launceston public of an adequate choice of goods or have any effect on the existing level of competition.

[4.138]

Note and Question

Again this case arose at a time when the internationalisation of businesses and franchises was less common. Should existing businesses be protected from incursions by those from other jurisdictions, when both businesses have operated with similar identifications? What of Ugg boots?

CONFIDENTIAL INFORMATION [4.140] Rights with respect to confidential information flow essentially from protection

conferred by courts of equity. This protection has been granted on the basis of the circumstances under which the information has been provided. The remedy contrasts with the reluctance of Australian courts to protect privacy in general. The normal remedy for breach of confidence is by way of injunction to prevent the public release of private material. It is clear that the rights can be enforced against third parties but the courts have been reluctant to describe the rights of protection for confidential information as property. Liability of third parties is commonly expressed to be based on bad faith or unconscionable conduct. [4.140]

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Oxford v Moss [4.145] Oxford v Moss (1979) 68 Cr App R 182 English High Court of Justice SMITH J: This is a prosecutor’s appeal by way of Case Stated. On May 5, 1976, an information was preferred by the prosecutor against the defendant alleging that the defendant stole certain intangible property, namely, confidential information being examination questions for a Civil Engineering Examination to be held in the month of June 1976 at Liverpool University, the information being the property of the Senate of the University, and the allegation being that the Respondent intended permanently to deprive the said Senate of the said property. The facts can be stated very shortly indeed. They were agreed facts. They are set out in the case and they are as follows. In May 1976 the defendant was a student at Liverpool University. He was studying engineering. Somehow (and this Court is not concerned precisely how) he was able to acquire the proof of an examination paper for an examination in Civil Engineering to be held in the University during the following month, that is to say June 1976. Without doubt the proof, that is to say the piece of paper, was the property of the University. It was an agreed fact, as set out in the case, that the respondent at no time intended to steal what is described as “any tangible element” belonging to the paper; that is to say it is conceded that he never intended to steal the paper itself. In truth and in fact, and in all common sense, what he was about was this. He was borrowing a piece of paper hoping to be able to return it and not be detected in order that he should acquire advance knowledge of the questions to be set in the examination and thereby, I suppose, he would be enabled to have an unfair advantage as against other students who did not possess the knowledge that he did. By any standards, it was conduct which is to be condemned, and to the layman it would readily be described as cheating. The question raised is whether it is conduct which falls within the scope of the criminal law. The learned stipendiary magistrate at Liverpool was of the opinion that, on the facts of the case, confidential information is not a form of intantible property as opposed to the property in the proof examination paper itself, that is the paper and the words printed thereon. He was of the opinion, further, that confidence consisted in the right to control the publication of the proof paper and was a right over property other than a form of intangible property. Finally, he was of the opinion that by his conduct the respondent had gravely interfered with the owner’s right over the paper. He had not permanently deprived the owner of any intangible property. Accordingly, the learned stipendiary magistrate dismissed the charge. The prosecutor appeals. The question for this Court, shortly put, is whether confidential information can amount to property within the meaning of the Theft Act 1968. By s 1(1) of the statute: “A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; …” By s 4(1): “‘property’ includes money and all other property, real or personal, including things in action and other intangible property”. The question for this Court is whether confidential information of this sort falls within that definition contained in s 4(1). We have been referred to a number of authorities emanating from the area of trade secrets and matrimonial secrets. In particular, we were referred to Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd [1963] 3 All ER 402, to Seager v Copydex Ltd [1967] 2 All ER 415, to the case of Argyll v Argyll [1965] 2 WLR 790, and Fraser v Evans [1968] 3 WLR 1172. Those are cases concerned with what is described as the duty to be of good faith. They are clear illustrations of the proposition that, if a person obtains information which is given to him in confidence and the sets out to take an unfair advantage of it, the courts will restrain him by way of an order of 244 [4.145]

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Oxford v Moss cont. injunction or will condemn him in damages if an injunction is found to be inappropriate. It seems to me, speaking for my part, that they are of little assistance in the present situation in which we have to consider whether there is property in the information which is capable of being the subject of a charge of theft. In my judgment, it is clear that the answer to that question must be no. Accordingly, I would dismiss the Appeal. [The Lord Chief Justice and Winn J agreed.]

[4.150]

Notes and Questions

1. A similar result was reached in Canada, see R v Stewart (1988) 50 DLR (4th) 1. A discussion of earlier stages of the Canadian decision and of revisions to criminal statutes of deal with theft of information and the now widely-publicised activities of computer hackers is provided in Hammond, “Theft of Information” (1984) 100 LQR 252. Developments are discussed in Director of Public Prosecutions v Murdoch [1993] 1 VR 406; Leader-Elliott and Goode, “Criminal Law” in Baxt and Moore (eds), Annual Survey of Australian Law 1993 (Law Book Co, 1994), pp 221-226. Why is it so clear that there is no property in confidential information if its release would be restrained? 2. In Smith Kline and French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 (Federal Court of Australia) Gummow J held that confidential property was protected by s 51(xxxi) of the constitution from taking without just compensation. He stated: In National Provincial Bank Ltd v Ainsworth (1965) AC 1175 at 1247-1248, Lord Wilberforce said that before a right or interest can be admitted into the category of property, it must be definable, identifiable by third parties, have some degree of permanence or stability, and be capable in its nature of assumption by third parties. This dictum has been applied in Australian decisions, for example, R v Toohey; Ex parte Meneling Station Proprietary Ltd supra, at 342-343; Sonenco 77 Pty Ltd v Silvia (1989) 89 ALR 437 at 445, 457. The degree of protection afforded by equitable doctrines and remedies to what equity considers confidential information makes it appropriate to describe it as having a proprietary character. This is not because property is the basis upon which that protection is given, but because of the effect of that protection; cf Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525 at 548 per Williams J; Boardman v Phipps, supra at 127-129 per Lord Upjohn. To reach that conclusion is not to engage in the circularity of reasoning to which Windeyer J referred in Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25 at 34, namely, by saying that equity intervenes in a particular class of case by injunction or other remedy, and by concluding that the reason for the remedy lies in the protection of an equitable proprietary interest. Here, the source of the equity is that described by Deane J in the Moorgate Tobacco Case supra, and is not based in property, but the effect of the protection given by the legal system is as I have described.

3. The constitutional context would seem to be the one in which the concept of property should be given its broadest meaning as a means of protection of the individual. By contrast the context of criminal statutes in Oxford v Moss (1979) 68 Cr App R 182 or taxation (stamp duty) statutes in Pancontinental Mining Ltd v Commissioner of Stamp Duties [1989] 1 Qd R 310 has produced a different result. Indeed both criminal and [4.150]

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taxation statutes are ones where narrow constructions (thus providing acquittal or relief from taxation for the individual) are favoured. 4. There is much writing on the issue of property aspects of confidential information. The material includes: McKeough, Stewart and Griffith, Intellectual Property in Australia (2004) Chs 1-2; Arup, Innovation, Policy and Law (Cambridge UP 1993) Ch 1; Ricketson, “Confidential Information – A New Proprietary Interest?” (1977) 11 MULR 223, 289; Neave and Weinberg, “The Nature and Function of Equities (Part II)” (1978) 6 U Tas LR 115; Kitch, “The Law and Economics of Rights in Valuable Information” (1980) 9 J Legal Studies 683; Hammond, “Quantum Physics, Econometric Models and Property Rights to Information” (1981) 27 McGill LR 47; Stuckey, “The Equitable Action for Breach of Confidence: Is Information Ever Property?” (1981) 9 Syd LR 402; and Weinrib, “Information and Property” (1988) U Tor LJ 117.

Breen v Williams [4.155] Breen v Williams (1996) 186 CLR 71 A woman consulted a plastic surgeon in 1978 about complications which occurred after surgery in 1977 (which he had not performed) for the insertion of silicone implants in her breasts. He performed remedial surgery but the complications continued. Some years later she became interested in litigation by class action in the United States against the manufacturer of the implants, in which it was alleged that they were defective. She was given an opportunity to “opt in” to a settlement which had been given conditional approval by a United States court, it being a condition of opting in that she file with that court copies of medical records in support of any claim she wished to make. She sought access to the records kept by the plastic surgeon in her case by proceedings in the Supreme Court of New South Wales claiming declarations. Property The appellant concedes that the property in the records as chattels is in the respondent. The concession is rightly made. Documents prepared by a professional person to assist the professional to perform his or her professional duties are not the property of the lay client; they remain the property of the professional [Leicestershire Country Council v Michael Farady & Partners Ltd [1941] 2 KB 205 at 216]. In the light of that principle, it is not easy to see what relevance the law of property has to the supposed right of the appellant to access to the respondent’s records. If (as it was put during argument) the respondent is said to have no proprietary right that would entitle him to refuse access, the question whether the appellant has a right to be given access still remains. On that approach the supposed right (if any) must find some basis other than property. But even on the approach, the argument is flawed. Absent some right to require of the exercise of some power to compel, production of a document for inspection, its owner is entitled by virtue of the rights of ownership to refuse to produce it. As for copying, where the professional person is the owner of the copyright, he or she has the sole right to copy or to permit the copying of the document. If the approach is that a right to access and to copy arises because the information contained in the records is proprietary in nature, the approach mistakes the sense in which information is described as property. The sense in which information is so described is stated by Lord Upjohn in Phipps v Boardman [1997] 2 AC 46 at 127-128, in these terms: In general, information is not property at all. It is normally open to all who have eyes to read and ears to hear. The true test is to determine in what circumstances the information has been acquired. If it has been acquired in such circumstances that it would be a breach of confidence to disclose it to another then courts of equity will restrain the recipient form communicating it to another. In such cases such confidential information is often and for 246 [4.155]

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Breen v Williams cont. many years has been described as the property of the donor, the books of authority are full of such references; knowledge of secret processes, “know-how”, confidential information as to the prospects of a company or of someone’s intention or the expected results of some horse race based on stable or other confidential information. But in the end the real truth is that it is not property in any normal sense but equity will restrain its transmission to another if in breach of some confidential relationship. As information is not property except in the sense stated by Lord Upjohn, the remedies which equity grants to protect against the disclosure of certain kinds of information do not have their course in notions of property. Deane J pointed this out in Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] (1984) 156 CLR 414 at 438: Like most heads of exclusive jurisdiction, its rational basis does not lie in proprietary right. It lies in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained. [Brennan CJ further held that there was no implied term and no fiduciary relationship giving rise to a duty to give access or to permit the copying of the records held by the medical practitioner. Dawson, Toohey, Gaudron, McHugh and Gummow JJ all agreed in the result.]

[4.160]

Notes and Questions

1. The result in this case turns on the denial of property rights for the patient. Even if the patient has no proprietary interest in the notes, the release of information from those notes may involve a breach of the patient’s rights to privacy in respect of the information held. Indeed it is difficult to imagine any information more deserving of privacy protection than a person’s medical history. 2. The court’s holding that access to the records was not part of implied obligations of the medical practitioner to the patient leaves significant issues as to the practitioner’s responsibilities in connection with those records. The practitioner owes an obligation to treat the patient with reasonable skill and, for example, disclosure of blood sugar levels in the records to a diabetic patient would seem a basic aspect of that treatment. 3. The result in the case has disturbing consequences for medical treatment and, for example, makes a change of practitioner difficult. How can a new practitioner proceed without access to the records?

PROTECTION FOR INTELLECTUAL PROPERTY [4.165] There is now a range of statutory regimes whereby rights with respect to the products

of intellectual endeavour are protected. The major pieces of Commonwealth legislation are the Copyright Act 1968 (Cth), Circuit Layouts Act 1989 (Cth), Designs Act 2003 (Cth), Trade Marks Act 1995 (Cth), Patents Act 1990 (Cth) and Plant Breeders Rights Act 1994 (Cth). All these pieces of legislation provide property rights for the creator of the intellectual work. In the case of copyright in particular, rights flow from the fact of production of the work. The writing of an article, the giving of a lecture or the performance of a piece of theatre or a musical work leads to protection for what is original both in content and manner of presentation. In most other cases the creator must apply for registration of the work. Registration may be challenged and the responsible official must decide if the work is original. [4.165]

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Generally the rights conferred are not perpetual but for a limited term of years. Owners are entitled to transfer their rights or deal with them by way of licences. Remedies for infringement of the rights are conferred. In all cases it is the expression of an idea rather than the idea which is protected. Infringement of copyright at a basic level involves reproduction of material written or composed by another; protection goes beyond prohibition of mechanical copying. Often whether an infringement has occurred is a matter of degree. Copyright attaches to the expression of an idea; setting out the idea in print or by performance elevates the idea to the level of property. The idea must also be original; restating an established theorem does not confer any rights. But the matter of degree arises as to when a combination of ideas or musical notes goes beyond a restatement to something infused with creation by the author. One of the best known copyright cases in recent times illustrates this issue. In Baigent v The Random House Group Ltd [2006] EWHC 719 the two claimants Michael Baigent and Richard Leigh claim that the novel The Da Vinci Code by Dan Brown was an infringement of their copyright in their book The Holy Blood and The Holy Grail. Both works had the subject matter of religious orders and the group the Knights Templar in particular. Influences of alleged decendents of Jesus and the existence and location of the Holy Grail appeared in both works. However these facts and ideas were part of general knowledge and copyright would only be infringed if some distinctive aspect of the first work was reproduced. That claim did not succeed. As a taunting to authors the judge commented that by virtue of various mergers and acquisitions Random published both works. A film production of the later work was in the offing starring Tom Hanks with a scheduled release in May 2006. The judge revealed that as a testament to cynicism in our times that there had been suggestions that the action was nothing more than a collaborative exercise designed to maximise publicity for both books. It is true that the book sales of both books soared during the course of the trial (in the case of the second work it was said to be a tenfold increase). The analysis of what amounts to improper copying of ideas involves an exercise of judgment beyond the more mechanical task of ascertaining a direct reproduction. The analysis should resonate with law students as the issue of plagiarism, or more generally cheating, arises in relation to every piece of assessment work submitted during their studies. Improper conduct in relation to submitted work includes the failure to acknowledge properly the sources of ideas. Improper conduct as a law student has the added penalty of a possible bar to admission to legal practice. How relevant are the concepts of the Da Vinci Case (Baigent v The Random House Group Ltd [2006] EWHC 719) to the determination of improper conduct in relation to assessable student work? The concept that ideas of themselves are not the subject of legal protection is related to the principle that generic terms cannot be the subject of a trademark or the basis of misleading or deceptive conduct. Thus in Dairy Industry Marketing Authority v Southern Farmers Co-operative Ltd (1982) 61 FLR 174, a drink distributor had launched a malt and honey milk drink called Good One Malt “N” Honey. The distributor could not prevent a rival from putting on the market a similar product called Malt & Honey. Australians and Americans disagree as to whether “ugg boots” are a generic term so that the term is not subject to trade mark protection in Australia but is in the United States. Similarly Cadbury’s have been unable to restrict the use by rival manufacturers of the colour purple in connection with the packaging 248 [4.165]

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of chocolates; see Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2006] FCA 363 and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) [2006] FCA 446.

RIGHTS IN MONEY AND FINANCIAL INSTRUMENTS Nature of money

Banco de Portugal v Waterlow and Sons Ltd [4.170] Banco de Portugal v Waterlow and Sons Ltd [1932] AC 452 House of Lords LORD ATKIN: My Lords, in this case your Lordships are, I think, agreed that, as the result of the breach of contract by Messrs Waterlow, the Bank of Portugal issued 209,718 500 escudo notes in exchange for forged notes innocently printed by the defendants. The question is what damages can be recovered by the Bank. The contention of Messrs Waterlow is that the Bank, when it issued good notes to the face value of over 100 million escudos in return for no consideration, suffered no damage at all except the cost of printing the good notes. This would have appeared to me a departure from the ordinary principles of assessing damages; but it has found favour with more than one judicial personage for whose opinions I have unfeigned respect, and was urged with much apparent zeal by eminent counsel: so that obviously it demands careful examination. The difficulty, it appears, only arises where the person issuing the notes is a bank of issue and where the obligation expressed in the note is not to pay in gold but to pay in paper currency, ie, other notes of the Bank. In such cases it is said the Bank have only parted with bits of paper and their damage is completely measured by the cost of reprinting the bits of paper. The argument strikes home at the present time where our currency is in the main a paper currency; and where the Bank of England are under no liability to pay their notes in gold. I hope to satisfy your Lordships that if the Bank of England by fraud or breach of contract are induced to issue a million pounds worth of notes for nothing they are entitled to recover against the wrongdoer a million pounds in damages. The result of the present contention is sufficiently striking. If the issue of $10,000 good notes by the Bank of Portugal for nothing involves them in no loss, it would seem to result that the issue of a similar amount for goods or obligations of an equivalent value would be complete gain. The Bank, therefore, when it creates a good debt of $10,000 by advancing that amount in notes to its customer will appear to have increased its assets by $10,000 without adding to its liabilities; similarly, when with the same sum it buys a 100% gold bond or the equivalent amount of bullion. It follows that it makes no difference to the financial position of the Bank whether in exchange for a good note it receives a good note or a bad note. I should have thought this result, in this language of one of your Lordships, “manifestly impossible”; but rules of law have to be tested in these days, and must survive the application of first principles. A bank note is a promissory note issued by a bank payable on demand. The English note contains the promise on the face. The Portuguese note does not, but there is competent evidence in this case that the note has the same effect. So far the banker issuing his note incurs precisely the same liability as a merchant issuing his note. If either fails to pay he is liable for the face value of the note. One Bank becomes alone entitled to issue notes; and let us assume that they have become currency so that they can be tendered in discharge of a debt: the position of the Bank remains the same. It is liable on its note. If its note is payable in gold, then to a claim on a note the Bank must pay in Gold; otherwise, on debts in general, the Bank as well as private traders will pay in currency; and, as I have said, on default will be liable to judgment for the face value. In any civilized State it will not be permitted to issue notes to an unlimited amount; it will, if honestly conducted, in any case determine its obligations by its possible resources; but the State will require that behind the promises to pay there stand solid resources in the form of gold and liquid securities; and will impose a positive restriction on the issue of [4.170]

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Banco de Portugal v Waterlow and Sons Ltd cont. notes beyond an amount which it considers necessary. But this has not bearing on the liability of the Bank to pay the face value of a note when issued. Now let us assume that the State alters the law by decreeing that the bank notes need no longer be paid in gold. While that decree lasts the notes are inconvertible, the currency is in the ordinary sense a paper currency. This happened in Portugal in 1891 by a moratorium directed to payment in gold which has been continued in Portugal ever since. The position has not altered. The merchant is in precisely the same position as before; he must pay in currency which will as before be notes, but now inconvertible notes. If he fails to pay he can be sued for the face value of his promissory note. The Bank is for the first time put in the same position as the merchant; it is bound to pay on its note; but it need only pay its note in currency, that is, in its own notes; and if it will not or cannot so pay, it can be sued for the face value of the note. Mr Simonds, for Messrs Waterlow, produced an analysis of the obligation of the Bank in issuing an inconvertible note with which in substance I agree. It is: (1) to pay in other notes; (2) when there is a return to gold, to pay in the decreed amount of gold; (3) if other currency is decreed, to pay in that other currency. But how this helps him it is difficult to see; for an examination it will be found that the obligation of a trader on his note is precisely the same, except that (2) will probably only be to pay in notes convertible into gold instead of paying in gold itself. Now in the case of a private trader it appears to be conceded that his loss in similar circumstances would be measured by face value. On this analysis the obligation of the Bank would appear to be the same. That it meets its obligation on its note by issuing a further note seems to have no effect upon the nature of amount of the original obligation; the original obligation is met by a renewal, the Bank have only gained time, not increased or decreased an obligation which would be measured just as before. They have in fact done exactly what the merchant has done: they have paid in currency; and their obligation is measured in the same way. If they had an unrestricted right of issuing notes their obligation would not be altered; they would still be liable to be sued on default for the face value of the note, but the effect of the unrestricted power would presumably be that the face value of the note would have a much lower exchange value than if there were a restricted power: so that the Bank would either have received little value originally or the holder of the note would intermediately have suffered loss on the diminution of the note value. But, in fact, in the ordinary course of civilized government, as in Portugal, restrictions still continue. In the present case in 1925 the issue of notes by the Bank for commercial purposes was restricted to $195,000,000, of which they had issued $64,000,000, leaving a power to issue of $131,000,000. In addition, the State from time to time had authorized the Bank to issue notes for State purposes, supporting these notes by a borrowing from the Bank secured by State marketable bonds. Restrictions as to proportions of gold and securities reserves still continued in existence so far at any rate as the issue for commercial purposes was concerned. Let us assume as might well have happened, that the forged issue, instead of amounting to $100,000,000, had amounted to $131,000,000. If the Bank had taken the same action they would have issued promissory notes to the full extent of their legal power. When sued on the notes so issued in exchange for the forged notes they could not have issued their notes in payment; they could have been sued for $131,000,000, and judgment must have gone against them for that sum. Of course, this never would have been permitted by the State, but ex post facto relief has nothing to do with the question of legal obligation. I therefore find the position to be that the Bank by issuing its note like the trader issues its promise to pay a fixed sum; issues a bit of its credit to that amount; like the trader, it is bound to pay the face value in currency; like the trader, it is liable on default to judgment for the face value exigible out of its assets; and, like the trader, if it is compelled by the wrong of another to incur that liability, its damages are measured by the liability it has incurred. It may be noted that this liability to pay the face value is not in the least affected, as has been suggested, by the question of convertibility. Whether the obligation is to pay in gold or in paper, the liability remains the same to pay 500 escudos, and a judgement on the note would be for precisely the 250 [4.170]

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Banco de Portugal v Waterlow and Sons Ltd cont. same sum. The exchange value and the face value are quite different matters. 500 escudos in gold will exchange for many more goods and much more foreign currency than 500 escudos in paper; as Messrs Waterlow would have found to their cost, if they had printed these notes when they were convertible into gold. The damages then claimed would have been twenty million pounds sterling instead of a million. Another way of illustrating the position seems to be this. If a person is wrongfully induced to part with a valuable thing, whether it be goods or choses in action, his measure of damages is the value of the thing at the time he parted with it. The cost of replacement does not enter into the measure of damages at all. If a man is fraudulently indeed to part with 500 standards of timber he recovers the value at the time; it is quite immaterial that he could have replaced the timber – say, from the Russian market – at a small portion of the value. If he manufactures for 1d articles which can sell for 6d, the measure of damages against the wrongdoer is 6d, not 1d. So if he was by fraud induced to promise to deliver 500 of the 6d articles so that the contract could be enforced by an innocent holder of the contract, it appears to me that on well established authority the damages would be 12l 10s, not 2l 1s 8d. This means that, whether he parts with goods or parts with an obligation, the measure of damages is the market value of what he parts with, which means what it will exchange for; and this necessarily means in the case of an obligation expressed in currency of the country the face value of the obligation. If he incurs an obligation to pay pounds sterling, you do not inquire at what cost he will acquire the pounds sterling necessary to fulfil the obligation; he may get them by getting some one to produce an article at much less cost which he can sell for the equivalent sterling; he may get them from a benevolent uncle or from some one who for a small premium has undertaken to make good his loss. Whatever the liability incurred, the measure of damages is market value, which in the case of an obligation to pay currency is face value. Some confusion has been introduced into the discussion by considering the question as though the Bank has “lost” the bank notes. If the notes had been “lost” before the Bank had made them the Bank’s contractual obligation by delivery the proposition of the defendants would be correct. The notes in such a case are nothing but a collection of bill stamps completed, but not delivered; to destroy them would but have the same result as burning a man’s cheque book whether the cheques were filled up and signed or not. I doubt myself whether Reason 16 of the Bank’s case ever meant to contend anything so unsound as is suggested; it was probably meant to be read together with the rest of the reasons. But I am quite satisfied that such a fallacy never entered into the head of such an experienced lawyer as Wright J. Throughout his judgment he is speaking of the liability of the Bank on the notes, and he finishes his judgment on this point by these words: “They say they were damaged by having to assume liability on these notes without getting anything in return. I think this argument is correct, and I think these notes must be taken for this purpose at their face value just as they would be if they had been issued by some other institution that is not a bank of issue.” I have already stated my grounds for believing this statement to be correct. For my part I cannot see the way to decide this case for Messrs Waterlow without reversing a number of authorities which have governed our Commercial law, and I understand it, from earliest times. There is one final and conclusive proof of the fallacy of the defendants’ contention to which I have not yet heard any answer. By issuing a note the Bank provide the holder of it with a piece of currency which can bring to the Bank the next day and compel the Bank to receive in discharge of his overdraft or in payment under a contract to buy securities or bullion. By issuing 100 million escudos in notes they provide the public with the means of coming to the Bank and depriving it of 100 millions’ worth of assets in debts, securities and gold. I say debts, for even Messrs Waterlow’s contention does to suggest that a debt payable in paper currency is worth nothing, or that if the debtor is solvent it is not worth its face value. If the Bank releases a debt of 500 escudos it loses 500 escudos. If it parts with 500 escudos’ worth of gold it loses 500 escudos; but if it issues for nothing a 500 escudo note today by the return of which tomorrow the debt of 500 escudos is discharged or the 500 escudos’ worth of gold is bought and paid for it loses nothing. I refuse to proclaim to business men in this country or abroad [4.170]

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Banco de Portugal v Waterlow and Sons Ltd cont. that our law is so unreasonable. It is with respect no answer to say that when the note is returned it can be used again for value. In fact, strictly speaking, it is not available; the note when returned is discharged, and the reissue of it creates a fresh obligation; but the answer to that suggestion is that notes issued for value can also, when returned, be reissued; so that the contention again amounts to this, that – note + value = -note, a proposition which I do not wish to qualify with an epithet. The actual notes paid up to December 26 exceed 200,000, so that the total claim against the defendants without any credit far exceeds 610,392l. The result is, after being given credit against the total loss suffered by the Bank, the plaintiffs are entitled to judgment for 610,392l. In my opinion, therefore, the appeal of the Bank should be allowed, and the judgment of the Court of Appeal should be set aside, the judgment directed by Wright J to be entered for the plaintiffs should be varied by increasing the sum there mentioned to 610,392l, and the plaintiffs should have the costs here and in both Courts below. The appeal of the defendants should be dismissed with costs here and in the Court of Appeal. [Viscount Sankey LC and Lord MacMillan agreed; Lords Warrington of Clyffe and Russell of Killowen dissented.]

[4.175]

Notes and Questions

1. The issue underlying the case is whether bank notes in the hands of the agency which is to issue them are worth more than their paper value. If there was a fire at the premises at which notes were being printed and printed notes were destroyed it is difficult to see how the loss could exceed the value of the paper as the notes would simply be reprinted. The unauthorised release of bank notes into the community poses greater problems as the number of notes in circulation will be greater than anticipated. Such a release could even impact upon the economy, for example, by increasing inflation and thus reducing the value of all notes in circulation. If you hold a significant quantity of genuine notes, could you sue a counterfeiter who releases a large quantity of the notes for your losses in the reduced value of your notes? Is the value of money but an illusion? 2. Money is defined as comprising “all chattels which, issued by the authority of the law and denominated with reference to a unit of account, are meant to serve as a universal means of exchange” (Mann, The Legal Aspect of Money (4th ed) p 8). Historically coins consisted of valuable metals and were used as a medium of exchange because of their value. However governments were unable to resist decreasing the precious metal content of the coins and thus lessening their value: debasing the currency. Furthermore notes also once carried promises of payment from the issuing authority. Today in Australia both notes and coins have value only as legal tender: see Reserve Bank Act 1959 (Cth), s 36(1); Currency Act 1965 (Cth), s 14(1). What this characterisation as legal tender means is that any person owing a debt is entitled to offer notes or coins (coins are only legal tender up to limited amounts) and the creditor is bound to accept that tender in satisfaction of the debt. 3. Good title to notes and coins is obtained by any person taking them for value and in good faith: titles passes by delivery see Lawson and Rudkin, The Law of Property (2nd ed, Clarendon Press, Oxford, 1982), pp 37-38. 4. Further understanding of the factual situation involved in the extracted case in gained from the article: Tillotson J, “The Portugese Bank Note Case” (1994) 68 ALJ 93. 252 [4.175]

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5. Virtual property would seem to have no real world consequences because it only exists in the virtual world. But some virtual property acquisitions and losses have real world costs and players may be upset by the loss of virtual property in that at least their game participation is diminished. Primarily their recourse is against the manager of the game and in accordance with game rules. Some managers do provide dispute resolution systems. However it would be foolish to dismiss the possibility that a player will be unsatisfied by the game dispute resolution system and a claim before the courts will take property rights further into thin air. See generally Lastowka and Hunter, “The Laws of Virtual Worlds” (2004) 92 Cal LR 1, and Blazer, “The Five Indicia of Virtual Property” (2007) 5 Pierce LR 137.

FINANCIAL INSTRUMENTS [4.180] Historically payment other than by money has been by bills of exchange and cheques.

Today in the consumer context these instruments have been largely supplanted by credit cards and disputes are ones of contract between the consumer and the banks. A cheque is an order to a bank to pay a nominated person or the bearer a designated amount. A cheque is commonly handed to the nominated person in discharge of a debt. That discharge is conditional on the honouring of the cheque by the bank. Cheques developed as a special form of bills of exchange and differ from such bills because they are not primarily intended to be transferred by the recipient but cashed at a bank. By contrast bills of exchange were intended to be used as a source of cash by sale to a third party who obtained value for the instrument from the original maker (drawer). An assignee of a bill of exchange (holder) could obtain good title even from a thief if that person took in good faith and for value and in accordance with commercial practice (holder in due course). On the development of bills of exchange and cheques see Holden, The History of Negotiable Instruments in English Law, (London, 1955). Today in Australia cheques are regulated by the Cheques Act 1986 (Cth) and protection for persons (including banks) taking a cheque is provided by the Personal Property Securities Act 2009 (Cth).

Arab Bank Ltd v Ross [4.185] Arab Bank Ltd v Ross [1952] 2 QB 216 Court of Appeal DENNING LJ: The first question in this case is whether the Arab Bank Ltd were holders in due course of the promissory note, and that depends on whether, at the time they took it, it was “complete and regular on the face of it” within s 29 of the Bills of Exchange Act 1882. Strangely enough, no one doubts that the “face” of a bill includes the back of it. I say strangely enough, because people so often insist on the literal interpretation of Acts of Parliament, whereas here everyone agrees that the literal interpretation must be ignored because the meaning is obvious. The meaning is that, looking at the bill, front and back, without the aid of outside evidence, it must be complete and regular in itself. Regularity is a different thing from validity. The Act itself makes a careful distinction between them. On the one hand an indorsement which is quite invalid may be regular on the face of it. Thus the indorsement may be forged or unauthorized and, therefore, invalid under s 24 of the Act, but nevertheless there may be nothing about it to give rise to any suspicion. The bill is then quite regular on the face of it. Conversely, an indorsement which is quite irregular may nevertheless be valid. Thus, by a misnomer, a payee may be described on the face of the bill by the wrong name, nevertheless, if it is quite plain that the drawer intended him as payee, then an indorsement on the back by the payee in [4.185]

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Arab Bank Ltd v Ross cont. his own true name is valid and sufficient to pass the property in the bill (Leonard v Wilson 2 Cr & M 589; Bird & Co v Thomas Cook & Son Ltd [1937] 2 All ER 227; Hadley v Henry 22 VLR 230), but the difference between front and back makes the indorsement irregular unless the payee adds also the misnomer by which he was described on the front of the bill. This is what he eventually did in Leonard v Wilson. Regularity is also different from liability. The Act makes a distinction between these two also. On the one hand a person who makes an irregular indorsement is liable thereon despite the irregularity. Thus, if a payee, who is wrongly described on the front of the bill, indorses it in his own true name, the indorsement is irregular, but he is liable to any subsequent holder and cannot set up the irregularity as a defence; or, if he is rightly described on the front of the bill, but indorses it in an assumed name, the indorsement is irregular but he is liable thereon as if he had indorsed it in his own name: see s 23(1) and s 55(2) of the Act. Conversely, a regular indorsement will not impose liability if it is forged or unauthorized. Thus, where a firm is the payee, but is described in an unauthorized name which is substantially different from its real name, an indorsement by one partner in that name does not impose liability on the other partners: Kirk v Blurton 9 M & W 284. It would be otherwise if the name was substantially the same: Forbes v Marshall 11 Ex 166. Once regularity is seen to differ both from validity and from liability, the question is when is an indorsement irregular? The answer is, I think, that it is irregular whenever it is such as to give rise to doubt whether it is the indorsement of the named payee. A bill of exchange is like currency. It should be above suspicion. But if it is asked: When does an indorsement give rise to doubt? I would say that that is a practical question which is, as a rule, better answered by a banker than a lawyer. Bankers have to consider the regularity of indorsements every week, and every day of every week, and every hour of every day; whereas the judges sitting in this court have not had to consider it for these last 20 years. So far as I know the last occasion was in Slingsby’s case [1932] 1 KB 544. The Law Merchant is founded on the custom of merchants, and we shall not go far wrong if we follow the custom of bankers of the City of London on this point. They have given evidence that they would not accept the indorsements in this case as a regular indorsement. They said that if a bill is made payable to “Fathi and Faysal Nabulsy Company” they would not accept an indorsement “Fathi and Faysal Nabulsy”. I think there is good sense in their view. For aught they know, in Palestine the word “company” may be of vital significance. It may there signify a different legal entity, just as the word “limited” does here (Bank of Montreal v Exhibit and Trading Co 11 Com Cas 250) or it may signify a firm of many partners and not merely two of them. I agree with the bankers that this indorsement does give rise to doubt whether it is the indorsement of the named payee. It was, therefore, irregular. It was suggested that this attitude of bankers was an excess of caution in their own interests. They insist on strict conformity, it was said, so as to be able to avail themselves of the protection of ss 60, 79, 80 and 82 of the Act of 1882, which they feared they might lose if they paid on an indorsement which did not correspond exactly with the name of the payee. But it is to be noticed that this usage of bankers goes back to times long before those sections were part of the law. The usage certainly existed in 1834 (see Leonard v Wilson), whereas s 60 did not appear, even in its original form, until 1853, and ss 79, 80 and 82 not till 1878. The truth is, I think, that the bankers adopted this strict attitude both in their own interests and also in the interests of their customers. It would be quite impossible for them to make inquiries to see that all the indorsements on a bill are in fact genuine; but they can at least see that they are regular on the face of them: see Bank of England v Vagliano [1891] AC 107 at 157, per Lord Macnaghten. That is some safeguard against dishonesty. It is a safeguard which the bankers have taken for the past 120 years at least, and I do not think we should throw any doubt today on the correctness of their practice. I do not stay to discuss the regularity of indorsements by married women or titled folk, except to say that titles and descriptions can often be omitted without impairing the regularity of the indorsement. The word “company” in this case is not, however, mere description. It is part of the 254

[4.185]

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Arab Bank Ltd v Ross cont. name itself. It was suggested that an indorsement in Arabic letters would be regular. I cannot accept this view. The indorsement should be in the same lettering as the name of the payee; for otherwise it could not be seen on the face of it to be regular. My conclusion is, therefore, that this promissory note, when it was taken by the Arab Bank Ltd, was not complete and regular on the face of it. They were not, therefore, holder in due course. The next question is: Was the irregularity waived? I think “No”. When the first note was presented, the maker, Mr Ross, said that he would honour the notes if he got the share certificates. That was not an unconditional waiver of any irregularities. It only meant that he was prepared to waive any irregularities if he got the share certificates. As he never got them, there was no waiver. There is no answer to the plaintiffs’ claim as holders, and the appeal must be dismissed. [Somervell and Romer LJJ agreed.]

[4.190]

Notes and Questions

1. Both bills of exchange and cheques (subject to the explanation of the “not negotiable” crossing) are species of negotiable instruments. What is meant by negotiability is that an instrument can be transferred so that a taker in good faith and for value acquires a good title to the instrument. Such a person is described as a holder in due course. Negotiability must be distinguished from transferability: a gift of a negotiable instrument still transfers such title as the donor had and the donee is classified as a holder and thus has the right to sue upon the bill. 2. The elements of a valid transfer depend on whether the instrument is a bearer or order instrument. A bearer instrument is transferred by delivery; an order instrument is transferred by signature (described as endorsement) plus delivery. A forged signature is ineffective to transfer an order instrument. How can you protect yourself if taking an order instrument/ What additional protections are available to banks? 3. The nature of holders and holders in due course was analysed by Blackburn J in Crouch v Credit Foncier of England Ltd (1873) LR 8 QB 374 at 381-382. 4. The definition of a cheque is that it is a bill of exchange drawn on a banker. The customer drawing the cheque (the drawer) requires the banker (the drawee) to pay a sum of money to the person named (the payee). The bank has played no part in the drawing of the instrument and has no liability under the instrument. Its responsibilities come from its contract with its customer and those responsibilities will commonly include the payment of valid cheques drawn upon the bank so long as sufficient funds are maintained by the customer. In the case of bills of exchange which are often payable at a future date the payee will seek to ensure the liability of the drawee by presenting the bill for acceptance. If the drawee then accepts the bill the drawee becomes an acceptor and is in general terms liable for payment according to the terms of the bill. 5. The practice arose whereby crossings were added to cheques. A crossing is simply two parallel transverse lines. A crossing means that payment of the cheque must be collected through a bank: Cheques Act 1986 (Cth) s 54. In practical terms this requirement means that the payee or a transferee from the payee must pay the cheque into a bank account. A “not negotiable” crossing is a crossing with the words “not negotiable” added. The effect of these words is that the cheque ceases to be negotiable – a transferee gets no better title than the transferor had, the transferee cannot become a holder in due course, the nemo dat quod non habet principle is restored: Cheques Act 1986 (Cth) s 55. A “not negotiable” cheque is nonetheless transferable: s 39. Nothing can prevent the transfer of the cheque from one person to another by delivery in the case of a bearer cheque or by signature plus delivery in the case of an order cheque. The transferee [4.190]

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Arab Bank Ltd v Ross cont. becomes a holder of the cheque. The nature of the not negotiable crossing is discussed by Manning J in Universal Guarantee Pty Ltd v National Bank of Australasia Ltd [1964-1965] NSWR 977 at 985-986. 6. As well as cheques drawn by a person on a bank, the practice has arisen of a bank drawing a cheque upon itself: a bank cheque. In effect the bank cheque amounts to a promise by the bank to pay the sum of money stated. Such an instrument is generally accepted as being as secure as money and much more difficult to be used by any thief. The only risks associated with a bank cheque are the failure of the bank or that the instrument has been fraudulently prepared. Bank cheques are usually insisted upon at property settlements because of their security. The nature of ordinary cheques and bank cheques as instruments evidencing a chose in action is analysed by the High Court in Parsons v Queen (1998) 195 CLR 619 extracted in Chapter 1 at [1.60]. 7. The Personal Property Securities Act 2009 (Cth) provides for priority of creditors, and purchasers of negotiable instruments, chattel paper and negotiable documents of title (ss 69 – 72). The interest of a creditor who receives payment of a debt owing by a debtor through a debtor-initiated payment has priority over any security interest (perfected or unperfected) in the funds paid, the intangible source of the payment (eg bank account) and any negotiable instrument used to effect the payment, unless the creditor actually knew the payment breached the relevant security agreement. The interest of a person who acquires a negotiable instrument (and takes possession or control) by consensual transaction has priority over a perfected security interest in the negotiable instrument if the person gave value for the instrument and the person acquired the interest without knowledge of the security interest. If the negotiable instrument is acquired in the ordinary course of a business, the level of knowledge is knowledge that such acquisition would breach the relevant security agreement. This title to a purchaser of a negotiable instrument turns the inquiry from the face of the instrument to ordinary business practice.

256 [4.190]

CHAPTER 5 The Torrens System: The Principle of Indefeasibility [5.05]

CENTRAL PROVISIONS .......................................................................................... 258 [5.10] [5.20] [5.30] [5.40] [5.50] [5.60]

[5.75]

MEANING AND EXTENT OF INDEFEASIBILITY: DEFERRED OR IMMEDIATE INDEFEASIBILITY .................................................................................................... 262 [5.80] [5.90] [5.95]

[5.105]

[5.115]

Registrar General of New South Wales v Van Den Heuvel .................................................................................. 273 Mortgages, indefeasibility and personal convenants to pay ...................................................................................... 285

INDEFEASIBILITY AND PROTECTION OF INDIVIDUAL TERMS IN REGISTERED DOCUMENTS ......................................................................................................... 290 [5.125]

[5.135]

Gibbs v Messer ..................................................................... 263 Frazer v Walker ..................................................................... 265 Breskvar v Wall ..................................................................... 267

INDEFEASIBILITY FOR WHAT ................................................................................. 273 [5.105]

[5.125]

Transfer of Land Act 1958 (Vic), s 41(1) ................................. 258 Land Title Act 1994 (Qld), s 184(1) ....................................... 259 Real Property Act 1886 (SA), ss 69, 70 ................................... 259 Land Titles Act 1980 (Tas), s 40(1) and (2) ............................ 260 Transfer of Land Act 1958 (Vic), s 43 ...................................... 260 Transfer of Land Act 1958 (Vic), s 44(2) ................................. 260

Mercantile Credits Ltd v Shell Co of Australia Ltd ..................... 290

EXCEPTIONS TO INDEFEASIBILITY OF TITLE ...................................................... 295 [5.140]

[5.150]

[5.215]

Fraud .................................................................................................... [5.155] Loke Yew v Port Swettenham Rubber Co Ltd ............................ [5.160] Bahr v Nicolay (No 2) ........................................................... [5.170] Davis v Williams .................................................................... [5.175] Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd ....................................................................................... [5.180] Russo v Bendigo Bank ............................................................ [5.190] Bank of South Australia Ltd v Ferguson ................................... [5.200] Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd ................... [5.203] Cassegrain v Gerard Cassegrain & Co Pty Ltd ......................... [5.205] Schultz v Corwill Properties Pty Ltd .........................................

297 298 300 309 318 320 327 330 332 338

The in personam exception ............................................................... 343 [5.220] [5.230] [5.235] [5.245] [5.250] [5.260]

[5.270]

Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd ....................................................................................... 295

Bahr v Nicolay (No 2) ........................................................... Vassos v State Bank of South Australia .................................... Grgic v ANZ Banking Group ................................................... Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd ................... Farah Constructions Pty Ltd v Say-Dee Pty Ltd ........................ Parker v Mortgage Advance Securities Pty Ltd .........................

344 349 351 356 367 371

Volunteers ............................................................................................ 374 [5.270]

Conlan v Registrar of Titles .................................................... 374 257

Australian Property Law: Cases and Materials

[5.280]

Overriding legislation ......................................................................... 382 [5.285]

[5.295]

Forgery, insufficient power of attorney or disability ........................ 387 [5.300]

[5.310] [5.315] [5.320]

Real Property Act 1886 (SA), s 71 .......................................... 391

STATE GUARANTEE OF TITLE ................................................................................ 391 [5.335]

Grounds for claiming compensation ................................................ 392 [5.340] [5.350]

[5.360] [5.365] [5.370]

Arcadi v Whittem .................................................................. 387

Prior certificate of title or folio and erroneous description of land ....................................................................................................... 390 Easements, adverse possession and tenancies ................................. 390 Rates and taxes .................................................................................... 390 [5.325]

[5.330]

Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd ................................................... 382

Diemasters Pty Ltd v Meadowcorp Pty Ltd .............................. 393 Parker v Registrar-General ..................................................... 397

Specific limitations on claims for compensation .............................. 400 Amount of compensation .................................................................. 400

REGISTRAR’S POWER TO CORRECT THE REGISTER ............................................ 401 [5.375]

State Bank of New South Wales v Berowra Waters Holdings ............................................................................... 402

CENTRAL PROVISIONS [5.05] The Torrens statutes provide for a system of title by registration. They also provide that, subject to certain exceptions, the Register is conclusive (or in other words that title is indefeasible). The set of provisions often referred to as the “paramountcy” provisions contain the most positive statements of indefeasibility of title. Section 42(1) of the Transfer of Land Act 1958 (Vic), for example, provides:

Transfer of Land Act 1958 (Vic), s 41(1) [5.10] Transfer of Land Act 1958 (Vic), s 41(1) 42. Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest (whether derived by grant from Her Majesty or otherwise) which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except (a)

the estate or interest of a proprietor claiming the same land under a prior folio of the Register;

(b)

as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser.

[5.15] (See similarly Real Property Act 1900 (NSW), s 42(1); Transfer of Land Act 1893 (WA), s 68(1) – (4); Land Titles Act 1925 (ACT), s 58(1).) As the Privy Council commented in Frazer v Walker [1967] 1 AC 569 at 580-581: 258 [5.05]

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It is these sections which, together with those next referred to, confer upon the registered proprietor what has come to be called “indefeasibility of title”. The expression, not used in the Act itself, is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. This conception is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; as will be seen later, there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claims in personam. These are matters not to be overlooked when a total description of his rights is required. But as registered proprietor, and while he remains such, no adverse claim (except as specifically admitted) may be brought against him.

Although differently worded, the paramountcy provisions in Queensland, South Australia, Tasmania and the Northern Territory have a similar effect. In the Land Title Act 1994 (Qld), s 38 provides the “indefeasible title for a lot is the current particulars in the freehold land register about the lot” and s 184(1) provides:

Land Title Act 1994 (Qld), s 184(1) [5.20] Land Title Act 1994 (Qld), s 184(1) 184. Quality of registered interests (1) A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.

[5.25] (See similarly Land Title Act (NT), ss 39 and 188(1).) In South Australia, the relevant parts of ss 69 and 70 of the Real Property Act 1886 provide:

Real Property Act 1886 (SA), ss 69, 70 [5.30] Real Property Act 1886 (SA), ss 69, 70 69. Title of registered proprietor indefeasible, except in cases of– The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications: Fraud (a) In the case of fraud, in which case any person defrauded shall have all rights and remedies that he would have had if the land were not under the provisions of this Act: Provided that nothing included in this subsection shall affect the title of a registered proprietor who has taken bona fide for valuable consideration, or any person bona fide claiming through or under him;… 70. In other cases title of registered proprietor shall prevail In all other cases the title of the registered proprietor of land shall prevail, notwithstanding the existence in Her Majesty, Her heirs, or successors, or in any person of any estate or interest whatever whether derived by grant from the Crown or otherwise, which but for this Act might be held paramount or to have priority; and notwithstanding any want of notice, or insufficient notice of any application, or any error, omission or informality in any application or proceedings.

[5.35] In Tasmania, Land Titles Act 1980, s 40(1) and (2) provide: [5.35]

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Land Titles Act 1980 (Tas), s 40(1) and (2) [5.40] Land Titles Act 1980 (Tas), s 40(1) and (2) 40. Estate of registered proprietor indefeasible (1)

For the purposes of this section “indefeasible”, in relation to the title of a registered proprietor of land, means subject only to such estates and interests as are recorded on the folio of the Register or registered dealing evidencing title to the land.

(2)

Subject to subsections (3) and (4), the title of a registered proprietor of land is indefeasible.

[5.45] Other sets of provisions, the “notice”, “protection” and “ejectment” provisions, (not all contained in all jurisdictions) reinforce the indefeasibility concept. Section 43 of the Transfer of Land Act 1958 (Vic) is typical of the notice provisions:

Transfer of Land Act 1958 (Vic), s 43 [5.50] Transfer of Land Act 1958 (Vic), s 43 43. Persons dealing with registered proprietor not affected by notice Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any land shall be required or in any manner concerned to inquire or ascertain the circumstances under or the consideration for which such proprietor or any previous proprietor thereof was registered, or to see to the application of any purchase or consideration money, or shall be affected by notice actual or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.

[5.55] (See Real Property Act 1900 (NSW), s 43(1); Real Property Act 1886 (SA), ss 186, 187;

Transfer of Land Act 1893 (WA), s 134; Land Titles Act 1980 (Tas), s 41(1) and (2); Land Titles Act 1925 (ACT), ss 59, 60(2); cf Land Title Act 1994 (Qld), s 184(2)(a) which provides simply that “… the registered proprietor … is not affected by actual or constructive notice of an unregistered interest affecting the lot”. See similarly Land Title Act (NT), s 188(2)(a).) Although there are differences in wording in the protection provisions, their meanings are similar. For example, s 44(2) of the Transfer of Land Act 1958 (Vic) provides:

Transfer of Land Act 1958 (Vic), s 44(2) [5.60] Transfer of Land Act 1958 (Vic), s 44(2) 44. Certificate etc. void for fraud … (2) But nothing in this Act shall be so interpreted as to leave subject to an action of ejectment or for recovery of damages or for deprivation of the estate or interest in respect of which he is registered as proprietor any bona fide purchaser for valuable consideration of land on the ground that the

260 [5.40]

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Transfer of Land Act 1958 (Vic), s 44(2) cont. proprietor through or under whom he claims was registered as proprietor through fraud or error or has derived from or through a person registered as proprietor through fraud or error; and this whether such fraud or error consists in wrong description of the boundaries or of the parcels of any land or otherwise howsoever.

[5.65] See Real Property Act 1900 (NSW), s 45(1) and (2); Real Property Act 1886 (SA), s 207; Transfer of Land Act 1893 (WA), s 202; Land Titles Act 1980 (Tas), s 42; Land Titles Act 1925 (ACT), s 159. Cf Land Title Act 1994 (Qld), s 184(2)(b) and Land Title Act (NT), s 188(2)(c). These provisions state that a registered proprietor is liable to a proceeding for possession of the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot. (But see Land Title Act 1994 (Qld), s 184(3)(b) and Land Title Act (NT), s 188(3)(b) which impliedly provide a similar protection to purchasers.) The ejectment provisions, where they exist, also take different forms and reinforce the paramountcy provisions by providing that no person can maintain an action to recover the land against the registered proprietor except in particular named circumstances. (Real Property Act 1900 (NSW), s 118; Transfer of Land Act 1893 (WA), s 199; Land Titles Act 1980 (Tas), s 149; Land Titles Act 1925 (ACT), s 152.) They are sometimes combined with the protection provisions.

[5.70]

Notes and Questions

1. Whalan, The Torrens System in Australia (The Law Book Co Ltd, Sydney, 1982), p 296, argues that the term “indefeasibility” when defined as annulled, defeated or abrogated is inappropriate to describe the protection given to a Torrens title. Indefeasibility of title under the Torrens system means that the title, if considered at a given time, cannot be defeated. It does not mean that the title is incapable of defeat at that time and any time in the future. A registered proprietor with an indefeasible title may lose that title if another person becomes the registered proprietor without fraud: indefeasibility attaches to the second proprietor, the person currently registered. 2. There has been considerable discussion as to the meaning of and overlap between these various sets of provisions. See, Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.100]–[4.120]. Do the “notice” and “protection” provisions expand the meaning of indefeasibility set out in the “paramountcy” provisions? What effect do the “ejectment” provisions have? 3. The notice provisions have the effect of ensuring that the common law doctrine of notice does not apply to Torrens land. (The common law doctrine of notice is discussed in Chapter 2.) How do the provisions achieve this end? 4. For some time, the courts adopted an interpretation of the paramountcy (for example, s 42 of the Transfer of Land Act 1958 (Vic)) and notice (for example, s 43 of the Transfer of Land Act 1958 (Vic)) provisions which resulted in the notice provision restricting the indefeasibility principle set out in the paramountcy provision. It was said that the protection of indefeasibility was only available to a person registering who had “dealt with the registered proprietor” as required by s 43: see, for example, Clements v Ellis [5.70]

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(1934) 51 CLR 217. Thus, for example, a purchaser taking a transfer from a fraudster who forged the name of the registered proprietor to the transfer, would not have dealt with the registered proprietor on the faith of the register. This interpretation pursuant to which the s 43 restricts the operation of s 42 is no longer the favoured one. See Frazer v Walker [1967] 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376. 5. Indefeasibility is under attack in some subtle ways. In Queensland, s 11A of the Land Title Act 1994 (Qld) provides that indefeasibility will be lost if the mortgagee does not take adequate steps to verify the identity of the mortgagor (Backstrom, “Forged Mortgages and Queensland’s careless mortgagee exception to indefeasibility” (2011) 26 Australian Property Law Bulletin 21). Similarly in New South Wales, a mortgagee must take steps to ensure that the person who executes the mortgage is indeed the registered proprietor of the land (s 56C of the Real Property Act 1900 (NSW)). All jurisdictions will be required to have verification of identity guidelines to meet the requirements of the national electronic conveyancing system (see http://www.arnecc.gov.au (Australian registrars national electronic conveyancing council) and http://www.pexa.com.au (property exchange Australia). 6. Is it possible that we will see uniform Torrens legislation in Australia: Hunter, “Uniform Torrens Title legislation: is there a will and a way?” (2010) 18(3) APLJ 201. With the introduction of nationally focussed electronic conveyancing protocols (see http:// www.arnecc.gov.au for the latest model participation and model operating rules for the electronic conveyancing system), the time is appropriate for close consideration of a national Torrens code. For historical perspectives, see Croucher, “Delenda est Carthago! Sir Robert Richard Torrens and his attack on the evils of conveyancing and dependent land titles: a reflection on the sesquicentenary of the introduction of his great law reforming initiative” (2009) 11(2) Flinders Journal of Law Reform 197; Taylor, “The Torrens System: definitely not German” (2009) 30(2) Adelaide Law Review 195; Lucke, “Ulrick Hubbe and the Torrens system: Hubbe’s German background, his life in Australia and his contribution to the creation of the Torrens system” (2009) 30(2) Adelaide Law Review 213; Raff, “Torrens, Hubbe, stewardship and the globalisation of property law systems” (2009) 30(2) Adelaide Law Review 245.

MEANING AND EXTENT OF INDEFEASIBILITY: DEFERRED OR IMMEDIATE INDEFEASIBILITY [5.75] As the Privy Council in Frazer v Walker [1967] 1 AC 569 at 580-581 stated “…

indefeasibility of title … is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys”. However, since the inception of the Torrens system, much debate has surrounded the time at which indefeasibility of title occurs. The early cases supported what is known as deferred indefeasibility. By 1971, however, the debate appeared settled in favour of immediate indefeasibility. The debate re-emerged in Victoria at the beginning of the 1990s in a slightly different form. An example is the clearest means of demonstrating the distinction between these concepts and of illustrating why and how it can become important. Assume A, the registered proprietor of Blackacre leaves her certificate of title with her solicitor, S, for safekeeping and that S forges 262 [5.75]

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A’s name to a transfer of the land in favour of B. Subsequently, the transfer is registered and B becomes the registered proprietor. A and B are both innocent parties. Does B, who is now the registered proprietor, have an indefeasible title or can A successfully maintain an action to recover “her” land? On the theory of immediate indefeasibility, B’s title is indefeasible. (The “paramountcy” provisions support this result.) On the theory of deferred indefeasibility, B’s title is not indefeasible: indefeasibility is “deferred” to one transaction away from the problem dealing. (The “protection” provisions support this result.) Thus, if B subsequently transferred the land to C and C became the registered proprietor, C’s title would be indefeasible and not subject to any attack by A. (See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.125]–[4.160].) The early Privy Council decision of Gibbs v Messer [1891] AC 248 supports the concept of deferred indefeasibility.

Gibbs v Messer [5.80] Gibbs v Messer [1891] AC 248 Privy Council [Messer, the registered proprietor of land, left her duplicate certificate of title with Cresswell. Cresswell forged a transfer of the title to a fictitious person named “Hugh Cameron”, who became the registered proprietor. Cresswell then prepared a mortgage from “Cameron” to the McIntyres, as security for a loan from the McIntyres to “Cameron”. This mortgage was registered, and Cresswell absconded with the money. After discovering what had happened, Messer brought an action to be reinstated as the registered proprietor, holding free of the McIntyres’ mortgage.] LORD WATSON: It is clear that the registration of the name of Hugh Cameron, a fictitious and non-existing transferee, cannot impede the right of the true owner Mrs Messer, who has been thereby defrauded, to have her name restored to the register. Accordingly, in the absence of Cresswell, who has not appeared to defend, the controversy between the litigant parties has been mainly, if not wholly, confined to the question whether the mortgage is or is not an incumbrance affecting Mrs Messer’s title. Webb J, the judge of the first instance, sustained the validity of the mortgage, but ordered that the plaintiff should be at liberty to redeem, and that the defendant, the registrar, should pay to her, out of the assurance fund, her costs of the action, all moneys from time to time paid by her for interest in respect of the mortgage, and also all moneys necessarily paid by her for principal, interest, and costs in order to its redemption. His decision was affirmed on appeal by the Full Court, with the variation that the plaintiff was found liable in costs to the mortgagees, to be added to her own costs of suit, and repaid to her by the registrar out of the assurance fund. The registrar has appealed to this Board from the judgment of the Full Court. … Their Lordships do not propose to criticise in detail the various enactments of the statute relating to the validity of registered rights. The main object of the Act, and the legislative scheme for the attainment of that object, appear to them to be equally plain. The object 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. That end is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title. In the present case, if Hugh Cameron had been a real person whose name was fraudulently registered by Cresswell, his certificates of title, so long as he remained undivested by the issue of new certificates to a bona fide transferee, [5.80]

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Gibbs v Messer cont. would have been liable to cancellation at the instance of Mrs Messer; but a mortgage executed by Cameron himself, in the knowledge of Cresswell’s fraud, would have constituted a valid incumbrance in favour of a bona fide mortgagee. The protection which the statute gives to persons transacting on the faith of the register is, by its terms, limited to those who actually deal with and derive right from a proprietor whose name is upon the register. Those who deal, not with the registered proprietor, but with a forger who uses his name, do not transact on the faith of the register; and they cannot by registration of a forged deed acquire a valid title in their own person, although the fact of their being registered will enable them to pass a valid right to third parties who purchase from them in good faith and for onerous consideration. The difficulty which the mortgagees in this case have to encounter arises from the circum-stance that Hugh Cameron was, as Mr Justice Webb aptly describes him, a “myth”. His was the only name on the register, and, having no existence, he could neither execute a transfer nor a mortgage … [Cresswell] professed to transact with the McIntyres in the capacity of Cameron’s law agent, he attested what purported to be Cameron’s signature to their deed of mortgage, and he gave them a document, used by them in order to obtain registration of their right, which bore that Hugh Cameron had appeared personally before him, and had signed the document in his presence, after making oath to the verity of its contents. The McIntyres must, in these circumstances, have understood Cresswell and Hugh Cameron to be distinct individualities. They nowhere allege the contrary; and if they had even suspected that Hugh Cameron was only another name for Cresswell, they would not have been justified in completing the transaction without inquiry. The McIntyres cannot, therefore, as matter of fact, be held to have dealt on the faith of the certificate as evidencing the proprietary title of Cresswell. The truth is that Hugh Cameron was in no sense an alias of Cresswell’s, but a fiction or puppet created by him, in order that it might appear to be an individual having a separate and independent existence. The reasoning of the learned Judges [in the courts below] fails to appreciate the difference between these two things. If Cresswell had, as they say he did, “assumed” the name of Hugh Cameron, and had used it fraudulently, he would not have been a forger. His fraud, in that case, would have lain in the representation that Hugh Cameron was his own designation, and he would, no doubt, have been amenable to the criminal law, in respect of such fraud. But, in first registering a fictitious Hugh Cameron as proprietor of the land, and then executing and delivering a mortgage in the name of Hugh Cameron, Cresswell represented the mortgagor to be a person other than himself, and committed the crime of forgery. The real character of the criminal acts perpetrated by Cresswell differs in no respect from what it would have been, had Hugh Cameron been a real person, whose name was put upon the register by him, and used by him in a forged deed creating an incumbrance. Although a forged transfer or mortgage, which is void at common law, will, when duly entered on the register, become the root of a valid title, in a bona fide purchaser by force of the statute, there is no enactment which makes indefeasible the registered right of the transferee or mortgagee under a null deed. The McIntyres cannot bring themselves within the protection of the statute, because the mortgage which they put upon the register is a nullity. The result is unfortunate, but it is due to their having dealt, not with a registered proprietor, but with an agent and forger, whose name was not on the register, in reliance upon his honesty. In the opinion of their Lordships, the duty of ascertaining the identity of the principal for whom an agent professes to act with the person who stands on the register as proprietor, and of seeing that they get a genuine deed executed by that principal, rests with the mortgagees themselves; and if they accept a forgery they must bear the consequences.

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Gibbs v Messer cont. [The Privy Council ordered that Messer be reinstated as registered proprietor, and held that the McIntyres’ mortgage did not constitute an encumbrance on Messer’s title.]

[5.85]

Notes and Questions

1. What are the reasons for the decision of the court in Gibbs v Messer [1891] AC 248? Did the decision of the Privy Council depend upon the fact that the document was void, forged or taken from a non-existent person? 2. See also Clements v Ellis (1934) 51 CLR 217; Caldwell v Rural Bank of NSW (1951) 53 SR (NSW) 415; Davies v Ryan [1951] VLR 283, all cases which essentially adopted the notion of deferred indefeasibility. 3. The concept of deferred indefeasibility encompassed in Gibbs v Messer was not adopted in the following two decisions extracted. Nevertheless, the Privy Council in Frazer v Walker [1967] 1 AC 569 did not overrule its earlier decision in Gibbs, choosing instead to distinguish it. After reading the extract from Frazer v Walker, analyse the circumstances in which the decision in Gibbs v Messer may provide an answer to a particular fact situation. See, for example, Garafano v Reliance Finance Corp Pty Ltd (1992) NSW ConvR 55-640 and ANZ Banking Group Ltd v Barns (1994) 13 ACSR 592 discussed in Butt, Fictitious Proprietors (1994) 68 ALJ 753. See, however, Real Property Act 1900 (NSW), s 3(1) which now defines “fraud” to include “fraud involving a fictitious person”.

Frazer v Walker [5.90] Frazer v Walker [1967] 1 AC 569 Privy Council [Mr and Mrs Frazer were the registered proprietors of land. Mrs Frazer borrowed a sum of money from the Radomskis and as security for the loan, she gave the Radomskis a mortgage over the property. Mrs Frazer forged her husband’s signature to the mortgage. She failed to make the payments of interest and the Radomskis exercised their power of sale under the mortgage and sold to Walker. Walker became the registered proprietor and he then tried to obtain possession of the land. Mr Frazer counterclaimed, contending that the mortgage to the Radomskis was a nullity and seeking cancellation on the Register of the mortgage of the Radomskis and the interest of Walker and restoration of his name and Mrs Frazer’s to the Register. After reviewing the key provisions in the relevant Torrens statute the Privy Council considered Mr Frazer’s claim against the mortgagees, the Radomskis.] LORD WILBERFORCE: … The leading case as to the rights of a person whose name has been entered on the register without fraud in respect of an estate or interest is the decision of this Board in Assets Co Ltd v Mere Roihi [1905] AC 176. The Board there was concerned with three consolidated appeals from the Court of Appeal in New Zealand, which had decided in each case in favour of certain aboriginal natives as against the registered proprietors. In each appeal their Lordships decided that registration was conclusive to confer on the appellants a title unimpeachable by the respondents. The facts involved in each of the appeals were complicated and not identical one with another, a circumstance which has given rise to some difference of opinion as to the precise ratio decidendi – the main relevant difference being whether the decision established the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchaser from such a proprietor [5.90]

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Frazer v Walker cont. whose title is indefeasible. In Boyd v Wellington Corpn [1924] NZLR 1174 the majority of the Court of Appeal in New Zealand held in favour of the former view, and treated the Assets Co case as a decision to that effect. The decision in Boyd v Wellington Corpn related to a very special situation, namely that of a registered proprietor who acquired his title under a void proclamation, but, with certain reservations as to the case of forgery, it has been generally accepted and followed in New Zealand as establishing, with the supporting authority of the Assets Co case, the indefeasibility of the title of registered proprietors derived from void instruments generally. Their Lordships are of opinion that this conclusion is in accordance with the interpretation to be placed on those sections of the Land Transfer Act 1952 which they have examined. They consider that Boyd’s case was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. The appellant relied on the earlier decision of the Board in Gibbs v Messer [1891] AC 248 as supporting a contrary view, but their Lordships do not find anything in the case which can be of assistance to them. Without restating the unusual facts, which are sufficiently well-known, it is sufficient to say that no question there arose as to the effect of such sections as corresponded (under the very similar Victorian Act) with s 62 and s 63 of the Act of 1952 now under consideration. The Board was then concerned with the position of a bona fide “purchaser” for value from a fictitious person, and the decision is founded on a distinction drawn between such a case and that of a bona fide purchaser from a real registered proprietor. The decision has in their Lordships’ opinion no application as regards adverse claims made against a registered proprietor, such as came before the courts in Assets Co Ltd v Mere Roihi, in Boyd v Wellington Corpn and in the present case. Before leaving this part of the present appeal their Lordships think it desirable, in relation to the concept of “indefeasibility of title”, as their Lordships have applied it to the facts before them, to make two further observations. First, in following and approving in this respect the two decisions in Assets Co Ltd v Mere Roihi, and Boyd v Wellington Corpn, their Lordships have accepted the general principle, that registration under the Land Transfer Act 1952, confers on a registered proprietor a title to the interest in respect of which he is registered which is (under s 62 and s 63) immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle 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. That this is so has frequently, and rightly, been recognised in the courts of New Zealand and of Australia (see, for example, Boyd v Wellington Corpn [1924] NZLR 1174, 1223 per Adams J, and Tataurangi Tairuakena v Mua Carr [1927] NZLR 688, 702 per Skerrett CJ). Their Lordships refer to these cases by way of illustration only without intending to limit or define the various situations in which actions of a personal character against registered proprietors may be admitted. The principle must always remain paramount that those actions which fall within the prohibition of s 62 and s 63 may not be maintained. The second observation relates to the power of the registrar to correct entries under s 80 and s 81 of the Land Transfer Act 1952. It has already been pointed out (as was made clear in the Assets Co case [1905] AC 176 at 194, 195 by this Board) that this power is quite distinct from the power of the court to order cancellation of entries under s 85, and moreover while the latter is invoked here, the former is not. The powers of the registrar under s 81 are significant and extensive (see Assets Co case). They are not coincident with the cases excepted in s 62 and s 63. As well as in the case of fraud, where any grant, certificate, instrument, entry or endorsement has been wrongfully obtained or is wrongfully retained, the registrar has power of cancellation and correction. From the argument before their 266 [5.90]

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Frazer v Walker cont. Lordships it appears that there is room for some difference of opinion as to what precisely may be comprehended in the word “wrongfully”. It is clear, in any event, that s 81 must be read with and subject to s 183 with the consequence that the exercise of the registrar’s powers must be limited to the period before a bona fide purchaser, or mortgagee, acquires a title under the latter section … As the appellant did not in this case seek relief under s 81, and as, if he had, his claim would have been barred by s 183 (as explained in the next paragraph), any pronouncement on the meaning to be given to the word “wrongfully” would be obiter and their Lordships must leave the interpretation to be placed on that word in this section to be decided in a case in which the question directly arises. The failure of the appeal against the second respondents entails (and it was not contended otherwise) that it must equally fail against the first respondent. Their Lordships would add, however, that the action against that respondent was an action for the recovery of land within the meaning of s 63 and that it would be directly barred by that section, quite apart from the fact that it could not be maintained against the other respondents. The appellant could not bring his case against the first respondent within any of the exceptions to that section. Also their Lordships would add, that, if it had been necessary for the first respondent to rely on s 183 of the Land Transfer Act 1952, he would by it have had a complete answer to the claim. The appellant argued that the second respondents were not “vendors” within the meaning of the section – the suggestion being that he is only a vendor who sells the precise estate or interest of which he is the registered proprietor, so that a mortgagee does not fall within the description. It was further contended that the second respondents were not “proprietors”, because they did not own the estate or interest (ie, the fee simple) which they purported to transfer. Their Lordships are in agreement with the Court of Appeal in holding that the section should not be so narrowly read and that it extends to the case of a mortgagee who is “proprietor” of the mortgage and who has power of sale over the fee simple. Their Lordships need not elaborate on this part of the case since they concur with the conclusions agreed on by all three members of the Court of Appeal. Their Lordships will humbly advise Her Majesty that the appeal should be dismissed. The appellant must pay the respondents’ costs.

Breskvar v Wall [5.95] Breskvar v Wall (1971) 126 CLR 376 High Court [The appellants were the registered proprietors of land. As security for a loan, they gave Petrie the duplicate certificate of title and an instrument of transfer signed by them. Pursuant to the Stamp Act 1894 (Qld), this transfer was void because it did not contain the name of the transferee. Subsequently, Petrie fraudulently inserted the name of his grandson, Wall, as the transferee and Wall became the registered proprietor. Before the Breskvars had discovered the fraud, Wall had contracted to sell the land to Alban Pty Ltd and had executed a transfer. Before this transfer was lodged for registration, the Breskvars placed a caveat upon the register.] MENZIES J: The issue between the appellants and the respondent, Alban Pty Ltd, which is the only issue with which this Court is concerned, is one between two persons, neither of whom is the registered proprietor, as to which of them should become the registered proprietor of the land described in certificate of title vol 3730 fol 104. The land is subject to The Real Property Acts, 1861 to 1963 (Q). The claim of the appellants is, firstly, that they were the registered proprietors of the land up to 15th October 1968, and remained thereafter as registered proprietors in law, notwith-standing the registration, on 15th October 1968, of a transfer which they had, on 5th March 1968, signed in blank. This transfer was given, with the duplicate certificate of title, to afford security for a loan from one [5.95]

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Breskvar v Wall cont. Petrie. It was, in fraud of them, registered in the name of Wall after his name had, in September 1968, been put into the transfer by Petrie to cheat the appellants out of their land. The learned trial judge found the fraud and found that Wall was a party to it. His Honour said [1972] Qd R, at 30-31: I find that in transferring the land to Wall and selling it in the way he did Petrie acted fraudulently in that he was attempting to cheat the plaintiffs out of the major part of their interest in the land. He was guilty of moral turpitude. His fraud was of the relevant kind under The Real Property Acts. (See Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 273, 274.) But he was an old man born on 24th March 1888 who succumbed to temptation. In the witness box he showed himself to be partially deaf and not very mentally alert. I find that throughout he was acting as the agent of Wall and of his wife and that Wall is affected by his fraud. Alternatively to the claim that they have remained as registered proprietors after 15th October 1968, the appellants claim that they are entitled to registration in place of Wall by virtue of their equitable right to become registered proprietors again. Before going further it is necessary to refer to an unusual provision, namely s 53(5) of The Stamp Acts (Q) which is, so far as is relevant, in these terms: (5) No instrument of conveyance or transfer executed on or after the first day of November, one thousand nine hundred and eighteen, of any estate or interest in any property whatsoever shall be valid, either at law or in equity, unless the name of the purchaser or transferee is written therein in ink at the time of the execution thereof. Any such instrument so made shall be absolutely void and inoperative, and shall in no case be made available by the insertion of a name or any other particulars afterwards. Moreover, for any breach of this subsection a penalty not exceeding twenty pounds shall be incurred by each party executing the instrument. It is apparent, therefore, that there are two objections to whatever title Wall has. The first is that it was obtained illegally by the use of an invalid instrument made in breach of s 53(5) of The Stamp Acts; the second is that it was obtained by his own fraud. The appellants can, I have no doubt, displace Wall’s title. To succeed, however, at the expense of Alban Pty Ltd, they must go further than they have to go against Wall. They must show either that Wall had no title at all, or, that their claim is to be preferred to that of Alban Pty Ltd. The claim of Alban Pty Ltd is that it holds a transfer from Wall to carry out a purchase of the land, made for valuable consideration by Alban Pty Ltd from Wall, and made, so far as Alban Pty Ltd was concerned, in good faith, without notice of any rights of the appellants. Their rights came to the notice of Alban Pty Ltd only when a caveat to prevent the registration of the transfer to it by Wall had been lodged. The learned trial judge found that Alban Pty Ltd was a purchaser in good faith and for valuable consideration without notice of the appellants’ rights. In support of their claim that Wall is not the registered proprietor, the appellants call in aid certain passages from the judgment of Dixon J in Clements v Ellis. His Honour cited a passage (1934) 51 CLR 217 at 258 from the dissenting judgment of Salmond J in Boyd v Mayor, Etc, of Wellington which concluded as follows [1924] NZLR 1174 at 1205: The registered title of A cannot pass to B except by the registration against A’s title of a valid and operative instrument of transfer. It cannot pass by registration alone without a valid instrument, any more than it can pass by a valid instrument alone without registration. [His Honour stated that this appeared to him as an admirable statement of the true position. For himself, his Honour said (1934) 51 CLR 217 at 237:] The principle, in my opinion, is that a prior registered estate or interest, for the removal of which from the register there is no authority but a forged or void instrument, is not destroyed unless afterwards a person, who, according to the existing condition of he register is entitled 268 [5.95]

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Breskvar v Wall cont. to do so, gives a registrable instrument which is taken bona fide for value and registered. The justification for destroying an existing legal estate or interest, which has already been duly established upon the register, is, in other words, found only in the necessity of protecting those who subsequently deal in good faith and for value in a manner, which, upon its face, the register appears to authorise, and who then obtains registration. Clements v Ellis was a case decided under the Transfer of Land Act (Vict) but the provisions of the Real Property Act (Q) are, with one exception to which I will refer later, substantially the same. What Dixon J said has been followed in New South Wales and in Victoria: Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 and Davies v Ryan [1951] VLR 283. Since these decisions, however, the Privy Council has decided Frazer v Walker [1967] 1 AC 569. In their opinion in this case their Lordships made no reference to Clements v Ellis, although it had been cited, but they did apply the decision of the majority in Boyd’s Case, preferring the judgment of the majority to the dissenting judgments of Springer and Salmond JJ. Their Lordships said [1967] 1 AC 569, 584: They consider that Boyd’s Case [1924] NZLR 1174 was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. It is important, however, to observe what their Lordships meant by the words “all such instruments” in the passage which I have just cited. They meant void instruments whereby the name of the person had been registered without fraud in respect of an estate or interest. This appears clearly from the reference to Assets Co Ltd v Mere Roihi [1905] AC 176 on the preceding page [1967] 1 AC 176, 583, and from the statement [1967] 1 AC 176, 584 that the main relevant difference between the majority and the minority in Boyd’s Case was whether the Mere Roihi Case established “the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchaser from such a proprietor whose title is indefeasible”. Frazer v Walker was not a case of conflict between unregistered interests. In that case 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 was 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, a co-proprietor with her. 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 decision in Frazer v Walker cannot, therefore, govern this case. Indeed, one may perhaps be excused from wondering how the former registered proprietor, who suffered from his wife’s forgery, could ever have hoped to succeed against the newly registered proprietor who took a transfer from registered mortgagees. The problem of competition for registration never arose in that case. Indeed, it is a case which would have fallen fairly and squarely within the statement of Dixon J in Clements v Ellis, at 237 cited previously. Nevertheless, Frazer v Walker is important here in establishing that, if and to the extent that earlier decisions were to the effect that an indefeasible title cannot be acquired by the registration of a void instrument, they have lost their authority. It must now be recognized that, in the absence of fraud on the part of a transferee, or some other statutory ground of exception, an indefeasible title can be acquired by virtue of a void transfer. It seems to me to follow that, where there is fraud or one of the other statutory exceptions to indefeasibility, a transferee does, by registration of a void transfer, obtain a defeasible title. [5.95]

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Breskvar v Wall cont. In this case, as I have already indicated, Wall, although he became registered proprietor, clearly enough did not obtain an indefeasible title. He obtained registration by the fraudulent use of an invalid instrument. It is the significance of his becoming registered in these circumstances that matters here. The first critical question which I pose is, therefore, whether, when Wall became registered as proprietor of the land, the appellants ceased to be the registered proprietors. With the guidance of Frazer v Walker about the effect of the registration of void instruments, I have reached the conclusion that they did, and I think so regardless of whether the transfer was invalid by virtue of s 53(5) of The Stamp Acts, or, that, by reason of fraud, the title acquired was defeasible. The registration was of an instrument executed by the appellants as registered proprietors, albeit in breach of law, and, upon its registration, they ceased to be registered proprietors. This is not a case where it is possible to apply Gibbs v Messer [1891] AC 248 where, as the Privy Council has explained, there was no real registered proprietor at all but only a fictitious person. After the registration of Wall as registered proprietor the appellants’ rights were no longer those of registered proprietors but were simply to impeach the defeasible title which Wall had obtained by that registration. [His Honour then went on to consider whether the appellants’ claim should be postponed to the claim of Alban Pty Ltd. This involved a consideration of the relative merits of competing unregistered interests. The following part of the judgment should be considered again in Chapter 6.] This brings me to what I regard as the second critical question, namely, whether the appellants’ claim in equity to registration, which is earlier in time than the claim of Alban Pty Ltd, should nevertheless be postponed to its claim. It is at this point that I think that s 53(5) of The Stamp Acts does introduce an element not to be found in earlier cases where earlier claims of an equitable character have been postponed to later claims. Such cases are Butler v Fairclough (1917) 23 CLR 78 and Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58. What this section says is that no transfer signed in blank “shall be valid either in law or in equity”. If, therefore, Alban Pty Ltd has to depend in any way upon that transfer to maintain the rights which it asserts, it must fail. That transfer cannot, in the face of the statute, be regarded as a good source of equitable rights. What Alban Pty Ltd holds, however, is a transfer from the registered proprietor, albeit a registered proprietor with a defeasible title, and it is necessary to determine what rights it has solely as such transferee. Whatever may be the position in other cases, it seems to me that in this case that question is resolved by a particular enactment which is not to be found generally in state legislation establishing the Torrens system. This enactment is s 48 of the Real Property Act of 1877. It is as follows: 48. Unregistered instrument to confer claim to registration. Every instrument signed by a proprietor or by others claiming through or under him purporting to pass an estate or interest in or security upon land for the registration of which provision is made by this Act shall until registered be deemed to confer upon the person intended to take under such instrument or other person claiming through or under him a right or claim to the registration of such estate interest or security … Wall, as I have already decided, was “a proprietor” and by virtue of the section, therefore, Alban Pty Ltd has a right or claim to the registration of the estate which the transfer purports to pass. Accordingly, there are conflicting claims to be registered in place of Wall and the final problem is which is to be preferred. The authorities already cited establish that the appellants’ right or claim should, in the absence of a good ground for distinguishing them, be postponed and it becomes necessary to determine whether The Stamp Acts, s 53(5), affords any such ground for distinction. By reason of the section it is apparent that what the appellants signed was not an effective transfer. It was a document without effect in law or in equity and no regis-tration should have been based upon it. By 270 [5.95]

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Breskvar v Wall cont. giving it to Petrie the appellants did not put him in possession of an effective instrument of transfer. The blank transfer, however, with no effect in law or in equity, once it had been wrongly filled in and lodged with the certificate of title, became the means whereby Wall was able to become registered proprietor and to deal with Alban Pty Ltd as such. Upon the authorities cited, this, I think, is enough to require the post-ponement of the appellants’ right or claim to that of Alban Pty Ltd. They did not put Petrie or Wall in a position to have Wall lawfully registered as proprietor. Nevertheless, in executing the transfer in blank they were in breach of The Stamp Acts, s 53(5), and it was their breach of the law that enabled Wall, in disregard of the section, to become registered as proprietor. The learned trial judge decided that the claim of the appellants must be postponed to that of Alban Pty Ltd and I would, for the reasons which I have given, dismiss this appeal from his judgment. BARWICK CJ [His Honour discussed the facts and the relevant legislative provisions and continued:] [T]he conclusiveness of the certificate of title is definitive of the title of the registered proprietor. That is to say, in the jargon which has had currency, there is immediate indefeasibility of title by the registration of the proprietor named in the register. The stated exceptions to the prohibition on actions for recovery of land against a registered proprietor do not mean that that “indefeasibility” is not effective. It is really no impairment of the conclusiveness of the register that the proprietor remains liable to one of the excepted actions any more than his liability for “personal equities” derogates from that conclusiveness. So long as the certificate is unamended it is conclusive and of course when amended it is conclusive of the new particulars it contains. The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which regis-tration itself has vested in the proprietor. 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. The affirmation by the Privy Council in Frazer v Walker of the decision of the Supreme Court of New Zealand in Boyd v Mayor, Etc, of Wellington now places that conclusion beyond question. Thus the effect of the Stamp Act upon the memorandum of transfer in this case is irrelevant to the question whether the certificate of title is conclusive of its particulars. [His Honour then went on to consider whether the appellants’ claim should be postponed to the claim of Alban Pty Ltd. His Honour then held that the appellant’s claim should be postponed to the claim of Alban Pty Ltd. See Chapter 6.] McTiernan, Windeyer and Gibbs JJ gave short concurring judgments, and Owen J agreed with Barwick CJ.

[5.100]

Notes and Questions

1. Between which parties was the real dispute in Frazer v Walker [1967] 1 AC 569? 2. For a discussion of the underlying policy issues, see Taylor, “Scotching Frazer v Walker” (1970) 44 ALJ 248; Griggs and Low, “Immediate Indefeasibility: is it under threat” (2011) 19 APLJ 222; Mason, “Indefeasibility – Logic or Legend?” in Grinlinton, Torrens in the Twentieth-first Century (2003), pp 3-26; Rodrick, “Forgeries, False Attestations and Impostors: Torrens System Mortgages and the Fraud Exception to Indefeasibility” [2002] Deakin Law Review 5; O’Connor, “Registration of Invalid Dispositions: Who Gets the Property?” in Cooke, Modern Studies in Property Law, Volume 3 (2005), Ch 3, pp 45-64; [5.100]

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O’Connor, Security of Property Rights and Land Title Registration Systems (PhD thesis, Monash University, 2004), Chs 5-6; O’Connor, “Deferred and Immediate Indefeasibility: Bijural Ambiguity in Registered Land Title Systems” (2009) 13 Edinburgh Law Review 194: Harding and Bryan, “Responding to Fraud in Title Registration Systems: A Comparative Study”, in Dixon (ed), Modern Studies in Property Law – Volume 5 (2009), p 3. The relationship of electronic conveyancing to the indefeasibility argument is explored in Arruñada, “Leaky Title Syndrome” (2010) New Zealand Law Journal 115. 3. The concept of immediate indefeasibility set out in Frazer v Walker [1967] 1 AC 569 has been adopted and applied in numerous Australian cases. See, for example, Breskvar v Wall (1971) 126 CLR 376; Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407; Vassos v State Bank of South Australia [1993] 2 VR 316; Bank of South Australia v Ferguson (1998) 192 CLR 248; Horvath v Commonwealth Bank of Australia [1999] 1 VR 643. Nevertheless, it has been argued that deferred indefeasibility would more appropriately balance the aims of the system of security of title and of a simple, certain and inexpensive conveyancing process. See, for example, Mason “Indefeasibility – Logic or Legend?” in Grinlinton, Torrens in the Twentieth-first Century (2003), pp 3-26. However, the importance of immediate indefeasibility was noted in Perpetual Ltd v Barghachoun [2010] NSWSC 108 at [25]: Indefeasibility of title is the most fundamental feature of the land registration system in Australia. Under it, the State guarantees the title of those with a registered interest in land, to the extent of that interest. The foregoing is trite. But the principle is so important, and adherence to it so essential, that registered title is able to be challenged, under the legislative provisions in each of the States, only in the most exceptional circumstances. The Torrens system has enabled conveyance with certainty in Australia, and even though there may be occasions where notions of comparative justice may seem to have been transgressed, it is essential that indefeasibility of title is not undermined.

The general law of rectification is neutralised by indefeasibility: We are Here Pty Ltd v Zandata Pty Ltd [2010] NSWSC 262. 4. In Victoria, a specific statutory provision, Transfer of Land Act 1958 (Vic), s 44(1), led to a questioning of the applicability of immediate indefeasibility in Victoria. Although initially it was held that s 44(1) resulted in deferred indefeasibility in some circumstances (see Chasfild v Taranto Pty Ltd [1991] 1 VR 225) later decisions endorsed the concept of immediate indefeasibility for Victoria despite the difference in statutory provisions: see Vassos v State Bank of South Australia [1993] 2 VR 316 (Hayne J); Eade v Vogiazopoulos (No 2) (1993) V ConvR 54-458; [1999] 3 VR 889 (Smith J); Coomber v Curry (1993) V ConvR 54-464 (Hayne J); Beatty v ANZ Banking Group Ltd [1995] 2 VR 292 (Mandie J); Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188. See also Rasmussen v Rasmussen [1995] 1 VR 613 (Coldrey J); National Australia Bank Ltd v Maher [1995] 1 VR 318; Sixty-Fourth Throne Pty Ltd v Macquarie Bank (1996) V ConvR 54-546 (Hedigan J) where s 44(1) was discussed. 5. In Breskvar v Wall (1971) 126 CLR 376, Menzies J appeared to distinguish Gibbs v Messer [1891] AC 248 on the basis that the Gibbs case involved a forged transfer from a non-existent person. For a criticism of this interpretation, see Teh, “Breskvar v Wall: The End of Deferred Indefeasibility?” (1974) 9 MULR 381 at 400-401.

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6. The principle supported by the concept of immediate indefeasibility is that registration of a void instrument passes title. An instrument may be void in a number of different ways other than those that occurred in Frazer v Walker [1967] 1 AC 569 (forged instrument) and Breskvar v Wall (1971) 126 CLR 376 (void as a result of a specific statutory provision). See, for example, Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 (lack of capacity); PT Ltd v Maradona Pty Ltd (1991) 25 NSWLR 643. See also cases where an instrument is void as a result of an unauthorised, unilateral alteration – Morton v Black (1986) 4 BPR 9164; Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238; Upton v Baron (2000) 9 Tas R 178 (unilateral alteration of a mortgage increasing the amount of the principal sum from $100,000 to $130,000 where the extra $30,000 had been advanced: indefeasible title in mortgagee. Note that in this case the alteration took place after registration and query how registration can cure a defect arising after registration); Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235 (NSW CA – lease unilaterally altered by lessor after signing with insertion of note of prior encumbrance). All cases holding that indefeasibility of title overrode the principle in Pigot’s Case (1614) 11 Co Rep 26b. Pigot’s Case is discussed in MacCallum, “A New Approach to the Unilateral Alteration of Instruments” (1980) 7 Adel L Rev 274, and see NSWLRC, The Rule in Pigot’s Case, Report 97, August 2001, recommending abolition of the rule. See now Conveyancing Act 1919 (NSW), s 184 providing that the rule in Pigot’s Case is abolished. See also Corinne Court (Owners of) 290 Stirling Street Perth Strata Plan 12821 v Shean Pty Ltd (2000) 23 WAR 1 (registered easement indefeasible despite failure to satisfy requirements for a company to grant the easement, discussed in Butt, “Easements: Permitted Use and Indefeasibility” (2001) 75 ALJ 407. Note, actual decision in the case overturned on appeal on another point: see Shean Pty Ltd v Corinne Court (Owners of) 290 Stirling Street Perth Strata Plan 12821 (2001) 25 WAR 65); Rock v Todeschino [1983] Qd R 356 (registered easement indefeasible even though no grant made at all). 7. In South Australia, the position is complicated by the express exception for forgery. This is discussed in this chapter at [5.295]. 8. Where native title is involved, it seems that registration of an invalid “previous exclusive possession act” does not confer “an indefeasible title on the registered proprietor in relation to native title”: registration does not cure the invalidity so as to make it effective to extinguish native title. See Secher, “Native Title – An Exception to Indefeasibility and a Ground for Invoking the Deferred Indefeasibility Theory” (2000) 7 JCULR 17 at 17 relying on Hayes v Northern Territory (1999) 97 FCR 32; [1999] FCA 1248. Alternatively, the Hayes decision could be viewed as creating an exception to the indefeasibility of the registered proprietor’s title: see Secher, at 42-46.

INDEFEASIBILITY FOR WHAT Registrar General of New South Wales v Van Den Heuvel [5.105] Registrar General of New South Wales v Van Den Heuvel [2010] NSW ConvR 56-266; [2010] ANZ ConvR 10-040 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. [The residential property was in the joint names, as joint tenancy, of the husband and wife. The husband forged the wife’s signature on a loan and a mortgage. The wife did not receive any funding from the transaction. The mortgage was registered. The issue before the New South Wales Court of Appeal was, “what did the mortgage secure”. YOUNG JA: (with whom Hodgson JA largely agreed): … It is now necessary to consider the terms of the relevant mortgage in some detail. The mortgage itself was fairly innocuous. However, to understand it, one needs to look not only to the mortgage, but also to the memorandum filed by Perpetual’s solicitors under s 80A of the Real Property Act 1900 (setting out standard clauses deemed to be included in the mortgage) and the underlying Loan Agreement. This is because, instead of adopting the traditional format of a simple mortgage document dealing with a security given to secure a definite sum lent plus interest, Perpetual elected to use the contemporary computer friendly format of the mortgage referring to monies due under the underlying Loan Agreement. An additional complication is that a so-called “plain English” document was employed. This endeavoured to deal with the situation of a loan to two persons by defining the word “I” as embracing “us” but forgetting to define “we” and sometimes using “we” instead of “I”. If “plain English” is to be employed in a document, great care must be taken to see that precision is not lost as it was in the case of the present mortgage. One more comment must be made before turning to the text of the document. After the primary judge’s decision, this court decided Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32; (2010) 14 BPR 27,339. That case was a forged mortgage case on documents very close, but not identical, to those used in the present case. The English case must be considered binding on us (indeed no-one argued to the contrary), and enables answers to be given on some of the questions posed in the present appeal. The mortgage is dated 11 November 2004. It includes the provisions of Memorandum 3161863. Clause 2.2 of the memorandum include the charging clause, viz: “The Mortgage is security for payment to you of the Secured Money …”. It also contains the covenant to repay, viz: “I agree to pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of each Secured Agreement or the Mortgage”. The mortgage form describes both the wife and her husband as “Mortgagor”. The mortgage form states that the “Mortgagor”: mortgages to the mortgagee all the mortgagor’s estate and interest in the land specified above … One then needs to turn to the definitions in cl 1.1 of the Memorandum. “I” is there defined as having the meaning “the person or persons named and described as the Mortgagor in the Mortgage Form and ‘me’ and ‘my’ and, if there is more than one of us, ‘us’ has a corresponding meaning.” “You” is defined to mean “the person or persons named and described as the Mortgagee in the Mortgage Form and ‘your’ has a corresponding meaning.” “Mortgage Form” means “the form of Mortgage which I have executed which refers to and incorporates this document.” “Secured Agreement” means “any present or future agreement between me or us, or any one of us, and You”. “Secured Money” means: 274

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Registrar General of New South Wales v Van Den Heuvel cont. • all amounts which are payable at any time or are contingently owing or payable to you under a Secured Agreement; and • Enforcement Expenses. Clause 1.2 includes as the penultimate bullet point: a reference to any thing (including without limitation, to the Secured Money or to the Property) is a reference to the whole or any part of it and a reference to a group of things or persons is a reference to any one or more of them I will refer to this as “the Group Clause”. Clause 11.7 of the Memorandum is headed “Joint and Several liability” and provides: “If I am [sic] comprised of more than one person, each person will be liable individually, and every two or more persons are liable jointly, for all promises and obligations under the Mortgage.” [Presumably the drafter meant to write “I is” rather than “I am” as the word “I” does not mean a person, but an expression, a trap for the “plain English” user!]. It is also vitally necessary to look into the precise terms of the underlying Loan Agreement. This also bears date 16 November 2004. It is said to supersede the preliminary loan approval of 19 October 2004, a document not in evidence. Clause 1 of the Loan Agreement is as follows: LOAN We hereby agree to lend money to you which you agree to borrow and repay. The terms of the Loan are as set forth in this agreement (including the Schedule) and the Terms and Conditions Booklet (Non-Consumer Credit Code) (“Terms and Conditions”). The terms “Borrower” and “You” appear next to the names of “Peter Harry Van Den Heuvel” and “Elizabeth Van Den Heuvel”. The schedule to the Loan Agreement provides for the interest rates to be charged and beside the words “New Security” is the following: Registered First Mortgage by Peter Harry Van Den Heuvel and Elizabeth Van Den Heuvel over 18 McIntosh Street QUEANBEYAN NSW 2620 being the land more particularly described in Certificate of Title 24/12658. The Loan Agreement incorporates a booklet of Terms and Conditions. Clause 1.1 of these Terms and Conditions defines “You” to mean “the Borrower or Borrowers”, and “your” has a corresponding meaning. Clause 1.2 includes the Group Clause. Clause 3 of the Terms and Conditions includes: Before a drawdown of your facility can be made: You must sign and return the Loan Agreement to our solicitors or settlement agent … Clause 22.3 of the Terms and Conditions is as follows: Joint and several liability If the Loan is being made to more than one person, then each person will be liable individually, and every 2 or more persons are liable jointly, for all amounts due under the Loan. All of your obligations attach to your successors and permitted assigns. It is useful at this stage to note how the documentation in the present case as abstracted above compares with that in the English case. There is a difference in that in the English case there was a Loan Offer followed by the mortgage documentation. In the instant case, there may have been a loan offer, there was certainly a preliminary Loan Agreement however, neither is before the court. The Loan Agreement, however, fulfils the same role as a Loan Offer accepted by the borrower. [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. Mr Leopold (who also appeared in English) says that for all intents and purposes the documentation was the same in the two cases save that, in the English case, there was a loan offer to two people requiring both to accept, whereas, in the instant case, there was no actual loan offer in evidence. It is useful now to consider the English case and how that decision impacts on the present case. In English, as here, a husband forged his wife’s signature to a mortgage to Perpetual which became registered. Default was made under the mortgage and Perpetual sought possession. The wife successfully opposed this. The court comprised Allsop P, Campbell JA and Sackville AJA, the lastmentioned giving the reasons of the court. At [11], Sackville AJA noted that, whilst the modern history of cases under the Torrens System where a husband had forged his wife’s signature to a mortgage which had become registered might be traced back to the Privy Council’s decision in Frazer v Walker [1967] 1 AC 569, no issue was apparently raised in that case as to whether the indefeasibility of the registered mortgagee’s title extended to the covenant to repay the amount advanced by the lender to the wife on the faith of a mortgage on which the husband’s signature had been forged. His Honour then noted that later authorities in Australia and New Zealand, while acknowledging that registration of a forged mortgage confers an indefeasible title on the registered mortgagee (unless the mortgagee has been guilty of fraud), have pointed out that there is a further question to be answered, at least where the contest is between the innocent registered proprietor and the mortgagee. That question is whether the indefeasibility of the mortgagee’s title effectively validates all the terms of what otherwise would be a void instrument and, if not, what is the test for identifying the provisions of the mortgage that can be enforced against the estate or interest of the innocent registered proprietor. Effectively the question is as Campbell J so succinctly put it in Small v Tomasetti [2001] NSWSC 1112; 12 BPR 22,253, 22,254 [9]: Notwithstanding that registration confers indefeasibility on a mortgagee, there is still a question, “indefeasibility for what?” Returning to the English case, Sackville AJA said at [12]: [12] In order to answer that question, courts have generally proceeded on the basis that it is a question of construction of the mortgage as to whether it grants the mortgagee a security interest that can be enforced against the land (including the interest of the defrauded registered proprietor). This has often involved the courts in a minute analysis of the language of complex mortgage documentation that is unlikely to have been read, let alone understood by a mortgagor. By hypothesis, the innocent registered proprietor in a case of forgery will not have even had a chance to read the documentation on which his or her fate as a proprietor will rest. His Honour then noted that the authorities have not always been entirely consistent in their approach to the enforceability of forged mortgages against the innocent registered proprietor whose signature has been forged, at least where the forger is a joint registered proprietor. He reviewed the Australian and New Zealand authorities and referred to the learned article by J Stoljar, “Mortgages, Indefeasibility and Personal Covenants to Pay” (2008) 82 ALJ 28. The basal facts in English were that Perpetual made a “Loan Offer” to: Niel William English … Kerrie Diane Therese English … which was expressed as follows: 276 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. The Lender offers You a Loan on the terms and conditions of this Loan Offer and the additional terms and conditions contained in the Interstar Loan Terms and Conditions Booklet (“Terms and Conditions”). (Emphasis in original.) Clause 5 of the Loan Offer, under the heading “SECURITY”, contained the following statement: By accepting this Offer You agree that the following new Security is to be provided to the Lender for the Loan: Registered First mortgage by Niel William English and Kerrie Diane Therese English over [the Property]. This was said by Perpetual to constitute the “acknowledgement” required by the Mortgage later signed by Mr English and on which he forged Ms English’s signature Clause 10 of the Loan Offer provided as follows: ACCEPTING THE OFFER To accept this Offer You and, if there is more than one person all of You, must sign and return to the Lender’s solicitors the original copy of this Offer so that it is received by the Lender’s solicitors or settlement agent within 21 days of the date of the Offer. (Emphasis added.) The Loan Offer was accompanied by the “Interstar Loan Terms and Conditions Booklet” (“Booklet”), referred to in the opening provisions of the Loan Offer. The Booklet (cl 1.1) defined “You” to mean: the person or persons to whom the Offer is made. The Booklet defined Security to mean: any existing or new mortgage or guarantee required by the Loan Offer. The Booklet (cl 1.2) include a clause identical to the Group Clause. Clause 20.3 of the Booklet provided as follows: Joint and several liability If the Loan is being made to more than one person, then each person will be liable individually, and every 2 or more persons are liable jointly, for all amounts due under the Loan. All of your obligations attach to your successors and permitted assigns. Mr English purported to accept the Loan Offer by signing the document. He forged the signature of Ms English to the document to indicate her acceptance of the Loan Offer. He had no authority to purport to accept the Loan Offer on her behalf. Each signature was said to be witnessed by a solicitor, whose name, signature and stamp appeared on the document. At [68], Sackville AJA helpfully set out the basic principles that govern this type of case as follows: 1.

Registration of a mortgage does not transfer the fee simple estate, but the mortgage takes effect as a security over the land: RP Act, s 57(1). Upon registration, the land becomes liable as security in manner and subject to the covenants set forth in the mortgage: RP Act, s 41(1); Provident Capital Ltd v Printy per Basten JA (with whom Tobias and McColl JJA agreed) [2008] NSWCA 131; 13 BPR 25,199.[25].

2.

Registration of a forged mortgage confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies: Breskvar v Wall [1971] HCA 70: 126 CLR 376; Yazgi v Permanent Custodians [2007] NSWCA 240: 13 BPR 24,567 at [14], per Beazley JA (with whom Ipp and Tobias JJA agreed); Pyramid Building Society (In Liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, at 191, per Hayne JA (with whom Brooking and Tadgell JJA agreed).

3.

Registration of the mortgage does not necessarily ensure the validity of every term of the mortgage, irrespective of the relationship between the term and the estate or interest created [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. by the mortgage itself: Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; 129 CLR 1, at 17, per Barwick CJ (with whom McTiernan and Stephen JJ agreed). Hence a personal right created by a covenant in a mortgage, such as a guarantee, is not rendered indefeasible by registration of the mortgage: Mercantile Credits Ltd v Shell Co of Australia Ltd [1976] HCA 9; 136 CLR 326, at 343, per Gibbs J; PT Ltd v Maradona (1992) 27 NSWLR 643. 4.

In New South Wales, the view has been taken that a personal covenant in a registered but forged mortgage to pay the amount of the mortgage debt, where the debt exceeds the value of the property, is not protected by the indefeasibility provisions of the RP Act: Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202, at 224, per Powell JA (with whom Meagher and Handley JJA agreed); cf Pyramid Building Society v Scorpion Hotels, at 196, where a different view may have been taken.

5.

The registration of a forged mortgage validates those terms of the mortgage which delimit or qualify the estate or interest of the mortgagee or are otherwise necessary to assure that estate or interest to the registered proprietor: PT v Maradona, at 679; Yazgi v Permanent Custodians, at [19]-[20].

6.

It is necessary to construe the terms of a mortgage to determine the scope of the estate or interest in respect of which indefeasibility is conferred by registration of the mortgage: Yazgi v Permanent Custodians, at [22]. Thus whether registration of a forged mortgage allows the mortgagee to enforce its security interest in the land in relation to a debt or obligation arising under an agreement separate from the mortgage is a question of construction of the mortgage: Westpac New Zealand Ltd v Clark [2009] NZSC 73, at [43], per Blanchard, Tipping and Wilson JJ.

7.

Generally speaking, if the mortgagee specifies a sum of money (plus interest) as the amount secured by the mortgage, the charge created by the mortgage will secure the amount so specified even if the document creating the indebtedness is void under general law principles: Small v Tomasetti.

8.

However, if as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt or obligation, registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation: Provident Capital v Printy, at [50]-[52]; Yazgi v Permanent Custodians, at [25]ff. The question of construction may be particularly difficult where the registered mortgage refers to antecedent documentation which is not incorporated in the Torrens register and which may be invalid on general law principles.

His Honour then turned to the construction of the documents which, as I have said, were close to, but certainly not identical, to those used in the instant case. At [71]-[73] his Honour considered the Group Clause and held that the word “group” includes two or more persons so that he rejected the argument that “I” meant only the jointure of wife and husband. However he said at [74] that that does not necessarily mean that cl 2.2 should be construed to create a security interest in favour of Perpetual that allows it to exercise a power of sale over Ms English’s interest in the property by reason of Mr English’s failure to comply with the terms of the Loan Offer. It is necessary to construe cl 2.2 having regard to the terms of the Loan Offer (a document which does not form part of the Torrens System register), including the term prescribing the means by which the offerees could accept the Loan Offer. Sackville AJA continued: [75] The statement in cl 2.2 that the Mortgage is security for payment to “you” (that is, Perpetual) of the “Secured Money”, requires reference to the definition of the latter term. “Secured Money” means, relevantly: 278 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. all amounts which are payable at any time or are contingently owing or payable to you under a Secured Agreement. (Emphasis added.) The definition of “Secured Money” does not itself identify the person or person by whom the monies are payable. [76] The definition of “Secured Money” requires reference to be made, in turn, to the definition of “Secured Agreement”. For present purposes, the definition has two cumulative components: any present … agreement between me or us, or any one of us, and you; and which I acknowledge in writing to be an agreement secured by the Mortgage. [77] Mr Leopold identified the “present agreement” to be the Loan Offer dated 24 April 2003 which Mr English purported to accept and to which Ms English’s signature as acceptor had been forged. It will be recalled that cl 10 of the Loan Offer provides that: To accept this Offer You and, if there is more than one person all of You, must sign and return … the original copy of this Offer … within 21 days … (Emphasis added.) The expression “You” is defined in the Booklet to mean “the person or persons to whom the Offer is made”. [78] The Loan Offer bore the genuine signature of Mr English purporting to agree to the terms of the Offer and accepting it. It also bore the forged signature of Ms English purporting to accept the Offer. The express statement in the Offer, that it was capable of acceptance only if all the persons to whom the Offer was made signed the acceptance, was plainly never complied with. In these circumstances, no enforceable agreement ever came into force between Perpetual and the husband and wife, or between Perpetual and the husband. The signature of Mr English alone was not capable of constituting acceptance of the Loan Offer. Perpetual never made an offer to Mr English alone and he never purported to accept any such offer. [79] It follows that the first limb of the definition of “Secured Agreement” in the Mortgage was not satisfied. There was no “present agreement” between Perpetual and Mr and Ms English, or between Perpetual and Mr English, at the time Mr English executed the Mortgage. There was no money payable under a Secured Agreement and therefore there were no amounts satisfying the definition of “Secured Monies” in cl 1.1 of the Memorandum. The Mortgage was not security for the payment of any Secured Money since there was nothing that satisfied that definition. In short, the undertaking in cl 2.2 of the Memorandum to pay the Secured Money as and when it became due had nothing to operate on. [80] It is therefore irrelevant that the word “I” is to be read as a reference to either the husband or wife, or to both of them. In whatever way “I” or the related pronouns are interpreted for the purposes of the Mortgage, it does not alter the fact that there is no Secured Money in respect of which the Mortgage is to be security. Sackville AJA then said at [82] that the Loan Offer, on its face, was made to Mr and Ms English and required acceptance by both of them. The fact that Ms English was unaware of the Loan Offer does not alter the requirements for a valid acceptance. Ms English never accepted the Loan Offer and therefore the requirements of cl 10 of the Loan Offer were never satisfied. The English case then deals with the rights which Perpetual would have against the husband in the relevant circumstances a matter to which I will return. The wife says that, on the same documentation, the same result must follow. There is a registered mortgage, but, on its true construction, no monies are secured by it. The Loan Agreement is a nullity against her as she never signed it. Therefore, Perpetual can have no claim on her interest in the Queanbeyan home. Mr Leopold submits that this result does not follow. He puts a number of propositions which may be summarized as follows: [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. 1.

There was no Loan Offer in the instant case.

2.

Although cl 3 of the Loan Agreement in the present case noted that a requirement before drawdown was that “You” must sign and return the Loan Agreement: (a) that was not an act in making a contract, rather part of the carrying out of a contract already made; (b)

that term was solely for the benefit of Perpetual which waived it by conduct.

3.

The wife’s counsel conceded at the trial that there was a binding agreement between her husband and Perpetual and should not be permitted to change tack on appeal. (The present argument, which is now reinforced by the English case was only put below by the Registrar General).

4.

There is an operative issue estoppel preventing the wife from denying the validity of the mortgage between the husband and Perpetual. [This submission is considered under head 4 below].

It is vital as between the wife and the Registrar General, and, to a lesser extent between the wife and Perpetual, as to whether the mortgage secured the money lent to the husband. If it did, then, by operation of the indefeasibility principle, the wife’s interest in the land can be realized by Perpetual; to recover the money it lent. If it did not, then the wife’s interest is protected and she has little or no claim against the Registrar General. As far as the husband is concerned, there is little difference. He either is bound by the mortgage or, if he is not, then, in equity, he will be considered under the same obligations as if he had signed the mortgage. This latter proposition is, in my view, the more technically correct way of stating the proposition that is sometimes put in a shorthand way by saying there is an implied agreement for a mortgage by conduct: Mestaer v Gillespie (1805) 11 Ves 231; 32 ER 1230; Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049 at 12,052, English at [100]. Again, it must be noted that it is always open to a joint tenant to mortgage his or her aliquot share in the land if he or she can find a person willing to lend on that security. Under the Torrens System, such a mortgage, being a mere hypothecation, does not sever the joint tenancy. The security is over the mortgagor’s interest alone. If the mortgagor predeceases the other joint tenants, the security ceases to exist over the land: Lyons v Lyons [1967] VR 169. The first two points noted in [147] are in my view correct. As to waiver, Mr Leopold cited the recent High Court decision in Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570; 83 ALJR 196. I do not believe that that case alters the previous law and that is that, once a contract has come into existence, a condition solely for the benefit of one party can be waived by that party by words or conduct. The conduct of Perpetual in paying out the money is clearly a waiver of its rights. “Waiver” is a word which may have different meanings in different contexts. Most often, though not always, waiver may only be held to have occurred when the person who is said to have waived had full knowledge of the operative facts and circumstances. That does not seem to apply where a person is deemed to have waived a contractual provision for his or her sole benefit. If it does, adherence to the course of conduct after the facts are known, suffices. The decision in the English case thus cannot simply be applied to the present case. However, the English case does decide that the Group Clause means that the argument that “I” means only the jointure of wife and husband should not succeed. The English case also dissuades one from saying that just because the husband and Perpetual went to pains to sign up extensive documentation and Perpetual parted with a large sum of money that the court would not find the whole arrangement a solemn farce and that there was no contract at all. 280 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. However, that factor is one which the court must take into account. Mr Leopold’s third point does not trouble me in a situation where the point was taken by another party below and there is a recent restatement of the law by this court after judgment was delivered and Perpetual cannot point to any forensic disadvantage in the concession at trial being withdrawn. Thus I come back to the question as what was secured by the indefeasible mortgage. This leads to the definition of “Secured Money” set out earlier which means monies owing under a “Secured Agreement.” “Secured Agreement” is defined as “any present or future agreement between me or us, or any one of us, and You”. The only possible “Secured Agreement” is the Loan Agreement. It was not signed by the wife, nor is it binding on her. However, the vital matter is whether, it being binding on the husband, the wife has (by virtue of indefeasibility) mortgaged her interest in the land because “one of us” as named in the mortgage, that is the husband, by the Loan Agreement owes money to Perpetual. It has been argued that because the Loan Agreement is drafted for both husband and wife to sign and only the husband signed it, it never came into effect. This argument is reinforced by reference to the condition in cl 3 of the terms and conditions noted above which required a return of the signed Loan Agreement before the loan was payable. The cases cited to support this proposition are principally those decided in the area of guarantees, where, as a general rule, if a guarantee is to be given by four people and only three sign the documentation, the usual result is that the court will hold that the three signed on condition that the guarantee would, only operate after all had signed; see eg Marston v Charles H Griffith & Co Pty Ltd [1982] 3 NSWLR 294. However, as I said in Katsaitis at 12,051, in each case the court must look at the intention of the parties. If the conclusion is that a person did not intend to take on an obligation unless others were also bound, then the document will not operate until all intended to be bound, have signed. However, this does not always follow. The primary judge held [71] that it was not contemplated that the Loan Agreement was not binding until both Mr and Mrs Van den Heuvel had signed it. He said that there existed between Perpetual and the husband all of the essentials of a binding contract and the monies were advanced to him in accordance with its terms. That finding was within the primary judge’s mandate. Moreover, as Mr Leopold submits in the instant case, Perpetual in paying over the money would know from past experience that wives’ signatures are sometimes forged and that it would at least have the husband bound by the documentation. On the husband’s side, he knew he had forged his wife’s signature to the documents and wanted the documents to be operative so as to receive the money he wanted. With respect to Basten JA, I cannot draw the contrary inferences that he considers should be drawn. BASTEN JA (in dissent – held that there was no mortgage in existence) Indefeasibility The second question is whether the loan agreement, despite its invalidity under the general law, obtained the benefit of indefeasibility, because it was secured by a registered mortgage which enjoys that benefit. In English, Sackville AJA (with whom Allsop P and Campbell JA agreed) set out principles, said not to be in dispute, as to the effect of registration of a mortgage over land: at [68]. However, the mortgage in question in English included an element in the definition of “Secured Agreement”, not found in the present case, namely a reference to any present or future agreement “which I acknowledge in writing [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. to be an agreement secured by the Mortgage”: at [76]. The court held that there was no such acknowledgment in writing and hence the default under the loan agreement was not secured by the mortgage. In other cases it has been necessary to consider terms in a mortgage of a kind colloquially described as “all monies” mortgages, where the loan secured is less precisely defined. Thus, in Provident Capital Ltd v Printy [2008] NSWCA 131 (Printy), the memorandum of mortgage contained a covenant on the part of the mortgagor to repay the secured money, which meant all money owing, amongst other things, under a “related agreement”. The case involved a single mortgagor whose land had been mortgaged without his authority by a fraudulent third party. The court upheld the judgment below, in which Studdert J had accepted that the deed of loan was not binding on the plaintiff because he did not sign it, and the mortgage, which obtained indefeasibility under the Real Property Act, secured money owing by the mortgagor to the mortgagee, which could only in the circumstances had been money owing under the deed and the mortgagor owed no debt under that deed: at [17]. The court considered in some detail the statutory scheme of the Real Property Act, in identifying the scope of indefeasibility: at [22]-[38]. The court stated at [26]: Being a security for payment of money, an essential element of any mortgage is that it will include a covenant on the part of the mortgagor for the payment of the debt secured by the mortgage. A second essential element as a charge which constitutes an interest in land is that the mortgage allows the mortgagee to recover the debt, in the case of default by the mortgagor, by sale of the land. That the Act considers the obligation to repay an essential element of a mortgage is confirmed by the provision for transfer which, in the case of a mortgage, includes “the right to sue upon any mortgage or other instrument and to recover any debt … and all interest in such debt …”: s 52(1). As noted by Dixon and Evatt JJ in Consolidated Trust Company Limited v Naylor [1936] HCA 33; 55 CLR 423 at 434, such language “is not incapable of including among the rights which pass to the transferee the benefit of the covenant by a surety who joins as a party in the instrument of mortgage”. Nevertheless, their Honours concluded (as did Starke J) that the language did not extend so far. Their Honours continued: The statute is concerned with dealings in land and it is because a mortgage involves such a dealing that the statute prescribes how mortgages may be transferred and with what consequences. It is concerned with the mortgage transaction in its entirety as it affects the land, and, therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction. Sections 41 and 42 of the Real Property Act provide that, upon registration, the land becomes charged as security for the debt secured by the mortgage, regardless of any form of invalidity which may afflict the mortgage under the general law: Printy at [30]. Section 41 renders indefeasible the security interest in the land “in manner and subject to the covenants, conditions, and contingencies set forth and specified in” the mortgage. Pursuant to ss 57 and 58, the mortgagee has a statutory right, where “default has been made in the observance of any covenant, agreement or condition expressed or implied in the mortgage” to exercise the powers conferred by s 58, which include a power of sale and recoupment of “the monies which may then be due or owing to the mortgagee”: s 58(3). The question remains, however, whether, where the secured covenant for payment identifies money owing under a separate agreement, the principle of indefeasibility extends to the separate agreement. In Perpetual Trustees Victoria Ltd v Tsai [2004] NSWSC 745, Young CJ in Eq (as his Honour then was), noted the differences between the “old fashioned form of mortgage”, which included a statement of the principal sum lent and an acknowledgment that the money had been lent, and the form of mortgage which secured money drawn down under a facility created by a separate agreement: at [20]. His Honour continued at [23]-[24]: 282 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. As the secured agreement itself does not bring with it any concept of indefeasibility and as there is an issue between the parties as to whether or not it was ever signed by the appellant or merely signed by a person impersonating the appellant, there is not the material to demonstrate to the required standard that there was a loan to the appellant. If there was no loan to the appellant he could not be in default not repaying the loan and, therefore, the mortgagee was not entitled to possession. In Printy, as in the present case, that which was uncertain in Tsai, namely that there was no loan agreement with the mortgagor, was established by the evidence and accepted by Perpetual. The result followed from a combination of the derivation of the relevant principles by reference to the terms of the Real Property Act and the construction of the mortgage. It is, accordingly, clear that the mortgagors are liable to the mortgagee in respect of their land, if there is default under the mortgage. However, unless there is an amount payable under a secured agreement there will be no default. The scope of the legal incidents of the mortgage are not in doubt: what the mortgagee needed to establish in order to obtain relief in the form sought under s 57 of the Real Property Act was that there had been default because an amount payable under an agreement arising dehors the mortgage, had not been paid. As there was no such amount payable under the loan agreement, the enforceability of the mortgage took the matter no further. This conclusion does not undermine the security of the Register, nor the ability of a transferee of the security to obtain a good title to the mortgage. As explained by Sackville AJA in English at [97]: It is true that the consequence of the invalidity of antecedent documentation may produce the result that a registered mortgage does not secure a debt. But that is the situation where a mortgagor repays the mortgage debt, yet the mortgage remains undischarged: cf C N and N A Davies Ltd v Laughton [1997] 3 NZLR 705 at 714; J Stoljar, “Mortgages, Indefeasibility and Personal Covenants to Pay” (2008) 82 ALJ 28 at 30. It is not the nature or extent of the legal interest of the mortgagee which is in issue, but its economic value at a particular time: whether a mortgage secures a particular debt will depend upon the existence of the debt. Where the mortgage secures a facility, what has been drawn down, what is repayable and what has been repaid will depend upon factors, none of which can be derived from an inspection of registered instruments. The personal obligation to pay, where it is “a debt merely collaterally secured by the mortgage” or arises “pursuant to a transaction external to the mortgage” may not be transferred by assignment of the mortgage: see Queensland Premier Mines Pty Ltd v French [2007] HCA 53; 235 CLR 81, 100-1 at [55] (Kiefel J) and French v Queensland Premier Mines Pty Ltd [2006] VSCA 287, at [39] (Maxwell P). Finally, it is necessary to consider whether the mortgage secured an “implied” agreement between Mr van den Heuvel and Perpetual, manifested, as explained by Hodgson JA, “by the conduct of Perpetual and the husband in signing the loan agreement document … and advancing and accepting money conformably with the terms of that agreement”: at [5]. However, as his Honour explained in National Commercial Banking Corporation of Australia Ltd v Hedley [1984] 3 BPR 9477 (Hedley) at 9483, and as approved in English at [100]: … the principle rests on two independent bases. First, the courts imply an agreement between the forger and the mortgagee for the forger to mortgage his or her interest as security for the loan provided by the mortgagee. Secondly, an estoppel arises from the representation made by the forger, relied on by the mortgagee, that the spouse’s signature is genuine. Hedley was concerned with an unregistered mortgage, the registration being set aside for fraud on the part of the mortgagee. Further, the mortgagee conceded that it was not entitled to pursue a claim with respect to the interest of the wife who had been the victim of the forgery. In any event, because of the registration of the mortgage (without fraud in this case), the question is not whether the mortgage [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. is a valid security: it undoubtedly is. Rather, the question is whether the implied loan agreement, as between Mr van den Heuvel and Perpetual, is one which is secured by the valid mortgage. In this regard, the mortgage expressly picks up an agreement between Perpetual and both, or either of, the mortgagors. That language is apt to catch an “agreement” with Mr van den Heuvel alone. The question is whether the implied agreement between Mr van den Heuvel and Perpetual is an “agreement” for the purposes of the definition of “Secured Agreement” in the mortgage. In English, Sackville AJA referred to this issue in the following terms: 84 Another possibility is that Mr English, in proceedings between himself and Perpetual, might be estopped from denying that an agreement in the terms of the Loan Offer had come into force between them. Perpetual’s supplementary written submissions make no reference to estoppel, presumably because it has never pleaded such a case against either Mr English or Ms English. 85 If, however, Perpetual did seek to make out a case of estoppel against Mr English, an issue would arise as to whether any estoppel available against him could avail Perpetual against Ms English. To put the matter another way, it is far from obvious that the expression “present agreement” in the definition of “Secured Agreement” in cl 1.1 of the Memorandum is apt to embrace, not an agreement in fact entered into, but one which a fraudulent party is estopped from denying in proceedings brought by the defrauded lender. The issue was not argued, but I doubt that the definition of “Secured Agreement” should be given such an expansive interpretation. The contra proferentem principle would seem to have particular force when applied to the construction of an instrument not only drawn up by an institutional lender, but the terms of which are sought to be enforced against a party who is neither a party to the instrument nor aware of the circumstances giving rise to the estoppel. There is a difficulty in determining this case on the basis of such an implied agreement: as fairly conceded by senior counsel for Perpetual in the course of the hearing, it was not pleaded. The agreement relied upon in para 4 of the statement of claim was identified as an agreement “dated 16 November 2004 and entitled ‘Loan Agreement’” and particularised as “a written document dated 16 November 2004 and incorporates an additional document entitled ‘Interstar Loan Terms and Conditions Booklet’”. Having conceded that reliance upon an implied agreement, if that were the accurate description of the consequence of the relevant legal principles, was not pleaded, Perpetual did not seek to amend its pleading, nor did it file a notice of contention seeking to support the decision below on a different basis, albeit one not addressed below. I would not allow Perpetual to rely upon this basis of liability. If it were permitted to rely upon an “implied agreement”, I would not consider such a legal construct to fall within the concept of “agreement” in the mortgage. It is not a mortgage which secures all monies outstanding on any account or basis as between the mortgagors or either of them and Perpetual: it is limited to monies owing under an agreement. Like the court in English, I would construe that concept as applying to contractual arrangements entered into by the parties and not to agreements constructed by the law in the circumstances where the contractual arrangement has been held not to exist. For these reasons, there was no debt owing under the mortgage and Perpetual was not entitled to the relief it sought on the basis pleaded by it. There remains for consideration the contention that, because it had a judgment against Mr van den Heuvel, entered into by default, it was entitled to the relief as mortgagee in relation to the land the subject of the mortgage. 284 [5.105]

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Registrar General of New South Wales v Van Den Heuvel cont. Significant time was spent in the course of argument debating the effect of the default judgment against Mr Peter van den Heuvel. The judgment was that Mr Peter van den Heuvel pay Perpetual a specified sum, namely $325,035.11. There was no dispute, either at trial, or in this court, that Perpetual was entitled to a judgment in that amount against Mr van den Heuvel. Accordingly, the only issue is whether, the default judgment having been given in these proceedings, there is an issue estoppel in respect of the basis of that judgment, namely that Mr van den Heuvel’s liability arose under the loan agreement. Once the court permitted the validity of the loan agreement and the scope of the security given under the mortgage to be in issue, in proceedings in which Perpetual sought possession of the property, the issue estoppel was no longer available to Perpetual. It was not sufficient to rely upon the default judgment for the reason noted above, namely that the mortgage did not secure all amounts owing as between the mortgagors or either of them or Perpetual.

[5.110]

Notes and Questions

1. Slight changes to the mortgage documentation is making all the difference to the results of these cases. Is this promoting form over substance? 2. In Perpetual Trustees Victoria Ltd v English [2010] ANZ ConvR 10-015; [2010] NSW ConvR 56-260, a husband forged the signature of his estranged wife on a loan and mortgage documentation that related to land jointly owned. The parties had separated in 1990, but never divorced. The loan for $536,000 was sought by the husband in 2003. The Court of Appeal considered that the resolution of the matter depended on the nuances of the registered mortgage and associated loan documentation. To accept the offer, the offer document stated that “you, and if there is more than one person all of you, must sign”. As the estranged wife had never signed, the loan agreement was never properly created, which then linked to the registered mortgage. The registered mortgage therefore secured nothing. See also Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328. 3. In addition to the arguments surrounding the extent of the mortgage, the issue of personal liability to repay has also been considered. See the following extract by Stoljar.

Mortgages, indefeasibility and personal convenants to pay [5.115] Jeremy Stoljar, “Mortgages, indefeasibility and personal convenants to pay” (2008) 82 ALJ 28 (footnotes omitted) Introduction and overview Registration of a mortgage under the Torrens legislation confers an indefeasible title on the mortgagee, even if, under general law, the mortgage is void. A mortgage usually also incorporates a personal covenant by the mortgagor to pay the mortgagee the amount secured by the mortgage. The operation of the principle of indefeasibility in respect of such a covenant gives rise to problems of a special kind. Is the covenant indefeasible despite the fact that, absent the effects of registration, the mortgage would be void? If a registered mortgage is void at general law, is the mortgagee entitled to a judgment for a money sum against the mortgagor personally, in addition or in the alternative to relief in respect of the land? In particular, if the mortgaged land is worth less than the amount owing under the mortgage, can the mortgagee obtain judgment against the mortgagor personally for the shortfall? [5.115]

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Mortgages, indefeasibility and personal convenants to pay cont. This article considers these questions. In particular, it considers the proposition that a personal covenant in a mortgage is so closely connected with the indefeasible estate or interest created by registration of the mortgage it also achieves indefeasibility. On the one hand, this proposition or one in similar terms has been applied or approved in numerous authorities including at intermediate appellate level in Queensland, Victoria, South Australia7 and New South Wales. On the other hand, the proposition seems inconsistent with the relevant provisions of the Torrens legislation, which are protective of interests in land, not personal rights; it appears inconsistent with the reasoning of a number of High Court authorities, which are to the effect that covenants in leases are protected by registration only if, or to the extent that, they are an incident of the lessee’s estate or interest in the land; it is inconsistent with intermediate appellate decisions directly on point in New South Wales and New Zealand, and it has been doubted by decisions of a single judge in New South Wales. In this article it is contended that this proposition does not reflect the operation of the Torrens legislation (although single judges in Queensland, Victoria and South Australia may still be bound by the decisions at intermediate appellate level noted above). Registration of a mortgage under the Torrens legislation does not achieve indefeasibility for a personal covenant to pay; registration secures the mortgagee’s title to an estate or interest in the mortgaged land. Registration of a mortgage void at general law affects the operation of a personal covenant contained in that mortgage only in a limited sense: a term or condition in a registered mortgage instrument which comprises a personal covenant to pay by the mortgagor may be apt, depending on the proper construction of the instrument as a whole, to measure the amount by which the land stands charged, and thereby enable the realisation of the security. However that limited operation does not found a claim by the mortgagee against the mortgagor personally. Thus, the answers to the questions posed at the outset are that if a registered mortgage is void at law the mortgagor is not liable personally under a covenant to pay, including in respect of any shortfall between the value of the mortgaged property and the amount owing; in that circumstance the mortgagee is confined to whatever remedies it may have against the land, including its power of sale…. Indefeasibility for what? In some cases a mortgage instrument secures money owing by the mortgagor on a separate loan agreement. A number of recent cases in New South Wales have considered whether, in that circumstance, the mortgagee, whose title is secure on registration, may enforce the mortgage for the amount owing under the separate loan agreement. Ultimately the question turns on the wording of the particular mortgage instrument. In Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281 Young CJ in Eq referred to the proposition established by Maradona and the cases following it, asdiscussed above, although noting that “one must be very careful about these wide statements” (at [16]). Young CJ in Eq held that if the mortgage secures moneys owing under a separate loan agreement but, because of forgery, there is no loan agreement at law, then there is no debt which the mortgage can secure: while there may be a registered mortgage, that mortgage “secures nothing”. A similar result was arrived at in Chandra. In that case, again, the loan and mortgage were forgeries. The terms of the mortgage instrument provided that the mortgagor was liable in respect of any “secured agreement”; however the only “agreement” falling within that definition was ineffective at law. Bryson AJ observed: Distinguishing between an estate or interest in land and a personal obligation created by a registered instrument can be difficult, particularly in relation to a covenant in a lease, to which some authorities relate. Bryson AJ continued: 286 [5.115]

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Mortgages, indefeasibility and personal convenants to pay cont. A covenant in a lease is more readily seen to be part of the estate or interest in land created by the lease than a personal covenant to pay a debt in a mortgage can be seen as part of the estate or interest in land created by the mortgage. To my mind the charge of the debt on the land is an estate or interest in the land, and the personal covenant to pay the debt is not, even though it is necessary to understand the personal covenant to see what is charged upon the land. The operation of a mortgage to charge a money obligation on land is recognisable without any difficulty as an interest in land; the personal obligation of a mortgagor himself to pay the debt, by means of enforcement available for debts generally and not by enforcements specifically against the land is, I think, equally clearly not an interest in land; even though it would quite frequently happen that the same personal covenant to pay a debt identifies both what debt is charged on land and what debt the mortgagor is personally liable for. A similar result was arrived at in Sabah Yazgi v Permanent Custodians Ltd [2007] NSW ConvR 56-195; [2007] NSWCA 240. In that case a husband signed a loan and mortgage in his own name, but forged the signature of his wife. Beazley JA (with whom Ipp and Tobias JJA agreed) observed (at [13]): It was common ground that because of the forgery, the personal covenant contained in the mortgage was not enforceable: see Grgic v Australian and New Zealand Banking Group Limited (1994) 33 NSWLR 202 at 224 per Powell JA (Meagher and Handley JJA agreeing); Perpetual Trustees Victoria Limited v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745 at [16]. No doubt because of such common ground Beazley JA did not go on to consider Maradona and the other cases discussed above which have affirmed the proposition that a personal covenant is protected by indefeasibility. Beazley JA held that it is necessary to look at the terms of the particular instrument of mortgage the subject of the litigation to determine the scope of the estate or interest in the land in respect of which indefeasibility is claimed by the registration of that mortgage. Again, the terms of the particular of instrument of mortgage before the court were not such as to impose a liability on the wife in respect of the forged loan agreement. Conclusion: What is the law in the various states? It is contended that, despite having been cited or approved in a number of cases, the proposition that a personal covenant is sufficiently connected to the estate in land to achieve indefeasibility, does not reflect the operation of the Torrens legislation (although the position in Victoria, Queensland and South Australia is discussed further below). The proposition that a personal covenant attracts indefeasibility is inconsistent with the indefeasibility provisions, which protect estates or interests in land, not rights against debtors in contract. It appears inconsistent with the reasoning of the High Court in the cases described above: those cases suggest that a covenant in a lease is protected by registration only if, or to the extent that, the covenant is an incident, or a part, of the estate or interest in the land; yet a mortgagor’s personal covenant is independent of the mortgagee’s interest in the land. And the proposition is inconsistent with intermediate appellate authority directly on point in New South Wales and New Zealand. However, the position in Victoria, Queensland and South Australia may diverge from that in New Wales and the other States and Territories. Take Victoria first. In Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188, the issue was whether a mortgagee’s title on registration of an invalidly executed mortgage could be impeached for fraud. Hayne JA, with whom Brooks JA and Tadgell JA agreed, held that the challenge to the lender’s title failed (at 196). The final paragraph of the judgment, in considering the form of the appropriate orders, includes the following: It has not been contended that the indefeasibility of the mortgage does not extend to the covenant for repayment and it is clear that it does so extend: Mercantile Credits Ltd v Shell Co Australia Ltd (1976) 136 CLR 326 at 343 per Gibbs J; PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 681. [5.115]

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Mortgages, indefeasibility and personal convenants to pay cont. A number of observations may be made in respect of this passage. It was made, as is noted, without the benefit of argument. Nor was it essential for the outcome of the case. At the same time, it is a considered statement, with which the other members of the court agreed. In those circumstances it would appear that, unless or until the Victorian Court of Appeal or High Court reconsiders the matter, the law in Victoria is that personal covenants attract indefeasibility on registration, including so as to oblige the mortgagor personally. A similar position obtains in Queensland and South Australia. In Queensland, in Parker v Mortgage Advance Securities Pty Ltd [2003] QCA 275 Davies JA, with whom Williams JA and Gerrard JA agreed, referred to and applied the proposition that the mortgagee’s indefeasible rights “included the covenant to repay the mortgage sum” (at [6]), although that proposition was not essential to the outcome of the case. In Clairview Developments Pty Ltd v Law Mortgages Gold Coast Pty Ltd [2007] QCA 141, Jerrard JA (with whom Helman J agreed) observed (at [40]), that counsel for the mortgagors in that case accepted that the mortgagees took on registration “an indefeasible title to the personal liability of the mortgagor for the mortgage debt”. Thus, as was the case in Pyramid Building Society, the point was not the subject of argument. In South Australia, the Full Court of the Supreme Court considered the question in Public Trustee v Paradiso (1995) 64 SASR 387. In that case a mortgagee sought judgment for a money sum in circumstances in which the signature of one mortgagor was forged and the other obtained by fraud. Prior J (with whom Cox J and Lander J agreed) held (at 388): The indefeasible title gained as mortgagee is subject to rights in personam between the parties to the mortgage: Mayer v Coe (1968) 88 WM (Pt 1) (NSW) 549. However, the liability as security cannot be a nothing. The covenant to repay gains authority from registration: Zafiropoulos v Recchi (1978) 18 SASR 5 at 13, 14. However, the case on which the court relied in the above passage, Zafiropoulos v Recchi (1978) 18 SASR 5, does not appear to establish the proposition for which it is cited as authority. In Zafiropoulos a mortgagor sought to injunct a mortgagee from exercising its power of sale. The mortgagor contended that the mortgagee’s interest was not “an estate in the land or an interest in the land” within the meaning of the South Australian Act, such that the mortgagee did not have the benefit of indefeasibility. Zelling J held that a mortgage under the Torrens legislation did create an estate or interest in land, declining to follow a Queensland decision to the contrary, Conroy v Knox (1901) 11 QLJ 112. However Zelling J does not appear to have addressed the separate question of whether a covenant to pay contained within a mortgage attracts indefeasibility on registration. Further, the reasoning of the Full Court of the Supreme Court of South Australia in Paradiso on this issue may be inconsistent with some of the authorities in New South Wales discussed above, particularly Sabah Yazgi and Tsai. While the judgment of the South Australian Full Court in Paradiso does not reproduce the relevant terms from the mortgage instrument, the mortgagors appear to have been contending, unsuccessfully, that because the purported loan agreement, pursuant to which the funds were advanced, was void at law for fraud the mortgage “secured nothing”. A contention to this effect was accepted in Sabah Yazgi and Tsai, as discussed above. Indeed, as appears from the passage from Paradiso quoted above, the court in Paradiso rejected the proposition that the mortgage could “be a nothing”, yet a proposition in these terms was accepted in Tsai. To conclude, the following principles reflect the relevant operation of the Torrens legislation (save arguably in Victoria, Queensland and South Australia). 1.

Registration of a mortgage confers an indefeasible title on the mortgagee.

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Mortgages, indefeasibility and personal convenants to pay cont. 2.

However, it still must be asked “indefeasibility for what?”. Registration of a mortgage validates those terms and conditions in the instrument of mortgage which delimit or qualify the estate or interest in the mortgaged land; it is necessary to examine those terms and conditions to determine the scope of the estate or interest in land so validated.

3.

A personal covenant to pay contained in a mortgage is independent of the charge created by the mortgage47 and does not attract indefeasibility on registration.

4.

If a personal covenant to pay contained in a mortgage instrument is apt to measure the amount by which the land stands charged for the debt the covenant is, to that extent only, secured by registration, but, even in that event, if the mortgage is void at law the covenant does not oblige the mortgagor personally and the mortgagee is confined to its remedies against the land….

[5.120]

Notes and Comments

1. For commentary on this issue see Harding, “Property, Contract and the Forged Registered Mortgage” (2010) 24(1) New Zealand Universities Law Review 21; Aitken, “Forged Mortgages in the Court of Appeal” (2010) 24(1) Commercial Law Quarterly 11; Vaughan, “What do forged ’all moneys’ mortgages secure” (2008) 82(10) ALJ 673; Grattan, “Forged but Indefeasible Mortgages: Remedial Options” in Bennett, Edgeworth and Sherry, Property and Security: Selected Essays (Thomson Reuters, Sydney, 2010) 171; Grattan, “Recent Developments regarding Forged Mortgages: The interrelationship between Indefeasibility and the Personal Covenant to Pay” (2009) 21 Bond Law Review 43. 2. There may be some convergence between the states on the enforceability (or not) of an all moneys mortgage. See the Victorian decision of Perpetual Trustees Victoria Ltd v Xiao Hui Ying [2015] VSC 21. However, we await a definitive High Court ruling. In this case, at [83]-[84], it was stated: “Whether, any, and if so what, amount is secured by a covenant for payment appears on the face of a forged mortgage, or in a document expressly incorporated by reference in the mortgage, the indefeasibility of the mortgage on registration will extend to the covenant for payment as properly construed”. Do you agree with this approach, and possible conclusion? 3. In a straightforward case, the covenant in a mortgage to pay a specific sum owing to the mortgagee, is a covenant which delineates and describes the nature and extent of the interest of the mortgagee and thus, pursuant to the principle in Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 (see [5.125]), attracts indefeasibility of title on registration. Any covenant defining the amounts comprising the principal sum, would similarly gain indefeasibility of title: see Eade v Vogiazopoulos (No 2) (1994) V ConvR 54-497. However, uncertainties have arisen in several areas. Where the mortgage is an “all moneys mortgage”, with the registered mortgage itself not acknowledging the loan or a specific sum owing to the mortgagee, and the loan agreement is contained in a document or documents extrinsic to the mortgage, difficulties can arise. It seems the fact that the debt is not created by the mortgage itself, does not affect the indefeasibility of the registered mortgagee’s title: PT Ltd v Maradona Pty Ltd (No 2) (1991) 25 NSWLR 643; Julong Pty Ltd v Fenn (2003) Q ConvR 54-586; French v Queensland Premier Mines [5.120]

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[2004] VSC 294. However, where the mortgage and the loan agreement are void (for example, as a result of the forgery of the mortgagor’s signature), the “indefeasibility” attaching to the mortgage is worthless. The extrinsic document, the loan agreement, is void because of the forgery and there is no registration of it to “cure” the defect. Unless the mortgagee can prove a debt owing from mortgagor to mortgagee in some other way, the covenant to pay to the registered mortgagee secures nothing: see Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281. See similarly Davies v Laughton (1996) 3 NZ ConvC 192,356; (1997) 3 NZLR 705 at 192,362 ((NZ) ConvC) where the obligation to pay arose under a collateral obligation of a void guarantee and Blanchard J in the High Court suggested that in such a case there may be no underlying obligation in respect of which the security can operate. As noted another problem concerns the situation where the debt owing exceeds the value of the land. Does the indefeasibility of the personal covenant to pay in the mortgage result in the mortgagee being able to claim the shortfall from the mortgagor personally in circumstances where the debt may not otherwise be recoverable (eg void mortgage)? It seems that indefeasibility should extend to a covenant to pay only insofar as the covenant defines and limits the mortgagee’s security interest in the property. However, doubt remains in relation to this issue: see Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; PT Ltd v Maradona Pty Ltd (No 2) (1991) 25 NSWLR 643 suggesting that the mortgagee can recover the whole amount but cf Vassos v State Bank of South Australia [1993] 2 VR 316 and Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202. See also Julong Pty Ltd v Fenn (2003) Q ConvR 54-586 and French v Queensland Premier Mines [2004] VSC 294 (HC Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81) – cases concerning transfers of mortgages and specific statutory provisions relating to transfers of mortgages.These cases would seem to support the notion that the mortgage and the debt are inextricably linked and that indefeasibility should extend only to the value of the security interest (the land). In New Zealand, the New Zealand Court of Appeal has held that registration of a void mortgage protects only the charge: the covenants “are not enforceable against the mortgagor separately … by means of a proceeding for the recovery of debt”. That is, any shortfall from the amount gained from the sale of the land is not recoverable by separate action: Duncan v McDonald [1997] 3 NZLR 669. See Toomey, “Certainty of the Title in the Torrens System: Shifting Sands” (2000) 4 FJLR 235 at 242 and 246.

INDEFEASIBILITY AND PROTECTION OF INDIVIDUAL TERMS IN REGISTERED DOCUMENTS Mercantile Credits Ltd v Shell Co of Australia Ltd [5.125] Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 High Court [Celtic Agencies Pty Ltd, the registered proprietors of land, granted a five-year lease to the respondent. This lease, which was registered, contained a number of consecutive covenants for renewal. The first option to renew was exercised when the original lease expired, and this extension of term was registered. Celtic Agencies then mortgaged the land in favour of the appellant. Before the respondent could register a further extension of the lease, the appellant gave notice of its intention to exercise its power of sale after default on the mortgage repayments. 290 [5.125]

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Mercantile Credits Ltd v Shell Co of Australia Ltd cont. The respondent then lodged a caveat to forbid the registration of any subsequent dealing with the land unless the dealing was stated to be subject to the renewed lease. The appellant sought a declaration that the extension was not binding upon it as mortgagee and that the mortgage took priority over the unregistered lease extension.] GIBBS J: … It then becomes necessary to consider the nature of a covenant for renewal. It is well settled that such a covenant runs both with the land and with the reversion. In Muller v Trafford [1901] 1 Ch 54 Farwell J, in the course of explaining why a covenant for renewal is not void for remoteness, described the effect of such a covenant in the following words [1901] 1 Ch 52 at 61: It must bind the land from its inception, because it would otherwise be an executory interest in land arising in futuro, and therefore obnoxious to the rules against perpetuity. Perpetuity has no application to covenants which run with the land, because they are so annexed to the land as to create something in the nature of an interest in the land. As between lessor and lessee, therefore, the lessee accepts and the lessor grants something which is more or less, according to the point of view from which you look at it, than the actual term or interest granted. It is a term subject to something and with the benefit of something. It is a reversion subject to something and with the benefit of something, and those two somethings are annexed to and form part of the land from the beginning of the term in such a sense that the doctrine of perpetuity has no application. It follows from this statement that the right of renewal is an incident of the lease and directly affects the nature of the term itself. However, it is clear that when the right is exercised “a new lease, a new demise” comes into being: see Gerraty v McGavin (1914) 18 CLR 152 at 163; Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 at 507-508 and 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193 at 199. The question whether the right of renewal gained priority over the mortgage by reason of the prior registration of the lease is, in my opinion, by no means an easy one. On the one hand it may be said that the right of renewal is an integral part of the estate vested in the lessee and, upon registration, obtains the same protection as the term itself. This was the view taken in Pearson v Aotea District Maori Land Board [1945] NZLR 542 by Finlay J. He said [1945] NZLR 542 at 550: “A right of renewal is something which affects and is, in a sense, definitive of the term of a lease.” He went on [1945] NZLR 542 at 550-551: “The right of renewal is adjectival in relation to the term granted. It constitutes a material qualification of the term, and is therefore something more than a mere ancillary right. It is in other words an integral part of the estate shown by the Register as vested in the lessee.” On the other hand, it might be said that what the lessee seeks in substance is to have priority accorded to the new lease which came into existence as a result of the exercise of the right of renewal, and that the new lease is not itself registered and gains no priority because it has its origin in a right conferred by a registered instrument. It does not appear ever to have been found necessary in Australia to decide whether Roberts v District Land Registrar at Gisborne (1909) 28 NZLR 616 and Pearson v Aotea District Maori Land Board should be followed and that question was left open by members of this Court in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 18, 35. The present case, unlike those two New Zealand cases, is not one in which the grant of the right of renewal was illegal or void and we are concerned not with a question of indefeasibility but with one of priority; although the two questions appear to depend on the same considerations, it is unnecessary to consider what the position would have been if the covenant had been void before the registration of the lease. In my opinion the judgment of Finlay J in Pearson v Aotea District Maori Land Board, so far as it is relevant to the present case, was correct. The right of renewal is so intimately connected with the term granted to the lessee, which it qualifies and defines, 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. I am assisted to this [5.125]

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Mercantile Credits Ltd v Shell Co of Australia Ltd cont. conclusion by two further consider-ations. First, it would be unjust and inconvenient if a right to renew contained in a registered lease could be defeated by the subsequent registration of a mortgage, and it is difficult to attribute to the legislature the intention that rights of renewal, which of course are a common incident of leases and are often of considerable value, should be liable to be defeated in this way. If the provisions of the Act are ambiguous, they should be construed in a way that will avoid inconvenience and injustice. Secondly, the provisions of s 119 of the Act appear to me strongly to support the view that it was intended that rights of renewal contained in a lease should be protected by the registration of the lease. Section 119 provides as follows: Every registered dealing with land shall be subject to any prior unregistered lease or any agreement for lease or letting for a term not exceeding one year to a tenant in actual possession thereunder: provided that no right or covenant to purchase the freehold contained in any such unregistered lease or agreement, nor any right or covenant for renewal of any such lease or agreement shall be valid as against any subsequent purchaser of the reversion, lessee, mortgagee, or encumbrancee, unless such lease or agreement be registered or protected by caveat. Under this section, a right to renewal contained in a lease for a term not exceeding one year to a tenant in actual possession is valid as against (inter alios) a subsequent mortgagee if the lease is registered or protected by caveat and it would be an extraordinary anomaly if a similar right contained in a registered lease for a greater term received no protection. On behalf of the appellant, reliance was placed on the express provision in s 117 of the Act that a right to purchase contained in a lease shall be binding, and it was submitted that this implies that it was intended that a right to renew should not be binding. However, a covenant giving a right to purchase is essentially different in character from a covenant for renewal. It is “not a covenant concerning the tenancy or its terms”; it does not “directly affect or concern the land” and it is “not a provision for the continuance of the term, like a covenant to renew”: Woodall v Clifton [1905] 2 Ch 257 at 279. It is “a separate and independent contract”: Sherwood v Tucker [1924] 2 Ch 440 at 444. Since such a covenant is collateral, and does not affect the estate or interest in land granted by the lease, the registra-tion of the lease, in the absence of a provision such as that contained in s 117, would not (or at least might not) confer any priority or indefeasibility upon the covenant or the right which it creates. The provisions of s 117 were necessary to make it clear that the protection of the Act extends to a right for or covenant to purchase the land described in a lease but the same reason did not exist to make specific provision for the protection of covenants for renewal. [His Honour held that the appellant’s rights as mortgagee could only be exercised subject to the respondent’s right of renewal and any extension resulting from its valid exercise.] STEPHEN J: This appeal raises a short but important point concerning the Torrens regis-tration of title system as it operates in its birth-place, South Australia, under the provisions of the Real Property Act 1886-1969. In issue are the conflicting interests arising, on the one hand, under a registered lease containing an option to renew and, on the other, under a registered mortgage subsequent in date to the lease. The mortgagee seeks to avail itself of its power of sale free of the interest of the lessee in the renewed term and the question is, in essence, whether registration of such a lease is effective to confer upon the lessee rights in respect of a renewed term as against a subsequent registered encumbrancer. [His Honour reviewed the facts and continued:] The legislation thus expressly recognizes not only that an option to purchase and, in the case of short term leases, also a right of renewal may properly be the subject of registration when included in a registered memorandum of lease. It goes further and declares the option to purchase to be “binding” – s 117 – and the right of renewal to be “valid” as against subsequent dealings in the land – s 119. In this sense these two sections not only confirm that rights of renewal may properly be entered 292 [5.125]

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Mercantile Credits Ltd v Shell Co of Australia Ltd cont. in the register book as special covenants in registered leases but also that when registered they will confer the benefits of registration upon the renewed terms resulting from their exercise. The contrast between these express references and the Act’s scheme concerning rights of renewal in leases for terms in excess of a year provides no occasion for doubts as to the registrability of the latter or as to the effect which such registration will have upon them. The express references in s 117 and s 119 meet special needs which do not exist in the case of rights of renewal generally. Were it not for s 117 it would be doubtful whether an option to purchase might properly be included in a registered memorandum of lease and whether, if included, its registration would confer indefeasibility upon a renewed term arising from its exercise. Such an option is of its nature unrelated to the tenant’s estate or interest under the lease; it has no closer connexion with that estate or interest than that the parties to it happen also to be in the relationship of lessor and lessee of the subject land. With it may be contrasted a right of renewal, which is intimately concerned with the existing relationship between lessor and lessee and which, as Finlay J said in Pearson v Aotea District Maori Land Board [1945] NZLR 542 at 550, 551, “is, in a sense, definitive of the term of a lease … is adjectival in relation to the term granted”. Hence, no doubt, the need felt for express reference if an option to purchase were to be permitted to appear on the Register Book and to receive the benefits conferred by registration. A rather different reason accounts for the express provision in s 119. The ordinary rights of tenants under the short term leases to which the section applies are preserved, despite non-registration, by the opening words of s 119; but the proviso makes it clear that neither rights of renewal nor options to purchase, although terms of a lease, come within the scope of this particular concession to unregistered interests which is strictly confined to the leasehold estate or interest itself. However, the proviso recognizes that registration entirely alters the position. Section 116 permits of the registration of short term leases and if such a lease be registered both a right of renewal and an option to purchase contained in it will be “valid as against” those who subsequently deal with the registered proprietor. An appreciation of the reasons for the express mention of rights of renewal of short term leases and of options to purchase leads to recognition that in dealing with them as it does the legislation evinces a clear intention that rights of renewal may be registered and, when registered, will attract to renewed terms all the advantages of registration. It cannot be supposed that registration of a memorandum of lease containing an option to purchase, or, if it be a short term lease, a right of renewal, is permitted and that by registration the rights which their exercise will create will be good as against subsequent dealings with the land while a right of renewal will generally be treated less favourably. It would require the clearest of words in these circumstances to deprive rights of renewal contained in long term leases of the benefits of registration and these are nowhere to be found; on the contrary s 116 and the Eighth Schedule are consistent with the bestowal of these benefits upon rights of renewal generally. To confer indefeasibility upon rights of renewal contained in registered leases does violence neither to the general scheme of the Act nor to the objects which it seeks to attain. The existence of such rights of renewal will be apparent upon any inspection of the register and those who deal in the land may thus learn of the extent to which the reversion is thereby contingently affected. What will be registered, and protected by that registration, is a right conferred by covenant which touches and concerns the land and runs with the land – Weg Motors Ltd v Hales [1961] Ch 176 at 193 et seq, affirmed on appeal – [1962] 1 Ch 49; it is an incident of the lease creating an interest in the land and forming a part of the lessee’s interest in that land. To accord it the protection afforded by registration is thus in no way inconsis-tent with the tenor of the legislation and gives rise to no anomalies. New Zealand courts have, over the years, had occasion to consider the matter here in issue as it has arisen [5.125]

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Mercantile Credits Ltd v Shell Co of Australia Ltd cont. under their own Torrens system legislation, with the consequences discussed in the judgments of the other members of this Court. It is satisfying to note that the decision in this case will accord with the pattern of New Zealand decisions. I would for these reasons dismiss this appeal.

[5.130]

Notes and Questions

1. This case was discussed in Bradbrook, “The Scope of Protection for Leases Under the Victorian Transfer of Land Act” (1988) 16 MULR 837. This article discusses the relationship between the protection given to unregistered and registered leases. 2. In Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 Barwick CJ held that registration of the dealing document confers indefeasibility for the interest created or transferred and on those terms and covenants in the document which delimit or qualify the estate. Although he held that the right of renewal delineated the estate of the lessee, in his view the validity of this particular type of covenant depended on its enforceability under the general law; if it was specifically enforceable only then would registration of the lease confer indefeasibility on the option to renew. This reasoning of Barwick CJ has been queried on the basis that the indefeasibility provisions are intended only to protect the title or interest registered (the lease, for example) and not additional equitable interests arising under the document: see Rossiter, “Options to Acquire Interests in Land – Freehold and Leasehold” (1982) 56 ALJ 576 at 626. The Mercantile Credits decision was applied in Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606 at 608 (rights of renewal lost for other reasons) and in Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424. 3. In Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424 options to renew in a registered lease were held to be enforceable against a registered proprietor who obtained registration after the lease was registered, notwithstanding the fact that the original lease had expired and the lease created by the exercise of the option to renew had not been registered. Cf Amber (Eastern Suburbs) Pty Ltd v Herman (1986) 5 BPR 97-355. In what way (if any) does the Eastdoro decision extend the principle set out in the Mercantile Credits case? Does this decision mean that a prudent purchaser would undertake a search of expired leases to see if there were any enforceable options on the property? See also Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR 625; Re Malsons Pty Ltd [1991] 2 Qd R 61; Tessari v Bais Pty Ltd (1993) 60 SASR 59. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.165]–[4.170]. 4. An option to purchase in a lease may be viewed as a separate and independent covenant. In some jurisdictions, it is specifically provided in the legislation that an option to purchase may be included in a registered lease: Real Property Act 1900 (NSW), s 53(3); Real Property Act 1886 (SA), s 117; Land Titles Act 1925 (ACT), s 83. Where this is done, it seems that the option to purchase acquires indefeasibility in the same way as the lease itself – see Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 341; Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607. 294 [5.130]

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5. In some cases an option to renew or an option to purchase (in those States where indefeasibility can attach to an option to purchase) may be illegal and/or void. Where the option in a registered lease is illegal, it seems the option does not gain indefeasibility by registration of the lease: See Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 per Barwick CJ, McTiernan and Stephen JJ. The option would be incapable of specific performance because of the illegality. 6. The covenant to pay rent by the tenant in a lease is “…intimately related to the lessee’s title created upon registration … it delimits or defines that interest” and so on registration of the lease indefeasibility attaches to it: see Karacominakis v Big Country Pty Ltd (2000) BPR 18,235 at 18,247 per Giles JA (with whom Handley and Stein JJA agreed). 7. The operation of the principle in the Mercantile Credits case in the context of a registered mortgage has been considered directly and indirectly in a number of cases recently (see Corozo Pty Ltd v Total Australia Pty Ltd [1988] 2 Qd R 366; PT Ltd v Maradona Pty Ltd (No 2) (1991) 25 NSWLR 643; Vassos v State Bank of South Australia [1993] 2 VR 316; Eade v Vogiazopoulos (No 2) (1994) V ConvR 54-497; Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; Julong Pty Ltd v Fenn (2003) Q ConvR 54-586; Ginelle Finance Pty Ltd v Diakakis (2004) NSW ConvR 56-064; Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281; French v Queensland Premier Mines [2004] VSC 294; Atlantic 3-Financial (Aust) Pty Ltd v Deskhurst Pty Ltd [2005] 1 Qd R 1.

EXCEPTIONS TO INDEFEASIBILITY OF TITLE [5.135] The Torrens legislation in all jurisdictions sets out specific exceptions to the

indefeasibility of the registered proprietor’s title. These may be termed “express” exceptions. In addition, the case law demonstrates that a number of other exceptions to indefeasibility of title exist. The express exceptions differ widely from jurisdiction to jurisdiction. As a result, some cases on exceptions are relevant only to the jurisdiction in which they were decided (and of course to jurisdictions with like provisions). A person who obtains a registered interest holds it subject to all encumbrances notified in the Register (Real Property Act 1900 (NSW), s 42; Transfer of Land Act 1958 (Vic), s 42; Real Property Act 1886 (SA), s 69; Transfer of Land Act 1893 (WA), s 68; Land Titles Act 1980 (Tas), s 40; Land Titles Act 1925 (ACT), s 58; cf Land Title Act 1994 (Qld), s 184(1) and Land Title Act (NT), s 188(1); “a registered proprietor of an interest … holds [it] … subject to registered interests affecting the lot”).

Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd [5.140] Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 High Court [Bursill and Berger were the registered proprietors of adjacent pieces of land. Bursill’s certificate of title noted that there was an encumbrance over the land described as a “right of way created by and more fully set out in Transfer No 7922”. In fact, this “right of way” over Bursill’s land was a transfer of a certain amount of air space to a predecessor in title of Berger. Bursill argued that it did not hold subject to Berger’s claimed right to the horizontal stratum of air space because that interest had not been “notified” on the register.] [5.140]

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Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd cont. WINDEYER J: … The critical question, as I see the matter, is then whether the interest in respect of buildings that Guy [a predecessor in title of Bursill] conveyed to Long [a predecessor in title of Berger] can be said to have been “notified on the folium of the register-book constituted by … the certificate of title” within the meaning of s 42 of the Act. If it was, then Bursill holds its land subject to it; and that involves no inroad upon an indefeasible title. The argument that the interest in the buildings is not notified on the certificate of title proceeded on the assumption that Bursill, when purchasing the land, could safely neglect to search transfer No 7922, which was expressly referred to on the certificate of title. It is contended that this reference to the memorandum of transfer did not amount to constructive notice of its full operation, because it was described as creating an “Extension of the Right of Way”. Doubtless this description would have been better if it had read “extension of right of way and rights in buildings above the way”. But it seems to me that what is “notified” to a prospective purchaser by his vendor’s certificate of title is everything that would have come to this (sic) knowledge if he had made such searches as ought reasonably to have been made by him as a result of what there appears. I here use the words of s 164 of the Conveyancing Act 1919 (NSW). We are not concerned in this case with s 43, which gives a protection against unregistered instruments, for transfer No 7922 was registered, and is noted on the certificate of title. It seems to me that, at any time from 1872 till today, a prudent conveyancer acting for a purchaser of the land that is now Bursill’s would have ascertained what it was that transfer 7922 referred to on the vendor’s certificate of title in law effected. True he might have been surprised to discover all that his search revealed. But surely no prudent person, seeing the reference to a right of way, would neglect to ascertain what exactly was the nature of the right of way, the land subject to it, the persons who could avail themselves of it, for what purposes in what manner and at what times. The need to make such a search seems the more obvious if, by an inspection or survey of the land, the intending purchaser had become aware that there was a building over part of the land which was in the occupation of his neighbour. And it seems unlikely that a purchaser of this land in a built-up area of the City of Sydney would not be aware of the existence of the passage way and of the building above it. Whether he was so or not the reference on the certificate of title to transfer 7922 was I think constructive notice of what it provided, that is that the land was subject not only to a right of way but also to an interest of the adjoining landowner in the building above the way. I think that the registered proprietor of the land that is now Bursill’s held his title subject to that interest. Therefore I consider that the owner of the land that is now Berger’s has, and has had, in law a right to the exclusive use and occupation of this building. This Berger’s predecessors in title have enjoyed for nearly a century. But no question of a right from adverse possession arises. The owners of Berger’s land have held the building as of right by documentary title. … MENZIES J (in dissent): [His Honour examined the nature of the transfer and continued:] It remains for consideration, however, whether the transfer of the building effected by transfer 7922 was itself notified upon the folium of the Register Book for the purposes of s 42 simply by reason of the notification of the rights of way created by the two instruments mentioned, including transfer 7922 by which the transfer was also made. If so, the estate of the registered proprietor is subject to the interest claimed by Berger; otherwise it is not. The question, of course, is not whether a careful purchaser might be expected to inspect the instruments referred to and by so doing discover that, should it have been intended to notify the transfer of the interest in the land as well as the creation of the right of way, the notifi-cation actually made was incomplete. The question is rather whether the transfer of the property interest was itself notified by the reference to an instrument which, it was quite 296

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Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd cont. accurately said, created a right of way. It seems to me that the only interests notified were the rights of way and that that description cannot be regarded as covering the transfer of the interest in land constituted by the transfer of the building. I do not think that it would be conducive to the purpose of the Act to establish indefeasibility of titles to regard what is clearly the accurate notification of the creation of rights of way as going further and notifying an unmentioned transfer of land by reason of the reference to the instrument by which the rights of way were said to have been created but which also effected the transfer. In my opinion the transfer of land was not notified upon the folium of the Register Book constituted by Bursill’s certificate of title and by reason of s 42 the registered proprietor holds the land free from the estate now claimed by Berger by virtue of transfer 7922. [Barwick CJ agreed with Windeyer J in a separate judgment.]

[5.145]

Notes and Questions

1. In what way, if any, does the decision of the majority in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 detract from the aims of the Torrens system? See Woodman RA, “Some Nuts for Cracking under the Torrens System” (NSW) (1977) 51 ALJ 97; and Sackville, “The Torrens System – Some Thoughts on Indefeasibility and Priorities” (1973) 47 ALJ 526 at 533-534. 2. The Bursill case was considered in Ex parte Property Unit Nominees (No 2) Pty Ltd [1981] Qd R 178 at 181-182 and referred to briefly in Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343. It was cited with approval in Hutchinson v Lemon [1983] 1 Qd R 369 and Registrar-General v Cleaver (1996) 4 NSWLR 713 at 723 per Handley JA. 3. In Siemenski v Brook Nominees Pty Ltd [1990] Tas R 236, the Bursill principle was not relevant because the contents of covenants set out in the folio could not be found by searching through the documents referred to. See similarly Town and Country Marketing Ltd v McCallum (1998) 3 NZ ConvC 192,698 discussed in McMorland, “Notice, Knowledge and Fraud” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 67-100 (covenant noted on earlier certificate of title, but by error of Registrar omitted from current certificate of title). Compare R v Recorder of Titles; Ex parte Horlock (unreported, Tas, No 25/1991). Fraud [5.150] In all jurisdictions, it is provided that fraud is an exception to the indefeasibility of the

registered proprietor’s title (Real Property Act 1900 (NSW), s 42(1); Transfer of Land Act 1958 (Vic), s 42(1); Land Title Act 1994 (Qld), s 184(1) – (3); Real Property Act 1886 (SA), s 69(a); Transfer of Land Act 1893 (WA), s 68(1), (2); Land Titles Act 1980 (Tas), s 40(2) and (3)(a); Land Titles Act 1925 (ACT), s 58(1); Land Title Act (NT), s 188(1) – (3). See also Transfer of Land Act 1958 (Vic), s 44(1)). Except in Queensland and the Northern Territory, it is provided that knowledge of an unregistered trust or instrument is not of itself to be imputed as fraud. Apart from these notice provisions, however, no other definition of fraud is provided in the legislation. [5.150]

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Lord Lindley delivered the judgment of the Privy Council in Assets Company Ltd v Mere Roihi [1905] AC 176, and in discussing the definition of fraud in the context of the Torrens legislation in New Zealand, his Honour stated: Passing now to the question of fraud, their Lordships are unable to agree with the Court of Appeal. Sections 46, 119, 129, and 130 of the Land Transfer Act 1870, and the corresponding sections of the Act of 1885 (namely, ss 55, 56, 189, and 190) appear to their Lordships to shew that by fraud in these Acts is meant actual fraud, ie, dishonesty of some sort, not what is called constructive or equitable fraud-an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud. Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he buys from a prior registered owner or from a person claiming under a title certified under the Native Land Acts, must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and 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.

This passage highlights the fact that, to invoke the exception, the registered proprietor or his or her agent, must have been fraudulent. These two possibilities are dealt with separately.

Fraud of the registered proprietor

Loke Yew v Port Swettenham Rubber Co Ltd [5.155] Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 Privy Council [The rubber company purchased a large area of land from the registered proprietor, Eusope. Although not registered as such Loke Yew was the owner of part of this land and Eusope only agreed to sell the whole of the land to the rubber company when he was given an assurance by the company that it would not disturb Loke Yew’s possession. Upon becoming the registered proprietor, the rubber company asserted that it was entitled to the whole of the land and Loke Yew sought relief. The Privy Council considered whether the conduct of the rubber company constituted fraud.] LORD MOULTON: … The negotiations between the plaintiff company and Haji Mohamed Eusope were carried on by a certain Mr Glass as agent on behalf of the company. The evidence shews that Haji Mohamed Eusope recognized throughout that he had parted with his interest in the Loke Yew lands (excepting the right to receive the annual payments or feus (sic)), and that it was arranged originally that the conveyance to the plaintiff company should not include Loke Yew’s land. The price excluding that land was fixed at $350,000. The deed of conveyance, however, purported to convey the original grant in its entirety. Haji Mohamed Eusope, who appears to have acted honestly throughout, refused to sign that conveyance without a document shewing that he was not selling Loke Yew’s land, and originally a lengthy document to that effect was drawn up for him by a conveyancer, which he asked Mr Glass to sign. This document, however, Mr Glass refused to sign, apparently because of objections taken to it by the representative of the bank who was in charge of the money to be paid as the purchase price. But Haji Mohamed Eusope would not proceed without an assurance that the lands of Loke Yew and Sz Woh Kongsi were not included in the sale. Mr Glass then replied that he need not be afraid, as he knew Loke Yew, and would purchase his interest. 298 [5.155]

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Loke Yew v Port Swettenham Rubber Co Ltd cont. Haji Mohamed Eusope required, however, something in writing, and accordingly the following document was written out and signed by Mr Glass: To Haji Mohamed Eusop bin Abubakar. I have purchased the land comprised in Grant No 675 of Mukin Klang in the District of Klang for the sum of $336,000. As regards Loke Yew and See Oh Kongsee’s land which is included in the said grant I shall have to make my own arrangements. Kuala Lumpur. (Signed) Philip J Glass 4th June 1910. Signed in the presence of (Signed) G H Day. Lease: Nos 1, 3, 4, 5, 6, 33, 36, 40, 42, 43, 50, 59, 82, 83, 84 & 2. Their Lordships have no doubt that the true conclusion to be drawn from the evidence is that the above statement of Mr Glass to Haji Mohamed Eusope was intended to be and was a statement as to present intention as well as an undertaking with regard to the future, and that that statement was false and fraudulently made for the purpose of inducing Haji Mohamed Eusope to execute a conveyance which in form comprised the whole of the original grant, and that but for such fraudulent statement that conveyance would not have been executed. At that time it is evident that Mr Glass intended to eject Loke Yew if he did not accept whatever sum he chose to offer, and that therefore he did not intend to purchase Loke Yew’s rights. It is also clear that it was understood, and intended by Mr Glass that it should be understood, that the document above set out was written (to use the words of one of the witnesses) “for the security of the vendor to shew that he was not selling Loke Yew’s land”, and their Lordships are of opinion that the document carries out that intention. The purchase price there mentioned of $336,000 makes allowance for the $14,000 to be paid for the land of Sz Woh Kongsi which is the last of the parcels noted in the margin and called therein “lease”, the other fifteen being the numbers of the sub-grants held by Loke Yew. It is important in this connection to note that the purchase price inserted in the conveyance is $417,000, shewing a difference of $67,000 when compared with the sum actually paid after allowing for the $14,000 for the land of Sz Woh Kongsi. This corresponds closely with the plaintiff company’s own estimate of $70,000 as the value of Loke Yew’s land which appears elsewhere in the suit. It is clear, therefore, from the amount actually paid that Loke Yew’s lands were not included in the sale. Having thus possessed himself of a formal transfer of the original grant to himself as trustee for the Port Swettenham Rubber Company, Limited, Mr Glass procured its registration, and thereupon the solicitors for the plaintiffs wrote to Loke Yew the following letter: Kuala Lumpur, Selangor, Federated Malay States, 22nd June 1910. Dear Sir, On behalf of the Port Swettenham Rubber Company, Limited, we are instructed to inform you that our clients have bought the land comprised in Grant 675, and we are further instructed to ask you to give directions to your coolies to cease from entering on this land and tapping the trees thereon. We are informed that you have an agreement of some nature with the former owner of this land, and that though our clients do not admit, and in fact deny, that you have any right against any person whatsoever under this agreement, yet to prevent any unpleasantness our clients are willing to pay you the sum of $20,000 if you will surrender to them any rights you claim under the said agreement. Yours faithfully, Hewgill and Day. Towkay Loke Yew. [5.155]

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Loke Yew v Port Swettenham Rubber Co Ltd cont. And on the defendant’s refusing to vacate the land the plaintiffs brought the present action for ejectment. Their Lordships therefore find that the formal transfer of all the rights under the original grant was obtained by the deliberate fraud of Mr Glass. He was aware that he could not obtain the execution of a transfer in that form otherwise than by fraudulently representing that there was no intention to use it until the plaintiff company were able so to do honestly by having acquired Loke Yew’s sub-grants by purchase, and he therefore fraudulently made such representation, and thereby obtained the execution of the transfer. It is an important fact to be borne in mind that although this fraud was clearly charged in the defence, Mr Glass was not called at the trial, nor was his absence accounted for. The inference to be drawn from this is obvious and is entitled to great weight.

Bahr v Nicolay (No 2) [5.160] Bahr v Nicolay (No 2) (1988) 164 CLR 604 High Court [The Bahrs (the appellants) entered into a contract to sell their land to Nicolay (the first respondent) who agreed to lease it back to them for three years. This contract also provided that the Bahrs would repurchase the land when the lease expired. Nicolay sold the property to the Thompsons (the second respondents) who, in cl 4 of the new contract of sale, acknowledged the Bahrs’ right to repurchase the land. Although the Thompsons also recognised this right after they became registered proprietors, they subsequently refused to sell. They argued that their indefeasible title was not affected by their “mere knowledge” of the Bahrs’ right to repurchase.] MASON CJ and DAWSON J: … The existence and extent of the purchaser’s equitable estate or interest in the property the subject of a contract of sale is commensurate with his ability to specifically enforce the contract. If the vendor’s obligation to transfer title is subject to a contingency then, as stated above, any order for specific performance will be expressed to be subject to that contingency. In that event, the purchaser, though entitled to specific performance, has a contingent equitable estate or interest in the land until the contingency is fulfilled. Whether the making of the formal contract in the present case is such a contingency as to make the appellants’ equitable interest, if any, in Lot 340, arising under cl 6, a contingent interest is a question which we need not pursue. The outcome of the present case does not turn on the precise nature of the appellants’ equitable interest. The outcome turns initially on the question whether ss 68 and 134 of the Transfer of Land Act 1893 (WA) (“the Act”) defeat that interest by reason of the second respondents having become registered proprietors of the land. And if this question be answered in the negative, there is the question whether the courts below were correct in holding that the appellants were not entitled to an order for specific performance against the second respondents, specific performance being unobtainable as against the first respondent. By cl 4 of the agreement between the first respondent and the second respondents, the second respondents “acknowledge (sic) that an agreement exists” between the appellants and the first respondent, that agreement being the undated 1980 agreement. The clause does not purport to create in favour of the appellants new rights over and above those previously existing. In terms it acknowledges the existence of the earlier agreement. Although the precise effect of the clause must be left for later consideration, it necessarily involves an acknowledgment of such rights as the appellants may have had under the earlier agreement. This characterization of cl 4 lies at the heart of the second respondents’ case: namely that mere notice of a prior unregistered interest does not amount to fraud within the meaning of s 68. That section provides that, except in the case of fraud, the registered proprietor holds the land subject only 300 [5.160]

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Bahr v Nicolay (No 2) cont. to encumbrances notified on the certificate of title, save for exceptions not material to this case. Section 134 provides that, except in the case of fraud, no person taking a transfer of land shall be affected by actual or constructive notice of any trust or unregistered interest and that knowledge of any trust or unregistered interest “shall not of itself be imputed as fraud”. Sections 68 and 134 give expression to, and at the same time qualify, the principle of indefeasibility of title which is the foundation of the Torrens system of title. As the Judicial Committee observed in Gibbs v Messer [1891] AC 248 at 254: The object 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. Neither the two sections nor the principle of indefeasibility preclude a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself: Breskvar v Wall (1971) 126 CLR 376 at 384-385. Thus, an equity against a registered proprietor arising out of a transaction taking place after he became registered as proprietor may be enforced against him: Barry v Heider (1914) 19 CLR 197. So also with an equity arising from conduct of the registered proprietor before registration (Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 563), so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 134. Provided that this qualification is observed, the recognition and enforcement of such an equity is consistent with the principle of indefeasibility and the protection which it gives to those who deal with the registered proprietor on the faith of the register. There is no fraud on the part of a registered proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest: Mills v Stokman (1967) 116 CLR 61 at 78; Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101. The decision in Waimiha Sawmilling merely gives effect to s 134 by excluding from the statutory concept of fraud an acquisition of title with notice of any trust or unregistered interest. However, Lord Buckmaster in expressing the reasons for the decision went rather further when he reproduced (at 106) the following passage of the remarks of Lord Lindley in the earlier decision (Assets Co v Mere Roihi [1905] AC 176 at 210): “Fraud … means actual fraud, dishonesty of some sort, not what is called constructive or equitable fraud …” Lord Buckmaster went on (at 106-107) to instance, as examples of fraud, the transfer whose object is to cheat a man of a known existing right and a deliberate and dishonest trick causing an interest not to be registered. These comments do not mean all species of equitable fraud stand outside the statutory concept of fraud. Far from it. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, Kitto J (at 273-274) held that a collusive and colourable sale by a mortgage company to its subsidiary was a plain case of fraud. According to his Honour (at 274), “(t)here was pretence and collusion in the conscious misuse of a power”, this being a “dishonest course”. Likewise, in Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491, Lord Moulton (at 504) instanced the case of an agent who has purchased land on behalf of his principal but has taken the conveyance in his own name, and in virtue thereof claims to be the owner of the land, though he is in law a trustee for his principal. It seems that his Lordship did not intend to make this illustration as an example of the statutory concept of fraud. His Lordship had earlier dealt with the issue of fraud and indefeasibility and was, when instancing the acquisition of title by an agent, propounding another answer based on the power and duty of the court to rectify the register. See the analysis of Loke Yew by Starke J in Stuart v Kingston (1923) 32 CLR 309 at 360-361. Despite this, the example given by Lord Moulton is in our view an instance of fraud within the meaning of s 68. According to the decisions of this Court actual fraud, personal dishonesty or moral turpitude lie at the heart of the two sections and their counterparts: see Butler v Fairclough (1917) 23 CLR 78 at 90, 97; Stuart v Kingston, at 329, 356. However, from the appellants’ point of view the examples may not [5.160]

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Bahr v Nicolay (No 2) cont. travel quite far enough because the dishonesty which they exhibit is dishonesty on the part of the registered proprietor in securing his registration as proprietor. This point, on which the second respondents heavily relied, emerges from the comments made by Lord Moulton for the Judicial Committee in Loke Yew. The appellant was the equitable owner of 58 acres of a parcel of 322 acres of land, his interest being unregistered. The registered proprietor of the entire parcel, who was the beneficial owner of 264 acres, transferred the entire parcel to the respondents who became registered as proprietors on their undertaking that they would purchase the appellant’s interest. Their Lordships described (at 502) a contemporaneous document, which was designed to record the undertaking, as “false and fraudulently made for the purpose of inducing” the transferor to execute a conveyance of the entire parcel. Lord Moulton expressed the Judicial Committee’s conclusion on the fraud issue by saying (at 504) that, as the transfer had been obtained by fraud, the case fell within the statutory exception to the principle of indefeasibility. For our part we do not see the illustrations given and the statements made in the cases as amounting to definitive pronouncements that fraud is confined to fraud in the obtaining of a transfer or in securing registration. The statements, viewed in their context, merely express the reasons why particular circumstances fall within the statutory exception. Nor do we see anything in the language or the purpose of s 68 which warrants such a restrictive interpreta-tion. Indeed, we agree with Higgins J in Stuart v Kingston when his Honour said (at 345) that there was much to be said for the view, expressed by Stawell CJ on the equivalent Victorian provision, that the section should be “construed strictly” and the exception “liberally”. The section restricts, in the interests of indefeasibility of title, rights which would exist otherwise at law or in equity. And granted that an exception is to be made for fraud why should the exception not embrace fraudulent conduct arising from the dishonest repudiation of a prior interest which the registered proprietor has acknowledged or has agreed to recognize as a basis for obtaining title, as well as fraudulent conduct which enables him to obtain title or regis-tration. In the context of s 68 there is no difference between the false undertaking which induced the execution of the transfer in Loke Yew and an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregis-tered interest was the foundation or assumption underlying the execution of the transfer. For the same reason the subsequent repudiation by a transferee of property of a limited beneficial interest in that property is fraudulent, when the transferee took the property on terms that the limited beneficial interest would be retained by the transferor. It is immaterial that the transferee “may have been innocent of any fraudulent intent in taking the conveyance in absolute form”: Bannister v Bannister [1948] 2 All ER 133 at 136. [Their Honours held that the Thompsons held the land subject to the rights of the Bahrs under an express trust. Thus, under the in personam exception, they were subject to the rights of the Bahrs. Their Honours stated that even if they had not reached this conclusion, they would have held that the Thompsons’ subsequent repudiation constituted fraud so that the Thompsons held subject to the Bahrs’ prior equitable interest.] WILSON and TOOHEY CJJ: … [T]he real question is – having registered their interest under the provisions of the Act, did the second respondents acquire a title which was indefeasible in the sense that it was no longer open to attack by the appellants? The question may be further refined by asking – having regard to ss 68 and 134 of the Act, was there in any relevant sense fraud on the part of the second respondents? Unless there was such fraud, the second respondents hold their title free of any interest the appellants have by reason of cl 6, subject to any claim in personam that may lie against the second respondents. That is a matter to which we shall turn later in these reasons. Section 68 of the Act asserts the principle that, except in the case of fraud, the registered proprietor of land holds the land subject only to such encumbrances as may be notified on the certificate of title 302 [5.160]

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Bahr v Nicolay (No 2) cont. save for certain exceptions, none of which is relevant here. Section 134 spells out the notion of fraud to some extent by providing that (again except in the case of fraud) no person taking a transfer of land “… shall be affected by notice actual or constructive of any trust or unregistered interest any rule of law or equity to the contrary notwithstand-ing; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud”. The cases on ss 68 and 134 and their counterparts are legion. They are noted in the standard texts on the Torrens System and in periodical literature. There has been a divergence of approach by the Australian courts on the one hand and the New Zealand courts on the other: see Butt, “Notice and Fraud in the Torrens System: A Comparative Analysis” (1977-1978) 13 UWALR 354; also Whalan, “The Meaning of Fraud under the Torrens System” (1975) 6 New Zealand Universities Law Review 207. Nevertheless, the basic elements are clear enough. The fraud referred to in ss 68 and 134 is actual fraud, involving some act of dishonesty on the part of the person whose title is sought to be impeached: Assets Co Ltd. v Mere Roihi [1905] AC 176; Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101; Butler v Fairclough (1917) 23 CLR 78; Wicks v Bennett (1921) 30 CLR 80; Stuart v Kingston (1923) 32 CLR 309, decision reversed by the Privy Council on another point – see (1924) 34 CLR 394. It is equally clear that to acquire land with notice of an unregistered interest such as a lease, to become the registered proprietor and then to refuse to acknowledge the existence of the interest is not of itself fraud: Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37; Wicks v Bennett; Friedman v Barrett; Ex parte Friedman [1962] Qd R 498; RM Hosking Properties v Barnes [1971] SASR 100; Achatz v De Reuver [1971] SASR 240. The point is made by Kitto J in Mills v Stokman (1967) 116 CLR 61 at 78, where his Honour said “… but merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud”. What then constitutes fraud for the purposes of ss 68 and 134? A convenient starting point is a passage in the judgment of the Privy Council in Waimiha Sawmilling Co v Waione Timber Co at 106-107: If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by a deliberate and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear. It is not, however, necessary or wise to give abstract illustrations of what may constitute fraud in hypothetical conditions, for each case must depend upon its own circumstances. The act must be dishonest, and dishonesty must not be assumed solely by reason of knowledge of an unregistered interest. The most often cited case in which fraud was held to have occurred is Loke Yew v Port Swettenham Rubber Company Limited [1913] AC 491. There a purchaser, with knowledge of the existence of an unregistered interest, represented to the transferor that it would make its own arrangements with the holder of the unregistered interest. It failed to do so, in circumstances where it was held to have been the purchaser’s intention to destroy the outstanding interest by registration of its own title. It was the purchaser’s fraudulent misrepresentation that persuaded the previous registered proprietor to transfer the land to it. With this decision may be contrasted Waimiha Sawmilling Co v Waione Timber Co. The registered proprietor of land, Howe, granted timber rights to the appellant which protected its agreement by caveat. Howe purported to determine the appellant’s interest for breach of covenant. The appellant appealed against a judgment upholding Howe’s re-entry. While the appeal was pending, Howe sold the land to Wilson who was acting as agent for a company to be formed, the respondent. Howe obtained an order for removal of the caveat (against which the appellant did not appeal) and transferred the land to Wilson. Wilson later transferred the land to the respondent. The appellant’s appeal against the judgment upholding Howe’s re-entry was itself upheld. Notwithstanding that [5.160]

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Bahr v Nicolay (No 2) cont. Wilson knew of the appellant’s claim and of the litigation between it and Howe, the Privy Council held that there had been no fraud on the part of the respondent. Consistently with these authorities, evidence going no further than to show that when the second respondents took a transfer of Lot 340 from the first respondent and became the registered proprietors of the land they were aware of the contents of cl 6, cannot amount to fraud within the meaning of ss 68 and 134. More is needed before the appellants can disturb the second respondents’ registered title on that ground. The emphasis in the authorities is on actual fraud on the part of the registered proprietor. Such fraud may be found even though the registered proprietor has not himself made any representation. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, Kitto J commented at 273-274: We were invited to hold that nothing is fraud in the sense which is relevant under the Real Property Act unless it includes a fraudulent misrepresentation. The whole course of authority on this branch of the law is to the contrary. Moral turpitude there must be; but a designed cheating of a registered proprietor out of his rights by means of a collusive and colourable sale by a mortgagee company to a subsidiary is as clearly a fraud, as clearly a defrauding of the mortgagor, as a cheating by any other means. In the present case the trial judge made these findings: I am satisfied that the second defendants purchased Lot 340 with the knowledge that they were bound by the terms of the Agreement ex 11 and with the belief that the plaintiffs had a right pursuant to the terms of the agreement ex 11 to re-purchase the land for $45,000, and that their purchase was subject to the plaintiff’s (sic) right to re-purchase Lot 340 from them. To a degree the findings tend to beg the question to which they are directed. What is meant by saying that the second respondents bought Lot 340 “with the knowledge that they were bound by the terms of the Agreement”? The second respondents may have thought that they were so bound, but were they? The second respondents may have thought that their purchase was “subject to” the appellants’ right to buy Lot 340 from them. But was it subject to such a right? What does the expression “subject to” mean in this context? Nevertheless the findings are important for the light they throw on the second respondents’ understanding at the time they contracted with the first respondent and on any obligation they may have assumed. … Had the second respondents acquired their interest in Lot 340 without knowledge of the existence of the appellants’ interest under cl 6 of the earlier agreement, they would, as a matter of priorities, have taken free of that interest. Section 134 would protect them if thereafter they acquired knowledge of the appellants’ interest. The position is that they took with knowledge of the contents of cl 6. Again s 134 operates to protect them if they did no more than take with notice. Did they do more? The second respondents did do more by writing their letter of 6 January 1982. Of course by then they were the registered proprietors of Lot 340; the fraud to which ss 68 and 134 refer is fraud committed in the act of acquiring a registered title: see Loke Yew v Port Swettenham Rubber Company Limited, at 503-504; Stuart v Kingston, at 329; Breskvar v Wall (1971) 126 CLR 376 at 384; and note s 199 of the Act which protects a registered proprietor against ejectment except in certain cases, one of which is: (iv) The case of a person deprived of any land by fraud as against the person registered as proprietor of such land through fraud or as against a person deriving otherwise than as a transferee bona fide for value from or through a person so registered through fraud. [Their Honours examined the facts in some depth, and continued:] Can it be said, using the language of Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101 at 106, that the designed object of the transfer to the second respondents was to cheat the appellants of 304 [5.160]

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Bahr v Nicolay (No 2) cont. a known existing right? Notwithstanding the various matters to which we have referred, we think the evidence falls short of establishing that case. The second respondents agreed to buy Lot 340 in the hope, even the expectation, that the appellants would not be able to buy back Lot 340. But the evidence does not justify a finding that it was their intention to ensure that the appellants did not do so. [Their Honours went on to hold that this case was more properly dealt with under the in personam exception (see below at [5.195]) The Thompsons, in acknowledging the Bahrs’ interest, became subject to a constructive trust so that they held their title on trust for the Bahrs.] BRENNAN CJ: [His Honour’s views on both the fraud and in personam exception are contained within the following extract. His Honour discussed the facts and continued.] The consequence of inserting cl 4 into the Thompsons’ contract was that the Thompsons acknowledged not only the fact that the Bahrs’ contract existed but also that the interest which they were purchasing was subject to the interest which the Bahrs’ had under cl 6 of the Bahrs’ contract. But cl 4 is more than an acknowledgment of a fact; in its context it appears to be a contractual stipulation. It is one of a number of “Conditions” in the Thompsons’ offer to purchase Lot 340 which Nicolay, by his attorney Robertson, accepted, and the offer was expressed to be “subject to the Conditions”. By reference to the Bahrs’ contract (to which cl 4 refers), it would have been apparent to the parties to the Thompsons’ contract – or, more real-istically, it ought to have been apparent to their legal advisers-that Nicolay would be in breach of cl 6 of the Bahrs’ contract unless cl 4 of the Thompsons’ contract is a contractual stipulation that the Thompsons’ title on completion was to be subject to the Bahrs’ interest. Having regard to the context in which cl 4 is found in the Thompsons’ contract and the relationship between the vendor Nicolay and the Bahrs which appears on the face of the Bahrs’ contract, I construe cl 4 not as a mere acknowledgment of a fact but as a term of the contract limiting the purchasers’ interest by defining the interest to which the purchasers’ title should be subject. … It follows that I would hold the Thompsons to have given Nicolay an undertaking to hold their title subject to the Bahrs’ interest. In my opinion such an undertaking is to be found in cl 4 on its true construction but, if not in cl 4, the undertaking was given by a collateral agreement. [His Honour outlined ss 68, 134 of the Transfer of Land Act 1983 (WA), and continued:] These provisions are designed to achieve the main object of the Torrens system of regis-tration of interests in land which the Privy Council in Gibbs v Messer [1891] AC 248 at 254, perceived to be: 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. That end is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title. The consequence is that, whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser has notice, a purchaser who takes with notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest: Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37; Munro v Stuart; Friedman v Barrett, Ex parte Friedman [1962] Qd R 498 at 511-512. Registration of the transfer is not fraudulent merely because the transferee knows that an antecedent interest of which he has notice will be defeated thereby. As Kitto J said in Mills v Stokman (1967) 116 CLR 61 at 78: “merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud”. [5.160]

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Bahr v Nicolay (No 2) cont. However, the title of a purchaser who not only has notice of an antecedent unregistered interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation. In Barry v Heider (1914) 19 CLR 197, Isaacs J said of the Land Transfer Acts (at 213): They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them. In Frazer v Walker [1967] 1 AC 569, at p 585, the Privy Council said that 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. Barwick CJ, who was a member of the Judicial Committee in Frazer v Walker, commented in Breskvar v Wall (1971) 126 CLR 376 at 384-385: Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title. Orders of that kind do not infringe the indefeasibility provisions of the Act. Those provisions are designed to protect a transferee from defects in the title of the transferor, not to free him from interests with which he has burdened his own title. In Loke Yew v Port Swettenham Rubber Company Limited [1913] AC 491 Lord Moulton gave an example of a case where equity would enforce the terms on which a transfer was taken. He said: Take for example the simple case of an agent who has purchased land on behalf of his principal but has taken the conveyance in his own name, and in virtue thereof claims to be the owner of the land whereas in truth he is a bare trustee for his principal. The Court can order him to do his duty just as much in a country where registration is compulsory as in any other country, and if that duty includes fresh entries in the register or the correction of existing entries it can order the necessary acts to be done accordingly. By contrast, Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101 was a case where the purchaser had notice of a claim to an unregistered interest but had given no undertaking to be bound by it. That case illustrates the proposition that where a transferee has purchased with mere notice of an unregistered interest, registration of the transfer to him does defeat the unregistered interest, but Waimiha Sawmilling Co v Waione Timber Co does not suggest that a registered proprietor who has purchased on terms that his title will be subject to an unregistered interest is able to defeat that interest upon the registration of his transfer. A registered proprietor who has undertaken that his transfer should be subject to an unreg-istered interest and who repudiates the unregistered interest when his transfer is registered is, in equity’s eye, acting fraudulently and he may be compelled to honour the unregistered interest. A means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest. That is not to say that the regis-tration of the transfer to such a proprietor is affected by such fraud as may defeat the registered title: the fraud which attracts the intervention of equity consists in the uncon-scionable attempt by the registered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title. The principles are stated in Bannister v Bannister [1948] 2 All ER 133 and Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044; [1982] 2 All ER 953. In Bannister, Scott LJ said (at 136): It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a 306

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Bahr v Nicolay (No 2) cont. conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available. Nor is it, in our opinion, necessary that the bargain on which the absolute conveyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It is enough that the bargain should have included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by another. In Lyus v Prowsa Developments Ltd land was sold by a bank, as mortgagee exercising a power of sale, subject to, but with the benefit of, a prior agreement to sell made between the mortgagor and the plaintiffs. The bank had consented to but was not bound by the plaintiffs’ contract. The purchaser from the bank (and a sub-purchaser who was subject to the same obligation) was held to take its interest subject to a constructive trust for the plaintiffs. Though a statutory provision similar to s 68 of the Act was relied on, Dillon J found that although there is no fraud merely in relying on legal rights conferred by statute, there was fraud in a purchaser’s “reneging on a positive stipulation in favour of the plaintiffs in the bargain under which the (purchaser) acquired the land”. Therefore, although a purchaser who secures registration of a transfer of the fee simple merely with notice of a third party’s right to purchase acquires on registration of his transfer a title freed of any obligation to the third party which equity would otherwise impose, a purchaser who has undertaken – whether by contract or by collateral undertaking – to hold his title subject to a third party’s right to purchase remains bound by his undertaking after registration of his transfer. If he should repudiate the third party’s right to purchase, equity imposes a constructive trust so that the registered proprietor holds his title on trust for the third party to the extent of the third party’s interest. It might be thought that, if the undertaking from which the constructive trust originates is found in an oral collateral agreement, s 34 of the Property Law Act 1969 (WA) or the Statute of Frauds would preclude its enforcement. But an undertaking that a title to be acquired on registration of a transfer shall be held subject to the unregistered interest of a third party is not itself a disposition of the third party’s interest; and s 34 of the Property Law Act requires only an instrument disposing of an interest in land to be in writing: Adamson v Hayes (1973) 130 CLR 276 at 306. … As the Thompsons not only had notice of the Bahrs’ interest but had undertaken that their title would be subject to the Bahrs’ interest, they cannot rely on the Property Law Act, the Statute of Frauds or the Act to avoid honouring their undertaking. As a contractual undertaking, it can be enforced by Nicolay to whom it was given. As the Bahrs’ interest was created by an antecedent agreement pursuant to which Nicolay was bound to enforce the Thompsons’ undertaking to honour the Bahrs’ interest, there can be no reason for denying the Bahrs’ standing to enforce the undertaking against the Thompsons directly in a suit in which Nicolay is a party: Snelling v John G Snelling Ltd [1973] QB 87, at p 99. Moreover, the constructive trust on which the Thompsons hold their title is a trust to give effect to the Bahrs’ interest. As beneficiaries of that trust, the Bahrs may enforce their interest against their trustee directly: Neale v Willis (1968) 19 P & CR 836, and cf Hersey v Giblett (1854) 18 Beav 174 (52 ER 69). The Bahrs are therefore entitled to enforce their right of purchase directly against the Thompsons. They do not thereby impeach the registration of the transfer to the Thompsons. Nor does the Act present a bar to the enforcement of the undertaking, though (to adopt what Barwick CJ said in Breskvar v Wall, at p 385) the terminal point of a decree enforcing the undertaking might be an order [5.160]

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Bahr v Nicolay (No 2) cont. directing the Thompsons to divest themselves wholly of the estate vested in them by that registration.

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Notes and Questions

1. Bahr v Nicolay (No 2) (1988) 164 CLR 604 has been analysed in a number of articles. See, for example, Lane, “Fraud and Personal Equities Under the Torrens System” (1988) 62 ALJ 1036; Duncan, “Jus Quaesitum Tertio and The Matrix of Circumstances” [1989] Queensland Lawyer 167; Lewis, “How Good is My Title?” (1988) Australian Current Law Article Number 11; Walsh, “Fraud and Personal Equities under the Queensland Torrens System” (1993) 6 Bond LR 120; Tooher, “Muddying theTorrens Waters with the Chancellor’s Foot” (1993) 1 APLJ 1. See also Gilling, ““Vexatious and an Abuse of the Process of the Court”: the Assets Company v Mere Roihi Cases” (2004) 35 Victoria University of Wellington Law Review 145. 2. Did Brennan J take the view that the conduct of the Thompsons was fraudulent? 3. In R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100, the defendants held possession under a two year unregistered lease with an option to renew for a further two years. During the term of the lease, the lessor sold the land to the plaintiff who knew of the terms of the lease and agreed to accept title subject to the “occupation” of the defendants. Subsequently, the defendants sought to exercise the option to renew and the plaintiff gave notice to quit stating that it was not bound by the terms of the unregistered lease. The court held in favour of the plaintiff. In what ways is it possible to distinguish this case from Loke Yew v Port Swettenham Rubber Company Ltd [1913] AC 491 and Bahr v Nicolay? See also Friedman v Barrett; Ex parte Friedman [1962] Qd R 498. 4. A tenant occupied the premises under a lease for three years with an option to renew for a further three-year term. The premises were sold and in the sale agreement between the vendor and the purchaser, it was provided that the sale was subject to the purchaser’s perusal of the lease “and the notification of the acceptance of the terms and conditions contained therein by way of written notification thereof by [the purchaser] or its solicitors to [the vendor’s] solicitors”. The purchaser’s solicitors gave the written notification before the completion of the sale. The purchaser became the registered proprietor and then contended that it was not bound by the option to renew. Would the case of Bahr v Nicolay ensure that the purchaser is subject to the tenant’s option to renew? See Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295. See also Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198. Cf Northern Building Contractors Pty Ltd v Bourseguin (1992) ANZ ConvR 598. 5. Can fraud occurring after registration be sufficient to vitiate title? Compare the view of Mason CJ and Dawson J with that of Wilson and Toohey JJ in the Bahr case. Some recent decisions of single judges of State Supreme Courts have preferred the view of Wilson and Toohey JJ: see, for example, Tanzone Pty Ltd v Westpac Banking Corporation (reversed on another point: Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521); Conlan v Registrar of Titles (2001) 24 WAR 299; Ryan v Starr [2005] NSWSC 170 (unreported, White J, 17 March 2005), but others have preferred the view of Mason CJ 308 [5.165]

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and Dawson J: see, for example, Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198; Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312. 6. Although notice of a prior unregistered interest does not impugn the title of the registered proprietor, where the registered proprietor expressly takes the fee simple subject to the rights claimed in a caveat noted on the title, the registered proprietor is subject to those rights: see Andrews v Superannuation Fund (1985) 124 LSJS 153 (decision of Olsson J of South Australia Supreme Court). The South Australian legislation specifically permits such a course of action. In jurisdictions where the legislation does not contain such a provision, would the result be the same?

Davis v Williams [5.170] Davis v Williams (2003) 11 BPR 21,313; [2003] NSWCA 371 (New South Wales Court of Appeal) [The respondent had purchased land with her husband as joint tenants. They had separated, but never divorced. The husband died and at the time of his death, he was registered as a tenant in common in respect of property jointly owned with the respondent wife. The wife alleges that the property should have been registered as joint tenants. Evidence revealed that the registration clerk had, some years previous, made the title reflect that the parties were tenants in common, rather than joint tenants. This was done so as to save a small amount of duty at the time of the transfer. It was unclear as to why the registration clerk did this. Could this be considered statutory fraud?] HODGSON JA: Issues on Appeal In my opinion, the issues raised on this appeal can best be considered under four questions: (1)

Was there fraud by the registration clerk within the meaning of s 42 of the Real Property Act?

(2)

If so, was this fraud for which Mr Williams was answerable?

(3)

Does Mrs Williams have a right to equitable relief?

(4)

Does Mr Davis have a claim for a constructive trust or equitable lien?

Fraud by the Registration Clerk? As noted by Young CJ in Eq., the case of Munro v Stuart (1924) 41 SR (NSW) 203 is authority for the proposition that fraud by a registered proprietor against a party other than that seeking to assert an interest against the registered proprietor does not bring the case within the fraud exception to s 42 of the Real Property Act. However, there is a subsequent line of authority to the effect that, if a registered proprietor has obtained registration by a fraud practised on the Registrar-General, that will be fraud for the purposes of s 42 which may be sufficient to deprive the registered proprietor of the advantage of registration: see Australian Guarantee Corporation Ltd v De Jager [1984] VR 483; National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477; Grgic v Australian & New Zealand Banking Group Ltd (1994) 33 NSWLR 202; Westpac Banking Corp v Sansom (1994) 6 BPR 13790; Sansom v Westpac Banking Corp (1996) 7 BPR 14615. In Hedley, I held that there was fraud by a bank where an acting manager had falsely certified that a mortgage was signed in his presence by a mortgagor, knowing that this mortgage was to be submitted to the Registrar-General for registration. No question was raised by the bank in that case as to whether the acting manager knew of the significance of his attestation in the process of registration. However, in circumstances where the acting manager did not give evidence and a Jones v Dunkel [5.170]

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Davis v Williams cont. (1959) 101 CLR 298 inference against the bank was available, an inference that the acting manager knew that the Registrar-General would be induced to act by this misrepresentation could readily have been drawn. An appeal to the Court of Appeal in that case was allowed on another point (Hedley v National Commercial Banking Corp of Australia Ltd., Court of Appeal, unreported, 31/10/86), and my decision on this point was acknowledged without comment. I remain of the view that, in the circumstances of that case, my decision was correct. As mentioned by Young CJ in Eq, there is also authority that false certification of this kind will not necessarily amount to fraud. In Russo v Bendigo Bank Ltd [1999] 3 VR 376, false attestation of a signature on a mortgage as having been signed in her presence made by a clerk employed by a solicitor acting for a bank was held not to be fraud by the bank. However, in that case, the clerk gave evidence, and the Court held that it was not shown that she knew the significance of her attestation in the process of registration or even that the mortgage was to be submitted for registration. The Court also said that it was not shown that the clerk’s attestation had the element of dishonesty or moral turpitude required for fraud. Mr Rayment QC, for Mr Davis and Mrs Gisler, submitted that, having regard to the decision in Russo, the primary judge was in error in finding that the registration clerk in this case committed fraud. The relevant findings are at paras [31], [36] and [37] of the primary judge’s judgment: 31 There was fraud in the sense I have discussed committed by Ms Moore. She altered the transfer from the Corporation to Mr and Mrs Williams, after the transfer had been executed, by crossing out the words “as joint tenants” and inserting the words “tenants in common in equal shares”. She knew that this did not represent the transaction between the Corporation and Mr and Mrs Williams and she expected the Registrar-General to act upon the alteration, as in fact occurred. She took that course for the purpose of saving a small amount of stamp duty. Nevertheless, she deliberately altered the transfer with the intention that the Registrar-General would act upon her alteration. Her conduct amounted to fraud for the purposes of the Act. … 36 Ms Moore was a registration clerk. She was employed through Ms Pinter to act on Mr Williams’ behalf in the stamping and lodgement of the transfer from the Corporation to Mr and Mrs Williams. The fraud which she committed was not authorised, but it was fraud committed in the course of and for the purposes of the transaction which Ms Moore was employed to do. Her fraud was fraud for which Mr Williams was responsible, it having been carried out by his agent in the course of her employment and, if it were necessary to add, for his benefit. 37 Although Ms Moore’s actions of themselves were not expressed to be the basis of the claim made in the Statement of Claim, her actions were proved by the evidence before the Court. Mr Williams’ responsibility for her actions was debated in the addresses of both Mr Alexis and Mr Marler. In the circumstances, the plaintiff is entitled to rely upon the acts of Ms Moore acting as agent for Mr Williams. The registration clerk did not give evidence in the case, and apart from the fact of the alterations themselves made by her to the transfer from the Housing Corporation, the only direct evidence of her state of mind was the note set out in para [68] of Young CJ in Eq.’s judgment. Fraud by the registration clerk was not alleged in the Statement of Claim, and no amendment to allege fraud by her was sought. Mr Alexis, for Mrs Williams, submitted to us that it was not until two days before the commencement of the hearing, when a draft of the affidavit of the solicitor acting for Mr Williams was served on them, that Mrs Williams’ advisers knew of the role played by the registration clerk; and accordingly, the case was permitted by the primary judge to be run on the basis that there was fraud by the registration clerk. This history was not disputed by Mr Rayment. It means I think that the fact that fraud by the registration clerk was not pleaded did not of itself preclude the finding made by the primary judge; but in my opinion these circumstances mean that any Jones v Dunkel submission arising from her not 310 [5.170]

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Davis v Williams cont. giving evidence has far less weight than if fraud by her had been alleged in the Statement of Claim, or even by an amendment formally made to the Statement of Claim. In my opinion, in these circumstances it was incumbent on the primary judge to consider carefully whether all elements of fraud had been made out against the registration clerk, or whether, as in Russo, the proof of fraud fell short. The relevant discussion in para [31] of the judgment does not in terms address the question whether the registration clerk really had it in mind to mislead the Registrar-General in a material respect and thereby influence the Registrar-General to do something materially different from what otherwise would have been done; or whether her behaviour had the element of dishonesty or moral turpitude sometimes said to be necessary for fraud. In my opinion, at least the first of these questions needed to be addressed; and this lack of reasons, together with the circumstance that the registration clerk did not give evidence, so that her mental state has to be a matter of inference from facts which are substantially undisputed, makes it appropriate for this Court to consider for itself whether an inference of fraud should be drawn. In my opinion, it can and should plainly be inferred that the registration clerk knew that the transfer was being submitted for registration to the Registrar-General, and that the alteration she made would cause the Registrar-General to make entries in the register that reflected the altered form of the transfer and not its original form. In my opinion, it could possibly also be inferred that the registration clerk knew that the Registrar-General would do this because the submission of the transfer would represent to the Registrar-General that the transfer as altered was in fact the transfer as signed and certified by the parties, and the Registrar-General would act because he would be induced to accept this false proposition; although this inference is less clear than the first one. However, even this of itself may not be sufficient to establish fraud. In circumstances where the effect of the altered document was understood by the registration clerk to be identical with the effect of two documents which she had for registration, there would be a real question whether she appreciated that to represent to the Registrar-General that this result was effected by one document rather than by the two was a material misrepresentation, which was such as to influence the Registrar-General to act in a way materially different from what otherwise would have been done, rather than being a mere formality. There may also be a further question, namely whether her conduct had that element of dishonesty or moral turpitude that is said to be necessary: Butler v Fairclough (1917) 23 CLR 78 at 91, 97; Wicks v Bennett (1921) 30 CLR 80 at 91; Stuart v Kingston (1923) 32 CLR 309 at 329; Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 273-4; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 614. For my part, however, I do not see that as being, in this case, a requirement distinct from those I have already raised. If the registration clerk made a representation to the Registrar-General, knowing it to be false in a material respect, and intending that the Registrar-General be induced by the representation to act in a way materially different from what otherwise would have been done, then I think that would be sufficient dishonesty or moral turpitude, irrespective of whether she had any intention that anyone be disadvantaged by this. If a lie is material in respects such as these and understood to be so, I do not think that lack of intent to harm can justify treating it as a “white lie” and as excluding dishonesty or moral turpitude. Should it then be inferred that the registration clerk appreciated (1) that the Registrar-General would make entries reflecting the altered form of the transfer because induced to have a false belief that the altered transfer was the transfer as signed and certified by the parties, (2) that the misrepresentation that this was so was material (where the same effect would have been achieved by the two documents) and (3) that this action by the Registrar-General was materially different from what would have been done if the two documents had been submitted? I would draw inference (1); but in circumstances where the registration clerk did not give evidence for the reasons referred to above, and where the only plausible motives for what she did was concern for efficiency and possibly some small saving for Mr Williams in respect of government charges, I would not draw inferences (2) and (3). [5.170]

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Davis v Williams cont. Appreciation of (2) and (3) would mean that the registration clerk appreciated that what she did was truly dishonest and not merely a convenient fiction of no consequence; and I am not prepared to infer that she appreciated this. In the absence of appreciation of (2) and (3), I do not think her conduct amounted to fraud. In my opinion therefore, the primary judge was in error in finding fraud by the registration clerk. Fraud Affecting Registered Proprietor? The primary judge did not find the solicitor guilty of fraud, and there is no Notice of Contention alleging that he should have. So the only question arising under this heading is, if I am wrong concerning the registration clerk and if the registration clerk was in fact guilty of fraud, would this fraud affect the title of the registered proprietor. The primary judge found that it did, because it was caused by the registration clerk as the registered proprietor’s agent, in the course of her employment as such and for his benefit. Because of my view concerning fraud, this question does not have to be decided. However, I think it is appropriate to express my views on it. It was submitted for Mrs Williams that the primary judge was correct in this matter. Mr Alexis submitted that the fraud was within the scope of the registration clerk’s authority, and in addition the registered proprietor took the benefit of it and thereby in substance ratified it. Questions concerning the authority of agents arise in various circumstances. One area concerns an agent’s authority to make a contract binding on the principal. Another concerns the vicarious liability of employers for wrongful acts committed by their employees. And another concerns a vicarious liability of persons for wrongful acts committed by other persons who are not their employees. This case seems to fall within the last area: the wrongful act was committed, not by an employee of the registered proprietor but by a contractor engaged by his solicitor. (I think the case of BNP Paribas v Pacific Carriers Ltd [2002] NSWCA 379, relied on by Mr Rayment, has little application to the present case, because it concerned questions other than the liability of a principal for the torts of an agent.) In the case of employees, the test in relation to acts not authorised by the employer has been stated as being whether the wrongful act was so connected with the job the employee was employed to do that it can fairly be regarded as an unauthorised mode of doing that job; or whether the connection between the employee’s duties and the wrongful act is sufficiently close to regard the wrongful act as within the scope of the employment: see Lloyd v Grace Smith & Co [1912] AC 716; Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1981] 2 NSWLR 1 and Lister v Hesley Hall Ltd [2002] 1 AC 215 and cases there cited. In the case of alleged agents who are not employees, it appears that a person may be liable as principal on a similar basis to an employer, if the wrong-doer was carrying out some activity as the principal’s authorised representative in dealing with a third party: see Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co-Operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 48-50 (CML), and cf. Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 58-60. A person may also be liable as principal where the wrong-doer is carrying out a task that the principal has undertaken to do, at least where the wrong-doing is merely negligent: see Scott v Davis (2000) 204 CLR 333 at 342-3 per Gleeson CJ, and at 357 in the dissenting judgment of McHugh J. If a person commits an unauthorised wrong-doing while acting as the authorised representative of another in dealing with a third party, then it seems that much the same question would arise as in the case of an employee, namely whether the connection between the wrong-doing and the authorised acts is sufficiently close to regard the wrongful act as being within the scope of the engagement. In both cases, the question whether the wrong-doing was for the benefit of the wrong-doer or the alleged principal will be a relevant, but not on its own conclusive, factor. 312 [5.170]

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Davis v Williams cont. In the present case, the registration clerk was engaged by the solicitor to deal with the RegistrarGeneral in relation to the transfers. Her task did not include making alterations to either of the transfers. But what she did was quite closely connected with her task and with the result she was engaged to achieve, and it was not for her own benefit, but apparently for the sake of efficiency or a small saving to Mr Williams. I think that, if what the registration clerk did had given rise to liability of the clerk in tort, then the solicitor would also have been vicariously liable in tort. The solicitor had been engaged by Mr Williams inter alia to deal with the Registrar-General; but I do not think the solicitor, if acting outside the solicitor’s very broad actual (express and implied) and ostensible authority, would be regarded as the client’s authorised representative, at least as that expression is used in CML. I think that expression is used in CML so as to suggest the representative represents the principal in the same general sort of way as an employee might do, thereby justifying assimilation of the case to that of an employer and employee: cf. Hollis at pp 54-60, per McHugh J. I do not think Mr Williams would have been liable in tort for what the registration clerk did, if that had amounted to a tort. This accords with the view of Street J in Schultz v Corwill Properties Pty Ltd (1969) 90 WN(Pt 1)(NSW) 529; although in that case, the solicitor’s fraud was for his own benefit, not for that of the client. This does not necessarily mean that Mr Williams would not have been answerable for the fraud (assuming the registration clerk’s act to have been a fraud) for the purposes of s 42 of the Real Property Act. If registration had been obtained by the solicitor’s fraud committed for the benefit of Mr Williams in carrying out the task of obtaining registration, then one would tend to expect that Mr Williams could not take advantage of the benefit of that registration. However, I think this is not because Mr Williams would be liable as principal for the solicitor’s wrong-doing, but because of a principle that a person cannot take or retain a benefit from a fraud committed on his or her behalf. I accept that there is a principle to that effect, which Young CJ in Eq. has called the Mair principle: see Kettlewell v Refuge Assurance Co [1908] 1 KB 545 (appeal dismissed [1909] AC 243) Mair v Rio Grande Rubber Estates Ltd [1913] AC 853, note by Handley JA “Exclusion clauses for fraud” (2003) 119 LQR 537. I think this approach was too readily dismissed by Street J in Schultz. However, I think there is a real question in the present case whether Mr Williams “took the benefit of” the fraud in any substantial sense. For the Mair principle to apply, in my opinion the principal must have a real choice whether or not to take or retain the benefit, and the benefit must be more than trivial. I refer to an analogy from the law of contract. If a person does work altering a house without being requested to do so by the house owner and without the house owner’s knowledge (for example, extras performed by a builder that were not obvious to the owner), the house owner will not be taken to have undertaken to pay for that work merely because the house owner has the benefit of the work through ownership and occupation of the altered house. This is because the house owner has no real choice in the matter. In my opinion, much the same approach should be taken in connection with the Mair principle. In this case, in substance the only “benefit” of the fraud to Mr Williams is that he obtained registration as tenant in common through the registration of one document rather than two, with a relatively trivial saving of government charges. Mr Williams cannot give up this “benefit” without also giving up what he would have obtained in the absence of fraud, because, for reasons discussed by Young CJ in Eq., the second transfer cannot now be registered. In my opinion, the “benefit” accepted by Mr Williams is insufficiently substantial, or insufficiently a matter of choice for Mr Williams, to require that he be considered answerable for the fraud of his agent. According, if I had considered that the registration clerk was guilty of fraud, I would not have found Mr Williams to be answerable for it. [5.170]

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Davis v Williams cont. Equitable Relief? Had Mrs Williams made out a case of fraud she could have relied on the transfer as registered being void; and she would then have had a title to the land on the basis that the Housing Corporation was a bare trustee of the property, initially for her and Mr Williams as joint tenants and, upon the death of Mr Williams, for her alone as survivor. In those circumstances, I think it would have been appropriate for a vesting order to be made to give effect to the beneficiary’s right to the property, without the necessity of Mrs Williams satisfying other requirements for equitable relief. However, in the absence of making out a case of fraud, Mrs Williams has to rely on a claim for relief based on some equitable right in personam. She seeks to do so now essentially on the basis that, prior to registration of the transfer, the Housing Corporation was a bare trustee of the property for her and the deceased as joint tenants; and Mr Williams has, through misrepresentations and negligence of his agents, deprived her of her right of survivorship. The misrepresentations and negligence would include those of the solicitor executing the transfer as solicitor for both transferees, the alterations of the transfer and associated misrepresentations by the registration clerk, and the subsequent inactivity of the solicitor to correct the situation. Although it might be said that the second and third matters on their own did not deprive Mrs Williams of anything, in the sense that the same result would have been achieved by having the two documents registered rather than just the one, the first deprived her of the chance of participating in what was going on and of the opportunity to make either some application to the Family Court or an application for sale of the property pursuant to s 66G of the Conveyancing Act. Had equitable relief on this basis been squarely sought, then as noted by Young CJ in Eq, the question of doing equity would have arisen. This would have involved among other things a close scrutiny of the substance and reality of any deprivation of opportunity as referred to above, and the matters relied on in the cross-claim would probably have been put forward as matters of defence, as going at least to the question of what was required for Mrs Williams to do equity. Submissions were made to the primary judge to the effect that the transfer should be rectified on the basis of a personal equity, and this claim is reflected in the Notice of Contention. In my opinion, the case for such rectification was not made out, in circumstances where the issues I have adverted to were not litigated, by reason of the absence from the Statement of Claim of any statement that this kind of personal equity was being relied on. On the material we do have, I agree with Young CJ in Eq. that, even if the issue of a personal equity had been fully explored, probably the best Mrs Williams could have done was to obtain some modest compensation. That was never sought, and is not sought by the Notice of Contention. In all the circumstances, I agree with Young CJ in Eq. that Mrs Williams’ claim of entitlement to the half interest in the property held by her late husband’s estate fails. Young CJ in Equity Section 42 of the Real Property Act reads, so far as is relevant: the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same … absolutely free from all other estates and interests that are not so recorded. It is unnecessary to canvass fully all the statements made in the authorities about statutory fraud. However, a couple must be noted. In Munro v Stuart (1924) 41 SR (NSW) 203, 206, Harvey J held that in order for there to be statutory fraud under s 42 the fraud must be fraud against the person who seeks the assistance of the court. In Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248, 256, the High Court said that it must be remembered that: 314 [5.170]

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Davis v Williams cont. [75] statutory fraud embraces less, not more, than a species of fraud which, at general law, founds the rescission of a conveyance; and [76] statutory fraud is not itself directly generative of legal rights and obligations, its role being to qualify the operation of the doctrine of indefeasibility upon what would have been the rights and remedies of the complainant if the land in question were held under unregistered title. Ferguson’s case was one where there had been a forgery within a bank “probably designed to speed up the process within the bank” which had had no effect on the mortgagor. The High Court held that the matter of forgery was irrelevant to statutory fraud. This case was followed by Wilson J in the Supreme Court of Queensland in Unic SA v Quartermain Holdings Pty Ltd [2002] 2 Qd R 660. A vital question is whether Ms Moore’s action could be classed as statutory fraud. There have been a series of cases in New South Wales and Victoria examining how far a false declaration of personal attestation to a mortgage which is then lodged for registration amounts to statutory fraud. It is useful at this point to examine some of these authorities in some detail. As I have already noted, his Honour considered the leading cases in this area namely Australian Guarantee Corporation v De Jager [1984] VR 483 (a decision of Tadgell J); National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477 and Grgic v Australian & New Zealand Banking Group Ltd (1994) 33 NSWLR 202. The first two of this series of cases were decided within six weeks of each other, presumably without the knowledge of the existence of the other. Each considered that in the circumstances of the case that it was a fraud on the Registrar General for a bank officer to state that he had witnessed a signature of a mortgage and that the mortgagor was personally known to him when this was untrue. In each case the officer knew that he was making that representation to the Registrar General so that the relevant document would be registered. In Hedley’s case Hodgson J said at 9482: My view is that this conduct does amount to fraud within the meaning of s 42 and s 43 of the Real Property Act. In my view, certainly, it is fraud in the sense of actual dishonesty and base conduct which had been directed to obtaining registration and has actually resulted in obtaining that registration. These two cases were considered by this Court in Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202. In that case, a son had carefully practised signing his father’s name for many years and signed his father’s name to a mortgage and had it witnessed by a bank officer. However, Powell JA, with whom Meagher and Handley JJA agreed, said at 222 that the fact of the bank officer’s “attestation could not, in my view, constitute statutory fraud unless it could be shown, either, that he knew that” the person who signed the mortgage was not in fact the registered proprietor or else “he was acting recklessly without caring whether or not” the mortgage was being signed by the registered proprietor. When one reads Hedley’s case one can see that Hodgson J wrestled with the problem as to whether fraud in ss 42 and 43 of the Real Property Act must actually be directed against the person who is claiming the unregistered interest or may be fraud against the Registrar General. His Honour said at p 9481 that the bank officer’s conduct amounted to actual dishonesty within the cases on statutory fraud. However, he then said: I note that that dishonesty was not … directed specifically to dishonesty in depriving Mrs Hedley of her interest in the property. Without having the benefit of any authority which he considered might guide him, his Honour opted for the result that the bank was denied indefeasibility for statutory fraud. In Westpac Banking Corp v Sansom (1994) 6 BPR 13790 at 13796, Rolfe J reviewed the authorities and said: [5.170]

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Davis v Williams cont. These authorities establish there is fraud, within the meaning of s 42, when a representation is made, contrary to the fact, that a person is personally known to the attesting witness and has signed the document in his/her presence. The purpose of the requirement that a registrable document should be signed by a person in the presence of another to whom he/she is personally known is, inter alia, to avoid the registration of forged documents. In addition to authorities to which I have already referred, his Honour referred to my decision in Scallan v Registrar General (1988) 12 NSWLR 514, 519 and the decision of this Court in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561. The former of those two cases does not assist: the latter was one where the Court of Appeal decided that the solicitor knew that by tendering mortgages to the vendor’s solicitor carrying a false representation that he had witnessed the relevant signature, that the vendor may suffer loss. Sansom’s case was affirmed on appeal; see Sansom v Westpac Banking Corp (1996) 7 BPR 14615. Mr Rayment referred us to the decision of the Victorian Court of Appeal in Russo v Bendigo Bank Ltd [1999] 3 VR 376. In that case, a bank registered a mortgage of real estate from Mrs Russo to secure a loan to a company controlled by her daughter and son-in-law. Mrs Russo’s signature on the mortgage had been forged by her son-in-law. Miss Gerada, an employee of the bank’s solicitor, signed the attestation clause that she had witnessed the mortgagor’s signature. Miss Gerada was unaware of the forgery. The court found that Miss Gerada was not guilty of fraud within the meaning of the Torrens Act, even though her attestation of the mortgagor’s signature was false because there was no dishonesty or moral turpitude on her part; there was no wilful and conscious disregard and violation of the rights of other persons, and this was so even if her attestation was dishonest. Mr Alexis submitted that the reasoning of Russo’s case was odd, seemingly involving a finding that a person who knew what she said was false was nonetheless not dishonest. He also submitted that the result was bizarre. I took these submissions into account, but I also note that Russo’s case was followed by Owen J in Conlan v Registrar of Titles (2001) 24 WAR 299, 345. Mr Rayment also referred to Tanzone Pty Ltd v Westpac Banking Corp (1999) 9 BPR 17287 (reversed, but not on this point as Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17521) where Windeyer J held that there was no fraud under the Torrens system where a person acted with notice that another had a mere equity being a right of rectification, yet acted to defeat that right. Bryson J in Hickey v Powershift Tractors Pty Ltd (1998) 9 BPR 17339 at 17344 considered that proffering a mortgage with knowledge of an untrue attestation was fraud and seems to suggest that fraud against the Registrar General is sufficient. Apart from the cases I have already mentioned, there is Vassos v State Bank of South Australia [1993] 2 VR 316; Beatty v ANZ Banking Group Ltd [1995] 2 VR 301 and Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1996) 136 ALR 166 (Nathan J) reversed [1998] 1 VR 188 by the Victorian Full Court. Although these cases discuss the various principles they really do not take the matter any further. Even though anyone who attests a dealing under the Torrens system falsely is in one sense committing fraud against the Registrar General, the cases show that that is not enough. It will be enough if an officer of the interested party which has become registered knowingly or recklessly certifies so that the registration is effected (De Jager, Hedley, Sansom). It will not be enough if some officer of the person who obtains registration without any moral turpitude or intention of depriving a person of an interest in land makes a false attestation (Russo). In all cases it must be shown that there was fraud by the person becoming registered or its agent in obtaining registration so that an interest which would otherwise take priority over that interest has been defeated. 316 [5.170]

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Davis v Williams cont. In the present case, Ms Moore never intended that her action would deprive any person of any interest in the land. The whole of the evidence shows that she took what she wrongly thought was a permissible short cut to achieving the task that Ms Pinter had set. However, Mr Alexis contends that Ms Moore was an experienced registration clerk, she must be taken to know that one does not alter documents without authority and that proffering the documents to the Registrar General to secure registration was wrong. He says that this is sufficient to show dishonesty within the meaning of that term as used in the concept of statutory fraud. In my view, cases such as Russo tell against that view, even though the flavour of it did come to the fore in cases such as Hedley. Ms Moore’s conduct might even be regarded as stupid. However, I cannot see any element of moral turpitude in it. Thus, I do not consider that the element of statutory fraud was made out in this case. Contrast GZELL JA (in dissent): In the instant circumstances, by altering the instrument and lodging it, the registration clerk falsely represented to the Registrar-General that New South Wales Land and Housing Corporation had transferred the land to the first opponent and her husband as tenants in common in equal shares. The false lodgement of the altered document was, in my view, enough to constitute fraud. That finding did not depend upon direct evidence that might have been given by the registration clerk as to her state of mind. Fraud was a priori. I agree with the learned trial judge’s conclusion: This was fraud in the sense I have discussed committed by Ms Moore. She altered the transfer from the Corporation to Mr and Williams, after the transfer had been executed, by crossing out the words “as joint tenants” and inserting the words “tenants in common in equal shares”. She knew that this did not represent the transaction between the Corporation and Mr and Mrs Williams and she expected the Registrar-General to act upon the alteration, as in fact occurred. She took that course for the purpose of saving a small amount of stamp duty. Nevertheless, she deliberately altered the transfer with the intention that the RegistrarGeneral would act upon her alterations. Her conduct amounted to fraud for the purposes of the Act. The second issue is whether, if I am correct in my view that there was fraud on the part of the registration clerk, it was fraud for which the deceased was answerable. In order to invalidate the title of the deceased as registered proprietor the fraud of the registration clerk must be brought home to the deceased or to his agent, his solicitor (Mere Roihi at 210). In the situation where fraud is committed by the person whose title is impeached or his agents, the principle of respondeat superior applies and the matter is to be tested by investigating whether or not the principal, in the particular circumstances, is liable to the person who has been defrauded for the acts of the agent (Schultz v Corwill Properties Ltd (1969) 90 WN (Pt 1) (NSW) 529 at 537). In his extensive analysis of the authorities in Conlan v Registrar of Titles (2001) 24 WAR 299, Owen J at 345 referred approvingly to what Batt JA had said in Russo at 392 with respect to the bringing home to the registered proprietor or his agents of the fraud: “That means that it must be sheeted home to the registered proprietor or his agents, that he or they must be shown to be infected by it or complicit in it.” Batt JA went on to find that the agent’s employee’s fraud could not be sheeted home to the agent or his principal. The registering party was neither complicit in nor aware of the fraud and it was too remote from the registering party to affect him. On the other hand, Ormiston JA in Russo took a different view, a view regarded as important by Owen J in Conlan. At 390 Ormiston JA said: … I would have found it hard to reach a conclusion that the bank should not be responsible for the acts of its solicitor in circumstances such as the present, if fraud had been established, [5.170]

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Davis v Williams cont. assuming the fraud in question not to have been for his own benefit. He was engaged to act as the bank’s solicitor and to advise it in relation to the very transaction, that is, what was thought to be a mortgage by the appellant in favour of the bank … If he had consciously gone forward and obtained registration of the mortgage in the knowledge of, or wilfully blind to, the fact only that it was not properly attested, then I doubt that would have involved him doing something outside the scope of his authority. If he had been party to the lodging of the documents (which is not clear), then he would be doing so in order to carry out the instructions of his client, the bank, and it was only by chance that the document was not properly executed or attested. The same reasoning would apply if Miss Gerada were to be held (contrary to my opinion) to have been guilty of fraud on the same limited basis. In my view that approach should be adopted in the instant circumstances. The solicitor was engaged to act for the deceased in the very transaction, lodgement of the transfer for registration. If she had consciously gone forward and obtained registration of the transfer in the knowledge of, or wilfully blind to, the fact that it had been altered after execution, she would not have been involved in doing something outside the scope of her authority. If she had been party to the lodgement of the transfer she would have been doing so in order to carry out the instructions of the deceased. It was only by chance that the document had been altered improperly. Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 involved a different question: whether the employee had authority to give valuations on behalf of his employer. Here there is no question of the solicitor’s retainer or that of the registration clerk. Likewise, BNP Paribas v Pacific Carriers Ltd [2002] NSWCA 379 does not assist the first claimant. It concerned the question whether the employee of the bank had authority to bind the bank to a contract of indemnity. In my opinion, the fraud of the registration clerk was brought home to the solicitor, the agent of the registered proprietor. The act of the registration clerk, although improper, was a mode of doing the very thing that she was authorised to do.

Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [5.175] Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 Court of Appeal [Consider again under the heading of fraud by agents and employees.] [The mortgagor company argued that the registered mortgage it had entered into, had not been validly executed as it was attested by a person who was not a director of the company. It further argued that the mortgagee’s “wilful blindness” to the correctness of the attestation constituted fraud and rendered the mortgage defeasible.] HAYNE JA: … It is said that some or all of these matters amounted to wilful blindness or reckless indifference by Pyramid’s solicitor (and thus by Pyramid itself) to the truth or falsity of the instrument which it tendered for registration and that this constitutes fraud of the kind spoken of in s 42. I do not accept that that is so … The decision in Assets Co Ltd has stood for many years and it is clear that for the purposes of s 42 “fraud” means actual dishonesty or moral turpitude: see, for example, Butler v Fairclough (1917) 23 CLR 78 at 90 and 97; Stuart v Kingston (1923) 32 CLR 309 at 329 and 356; Bahr v Nicolay (No 2), 614 per Mason CJ and Dawson J and at 631-632 per Wilson and Toohey JJ; Grgic v Australian and New Zealand Banking Group Ltd, 221 per Powell JA. Further, although it is clear that what was said in the 318

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Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd cont. Assets Co Ltd case is not to be read as saying that all kinds of equitable fraud stand outside the statutory concept of fraud, proof of dishonesty is essential. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 Kitto J held that a collusive and colourable sale by a mortgage company to its subsidiary was a plain case of fraud there being “pretence and collusion in the conscious misuse of a power” – a “dishonest course”: see 113 CLR 265 at 274. But in that, as in other cases in which fraud has been found, there was actual dishonesty and it is that which Scorpion sought to demonstrate in this case. Of course, fraud may take various forms. Registering an instrument which the registering party knows is forged is an obvious example. But that was not the case which Scorpion sought to make on the trial of this action or on the hearing of the appeal before us. Rather, the fraud alleged against Pyramid was said to be a reckless indifference to the truth of the document which it tendered for registration. In support of this contention, counsel for Scorpion placed particular emphasis upon the decisions of Tadgell J in Australian Guarantee Corp Ltd v de Jager [1984] VR 483 and Mandie J in Beatty v Australia and New Zealand Banking Group Ltd [1995] 2 VR 301. In both cases it was found as a fact that a person employed by the mortgagee had signed an instrument of mortgage as a witness to the affixing of the signature by one of the mortgagors when in fact that witness had not seen the mortgagor sign the document. Thus in both cases the employee of the mortgagee knew that the document contained a false statement – that it had been executed by the mortgagor in the presence of the person who had signed as witness. In each case it was held that the mortgagee was guilty of fraud within s 42 of the Transfer of Land Act. In my view no such case was made out here. There was, in this case, no evidence that Pyramid, or anyone acting on its behalf, knew that the witness to the affixing of the mortgagor’s company seal was not a director of the company (if in fact that was so). There was no evidence that Pyramid, or anyone acting on its behalf, knew that the execution of the mortgage had not been authorised by Scorpion (if that was so). It was not suggested to Carr (the solicitor who had acted for Pyramid in the mortgage transaction) that he had chosen not to make enquiries about these (or any other) matters because he feared what he might find out. Again, no such case was made out. The expressions “reckless indifference” and “wilful blindness” are useful shorthand expressions to describe some kinds of cases of fraud. As the classical exposition by Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at 374 shows, fraud can be proved by showing that a false statement has been made without belief in its truth or, “recklessly, careless whether it be true or false”. But as was said in the Assets Co Ltd case, the mere fact that a person might have found out fraud if further enquiries had been made does not of itself prove fraud. The enquiry is an enquiry for actual dishonesty not for want of due care … I do not accept that the matters that are now put forward as showing that Pyramid acted dishonestly do so, whether those matters are taken separately or in combination. At most they might show either that Pyramid or its solicitors failed to take due care in settling the loan and mortgage transaction, or that if enquiry had been made, fraud might have been revealed. The finding which the trial judge made, was that: … the bank [sic Pyramid] had no actual belief that the affixing and attesting of Scorpion’s seal was done properly, when it proffered the instruments for registration, whereas it should have had a positive belief in the validly(sic.) of those matters, it did not, and to that extent must be seen not to have had requisite belief, thereby evincing a degree of turpitude which amounts to fraud under the section. In my view the evidence went no further than to show, at most, that had Pyramid made further enquiries (enquiries which it should have made) it would have discovered that the mortgage had not been properly executed. That is not fraud. [5.175]

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Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd cont. If the finding I have quoted was intended to go further than that (and I am by no means certain that that was intended) the evidence did not support it. The judge accepted that the solicitor for Pyramid as an honest witness. There was no evidence that might suggest that he had been dishonest whether in the witness box or in his conduct of the transaction. It was suggested that he should have made more enquiries than he did but it was never put to him in the course of his evidence that he refrained from making those enquiries for fear of what he might find out. This is not a case in which there has been shown to be any want of probity or “moral obtuseness” of the kinds discussed in cases such as Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378; Sixty-Fourth Throne or International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561. It follows that the title obtained by Pyramid on registration of its mortgage is indefeasible. [Brooking and Tadgell JJA agreed with the judgment of Hayne JA.]

Russo v Bendigo Bank [5.180] Russo v Bendigo Bank Ltd [1999] 3 VR 376 Court of Appeal [As security for a loan to a company controlled by the registered proprietor’s daughter and son-in-law, the bank took a mortgage over the registered proprietor’s land. The signature of Mrs Russo, the registered proprietor, was forged on the mortgage document by her son-in-law. A young law clerk of the solicitor for the mortgagee, Rita Gerada, falsely witnessed Mrs Russo’s signature on the mortgage. She could not remember having done this and was unaware of the forgery. She gave evidence that she had been instructed not to attest the signature of any person unless that person had signed in her presence. Mrs Russo argued that the bank’s title was defeasible on the basis of the fraud exception in s 42 of the Transfer of Land Act 1958.] ORMISTON JA: … Moreover from early times it was both assumed and held that the concept of fraud referred to in the legislation derived from the Torrens Act was what was called “actual fraud”, from which I understand the courts were excluding equitable fraud of the kind which has come to be called “constructive fraud”. Such a limited view of the notion of fraud was no doubt consistent, in the broadest sense, with the purposes intended to be served by the new legislative scheme for registered title. Nevertheless in recent years it might appear that some qualification has been placed upon the original interpretation, in particular by observations of Mason CJ and Dawson J in Bahr v Nicolay (No 2) (1988) 164 CLR 604. [Ormiston JA then reviewed many of the important authorities on the meaning of fraud in the Torrrens legislation and continued …] Consequently, having regard to the manner in which the interpretation of the concept of fraud has changed over the years both in New Zealand and in Australia, I would respectfully suggest that the most satisfactory definition of the concept of fraud was given in 1923 by Salmond J in the Waimiha Sawmilling case when heard by the New Zealand Court of Appeal: [1923] NZLR 1137 at 1173: The term “fraud” is not here used in its most restricted sense as including merely deceit, nor in its widest sense as including the constructive or equitable fraud of the Court of Chancery. It means dishonesty – a wilful and conscious disregard and violation of the rights of other persons. I should add that I do not believe that anything stated above runs counter to any observation of this court expressed in recent decisions such as Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 191 and 193, Macquarie Bank v Sixty-Fourth Throne at 142-146 and F & F Holdings Pty Ltd v Ridge Lane Pty Ltd [1998] VSCA 72 at [40]. 320 [5.180]

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Russo v Bendigo Bank cont. (c) Whether Miss Gerada was guilty of “fraud” It is necessary at this stage to return to the facts upon which the appellant says that there was fraud in the relevant sense committed by Miss Gerada. For the present it should be acknowl-edged that the enquiry may be artificial in the sense that in certain circumstances an aggregation or accumulation of knowledge may be relevant for the purpose of charging the bank with fraud within the meaning of the statutory exception. Before turning to those arguments, however, two matters should be noted. First, unlike the situation discussed by Tadgell J in AGC v De Jager, there was no relevant knowledge or information on the part of the bank inasmuch as there was no material upon which it could even be suggested that it ought to have known that the appellant’s signature was forged or that Miss Gerada had not witnessed Mr Halaseh affixing the appellant’s signature in her presence. Secondly, the learned judge found, although it had been contended to the contrary, that Mr Reichman was likewise ignorant both of the forgery and of the false attestation. Nevertheless, the learned judge’s fact findings were such that it could not be denied that Miss Gerada was aware or ought to have been aware that her attestation was false in the sense that she must have been aware that, contrary to what she wrote in that clause, she was not present when the appellant purportedly signed the mortgage. Of course, it does not follow that she was aware that Mrs. Russo’s signature was forged by Mr. Halaseh or by anybody else. For all she knew Mrs Russo had signed and the falsity of her statement went essentially to her presence at the time of the purported signature. Whatever be the limitations of the learned judge’s findings against Miss Gerada, they undoubtedly involved her being party to a false statement and thus it is said that allowing that false statement to go forward for the purposes of the transaction in question must have been fraudulent, to the extent that it ought now to permit the appellant to go behind the registration of the mortgage and have it set aside as against the bank. Moreover, it was argued that Miss Gerada not merely signed the false statement in the attestation clause but, more importantly, was aware that she ought not to have done so except when she had been present at the signing, for she conceded that she had been clearly and firmly instructed as to how she should witness signatures. Thus it was no mere oversight, nor a casual approach to the attesting of signatures which might be thought to be commonplace in the community as a whole, inasmuch as many people believe that it is sufficient for the purpose that one knows a signature or that one can be assured at the time of witnessing that it is the signature of the person whose name appears on the document. Those beliefs, as Tadgell J held in AGC v De Jager, are unwarrantable, certainly in the case of documents which have to be lodged in the Titles Office and certainly where the witnessing of a signature is otherwise of legal significance. [So the circumstances which led to his Honour’s finding of absence of fraud might be thought surprising, even in themselves “unwarrantable”. But in my opinion such criticism, accurate though it may be as to known falsity, overlooks the final and critical element in fraud, namely dishonesty or want of probity, a “wilful and conscious seeking to defeat or disregard another’s rights”. The weakness in the appellant’s case is twofold: first, there was no direct evidence of dishonesty or moral turpitude on the part of Miss Gerada, unless one were able to rely solely on the untruth told by her in the attestation clause; secondly, there is not a scintilla of evidence to show that she was involved in Mr Halaseh’s dishonesty or that she would have any reason to do so. To support the first proposition (the second not being denied) it was said on behalf of the respondents that there was no evidence: (i) that Miss Gerada knowingly put the mortgage forward on the path to registration; (ii) that she did not believe that the mortgage was executed in her presence by Mrs Russo and (iii) that she appreciated that the lodging of the mortgage would convey a representation to the contrary. I cannot accept contention (ii) for, according to the learned judge’s findings, she had no belief that it was executed by the appellant in her presence, despite her later protestations to the contrary. The facts were unambiguous and Miss Gerada was not so stupid as to have thought at the time that Mrs Russo was present when she had apparently signed. It was found, indeed it was not disputed, that she was not [5.180]

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Russo v Bendigo Bank cont. present and Miss Gerada must have been aware of that fact when she added her signature as an attesting witness. Of course this conclusion says nothing to deny that she believed Mrs. Russo had signed. The other two matters are far less easily answered and they go, in a significant way, to the issue of how Miss Gerada’s behaviour should be characterised. As to the question whether Miss Gerada knew that she was putting the mortgage forward “on the path to registration”, there is surprisingly no evidence. One might think that that is a matter which could be inferred. If one was dealing with a person of professional training or long experience as a law clerk, the inference might well be irresistible. But there was no evidence as to Miss Gerada’s understanding of conveyancing procedures, nor any attempt to cross-examine her to show what her understanding was. The strongest point against her is her concession that Mr Reichman was adamant that signatures must be attested in the presence of the signatory, from which many would infer that something untoward might occur if that instruction were not followed. What Miss Gerada knew of the process is left to the imagination. Perhaps in most cases documents which she attested were sent directly for lodging in the Titles Office; she may even have been there herself, although there is no evidence to that effect. It may be that most of the work she did was for the bank, in which case the documents would probably have been sent to the bank with a letter from Mr Reichman but would not to her knowledge have been taken further. In the present case one might even infer that the mortgage was sent to the bank to be held as an equitable mortgage pending the need to expend money in registering it. That seems not unlikely inasmuch as the mortgage was not registered until 4 April 1990 which one might assume was the date of lodgment for that purpose. Again there was no evidence as to how or by whom that lodgment was effected (other than the concession that a commercial firm was used, as referred to in [10]) and indeed by that time Miss Gerada had left the employ of Mr Reichman. There was, of course, no evidence that she knew about the significance of attestation clauses so far as the registration of title was concerned. A very careful argument was prepared (for other purposes) on behalf of the appellant to show how significant attestation in the process of registration at the Titles Office was but there was in truth no dispute as to the significance that these clauses play in registering a title. But that is what the trained lawyer knows, not a 19 or 20 year old clerk. Other than that she would be aware that the document might be registered and enforced against the signatory, I do not believe that there is sufficient evidence to show that she was aware of the significance of her attestation in the process of putting forward the mortgage “on the path to registration”. Likewise, as to her appreciation that the lodging of the mortgage would convey a representation to the contrary to the Titles Office, I see no basis for concluding that it had been proved that she was aware and appreciated the significance of her role. Certainly she would be aware that what she had said in the attesting clause was not strictly accurate but, bearing in mind that she had no knowledge at the time of the forgery by Mr Halaseh, she could well have been totally unaware of the difference her attestation made in the process leading to registration. It was not shown that she had any reason to doubt the signature and thus putting the mortgage forward might, for all the evidence shows, have been seen by her as no more than a formal step in the requisite legal chain of procedures. That, I believe, is the reason why the learned judge held that in the circumstances she had believed it merely to be a “formality”. Here she was mistaken but she was not shown to be a person of the training or sophistication to appreciate the legal consequences of a failure to comply with what may have seemed to her a legal technicality. Certainly, I would not on appeal infer that at the age of 19 or 20, with training effectively only as a clerk over some three years, she had the necessary appreciation of the consequences or significance of her false statement. In short, I believe that Miss Gerada knew that what she had said was false but I do not believe that she has been shown to be dishonest. It was argued that dishonesty could be satisfied by showing objectively that particular behaviour was in all the circumstances dishonest by objective statements. A 322 [5.180]

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Russo v Bendigo Bank cont. basis for this contention was said to be found in the judgment of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. The judgment given by Lord Nicholls has been seen to give countenance to the view that dishonesty may be proved objectively, at least in relation to proving dishonest participation in a breach of trust. As to that I would say only that one should be careful about applying rules as to dishonesty laid down for the purpose of the rules of equity, for one may remember that one of the principle reasons Sir Robert Torrens had for introducing the concept of inde-feasibility of title was to overcome the sophisticated use of equitable principles to hold up and defeat claims to title. But even then Lord Nicholls did not assert that a mere concatenation of events might establish dishonesty. As to objectivity he said only that at 389: “acting dishonestly … means simply not acting as an honest person would in the circumstances. This is an objective standard.” That the standard should be objective is one thing but it is another to say that there is no subjective element. Indeed his Lordship immediately said: Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated … Thus for the most part dishonesty is to be equated with conscious impropriety. In the present case it is the conscious impropriety of Miss Gerada which the appellant has failed to make out. It is that element of “fraud” under the Act which the courts have consis-tently over the years maintained as essential, that is “personal dishonesty” or “moral turpitude” that has not been brought home to Miss Gerada in the present case. She had nothing to gain from her false statement, except possibly some saving of time or trouble. She was not involved in Mr Halaseh’s dishonest schemes. She had no knowledge that Mrs. Russo did not sign and no knowledge that she did not wish to sign the mortgage. In my view it would be a curious consequence that her behaviour should be characterised for this purpose as fraud, for the very essence of that concept is to relieve people from the consequences of indefeasibility only where their behaviour, or the behaviour of those for whom they are responsible, has that element of dishonesty, of conscious moral turpitude or wickedness such as would justify the intervention of a court to set aside the mortgage or other registered estate. Consequently I would reject the appellant’s argument that the learned judge was wrong in holding that Miss Gerada was not guilty of “fraud” within the meaning of the Act. (d) Whether the respondent bank was otherwise guilty of “fraud” The issue of objectivity also led to the appellant’s contention that, even if Miss Gerada was not personally guilty of fraud, then the respondent bank was guilty of it by reason of its own knowledge and in particular the knowledge and understanding of Mr Reichman for whom it was said that the bank was here responsible. As to the bank itself it was conceded that no specific act carried out by its officers was relevant to the consideration of this question. It was not aware of the forgery and it was not party to any scheme to obtain a mortgage from the appellant contrary to her wishes. If it were to be held responsible for the circumstances under which the appellant lost her interest in the land, then it could only be because the bank itself put the mortgage on the path to registration (a matter for which it could not otherwise be criticised) and because its solicitor, Mr Reichman, both by reason of Miss Gerada’s acts and by reason of his own acts, knowledge and understanding should be treated as guilty of fraud for which the bank should be held responsible. It would seem that the only factor additional to those which had been found against Miss Gerada was that Mr. Reichman had the knowledge and understanding of conveyancing law and procedures which could have resulted in his knowing that the consequences of allowing the improperly attested document to go forward were so serious as to amount to fraud. So it was said that, if he had known that the document had not been properly attested, then it would have been wrong of him to allow the signed mortgage to go to the bank in the expectation that it would be registered upon the faith of the [5.180]

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Russo v Bendigo Bank cont. attestation clause. Mr Reichman, a solicitor (and thus the bank), could not hide behind the misdeeds of his clerk if that clerk knew the statement in the attestation clause to be false. So it was said that the aggregation of these facts were sufficient to justify a finding of fraud against the solicitor (and thus the bank) even though the individual behaviour of each was not such as could be characterised as fraudulent. Again it must be said that, in this context and for these purposes, knowing or known falsity is not the same as fraud, for what the court is required to ascertain is whether there was actual fraud in the sense I have attempted to describe earlier. For the present it may be assumed that some accumulation or aggregation of matters or factors may be permitted for this purpose. Such an aggregation produced, in effect, the outcome in AGC v De Jager, although most of the matters there relied upon arose out of the acts or understandings of the employees of AGC itself. The complex matters which led to Tadgell J’s finding that there was fraud in the circumstances of that case appear in particular from 494-499 of the judgment. In that case, however, there was a letter (set out at 491) prepared by AGC’s employees admitting that they knew that the documents were not properly attested and there was other evidence that they knew of the consequences of forwarding the mortgage for registration, there being no doubt that they had so forwarded it, so that the judge held that when forwarded they were aware that the document falsely contained a representation to the effect that the signatures were properly attested. Thus it was critical to his Honour’s finding that those responsible for the conduct of the relevant employees in the office of AGC at Preston knew of these circumstances, inasmuch as he held that the document had been wrongfully presented for registration in circumstances where they had no honest belief that it was a genuine document upon which the registrar could properly act: at 498. The present case is very different. Apart from the fact that the acts here relied upon were not acts of employees but only of persons engaged as solicitors and agents for the purpose, to which I shall briefly return, there was no combination of acts in the present case which could properly be held to amount to actual fraud. Despite attacks made on Mr Reichman in the course of the case, the judge rejected all allegations of impropriety, so that it was held that he was not party to any scheme to defraud the appellant and that he had no knowledge of either the forgery or the falsity of the attestation clause. Moreover, it seems that he, at least, had done as much as he could fairly be asked to do so far as execution was concerned in that he had made it clear to Miss Gerada that conveyancing documents should only be attested in the presence of the parties signing the document. Thus, even taking into account the acts of both Mr Reichman and Miss Gerada, there was no conscious dishonesty or moral turpitude or wickedness which would give a characteristic to the transaction which it did not otherwise have. False statement there may have been, fraudulent it was not. [The following part of the judgment should be re-read after reading the Schultz case at [5.205]] It is therefore strictly unnecessary to deal with the further argument that even if Miss Gerada or Mr Reichman in combination with Miss Gerada had been guilty of “fraud” the bank could not be held responsible for that in the circumstances. The argument was advanced that Mr Reichman was engaged to carry out the conveyancing transaction on behalf of the bank and to give it appropriate advice for that purpose and, in so far as the bank’s agent had been engaged to act on behalf of the bank, it must take the consequences of having employed him so that the bank should be fixed with the alleged fraud. It was argued that the knowledge of Mr Reichman and Miss Gerada could not be imputed to the bank as principal unless that were knowledge gained when acting within the scope or course of their authority. To the extent that Mr Reichman’s acts were improper, such as would otherwise be characterised as amounting to fraud, then it was said that that of itself took his acts outside the course of his authority. I confess, notwithstanding the authorities cited to the contrary, that I would have found it hard to reach a conclusion that the bank should not be responsible for the acts of its solicitor 324 [5.180]

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Russo v Bendigo Bank cont. in circumstances such as the present, if fraud had been established, assuming the fraud in question not to have been for his own benefit. He was engaged to act as the bank’s solicitor and to advise it in relation to the very transaction, that is, what was thought to be a mortgage by the appellant in favour of the bank. What he was doing, at least until the critical moment, was precisely that and so, likewise, I would say that he was so acting at and after the time the false attestation clause was appended. If all he knew (on this hypothesis) was that Miss Gerada was not present, there would have been no frolic of his own and no dealing with the subject of the action so as to deprive his principal of the benefits of the transaction. The only error (on the same hypothesis) would have been to acquiesce in his employee’s appending her signature as a witness to a document which turned out later not to have been signed by the appellant. If he had consciously gone forward and obtained registration of the mortgage in the knowledge of, or wilfully blind to, the fact only that it was not properly attested, then I doubt that would have involved him doing something outside the scope of his authority. If he had been party to the lodging of the documents (which is not clear), then he would be doing so in order to carry out the instructions of his client, the bank, and it was only by chance that the document was not properly executed or attested. The same reasoning would apply if Miss Gerada were to be held (contrary to my opinion) to have been guilty of fraud on the same limited basis. I would concede that if Mr Reichman had sufficient knowledge for it to be said that he had no real belief in the validity of the document or that he knew that it had not been correctly attested, then the appellant may have been able to rely on what are now the well-known authority of Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576; (1969) 90 WN (NSW) (Pt 1) 529, as applied by Tadgell J in AGC v De Jager at 495-496. But Schultz’s case should not be taken further than a proper analysis of it will bear out. The relevant act there was forgery carried out by the solicitor himself for his own benefit. As was stated by Street J, the statement of principle in the Assets Co case by Lord Lindley itself directly (and indeed twice) refers to fraud which can be “brought home to the person whose registered title is impeached or to his agents”. The extension of the principle by reference to ordinary rules of agency was recognised by Street J at NSWR 583; WN (NSW) 538, so that he stated: It is not enough simply to have a principal, a man who is acting as his agent, and knowledge in that man of the presence of a fraud. There must be the additional circumstance that the agent’s knowledge of the fraud is to be imputed to his principal. This approach is necessary in order to give full recognition to (a) the requirement that there must be a real, as distinct from a hypothetical or constructive, involvement by the person whose title is impeached, in the fraud, and (b) the extension allowed by the Privy Council that the exception of fraud under s 42 can be made out if “knowledge of it is brought home to him or his agents.” The kind of fraud based on knowledge here alleged to be imputed to the bank by reason of what is asserted to be Mr Reichman’s knowledge of the falsity of the assertion as to Miss Gerada’s presence would, in other circumstances, have been the very kind of fraud which ought to have been so imputed in that it did not involve acts which properly understood would have taken him outside the scope of his actual or apparent authority. It is not, however, necessary to reach any final conclusion on this aspect of the appeal. The answer to the case is that there was no such impropriety of a kind which should be charac-terised as fraud for the purpose of the Act for which the solicitor was either himself responsible or responsible indirectly by reason of the activities of his employee. There were not, in his knowledge or understanding of the transaction, those matters or factors which could fairly characterise his conduct as amounting to actual fraud of the kind coming within the exception to indefeasibility of the bank’s title given to it by reason of the provisions of the Transfer of Land Act. In turn, the bank could not be held responsible for any of the acts alleged against it. For these reasons I would also reject the argument that the bank had been guilty of “fraud” within the meaning of the Act. [5.180]

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Russo v Bendigo Bank cont. I would therefore dismiss the appeal. [Winneke P agreed with the judgment of Ormiston JA. Batt JA agreed that the false attestation of the mortgage document did not, in itself, constitute fraud within s 42 of the Transfer of Land Act 1958 (Vic). Batt JA took the view, however, that the fraud of an agent’s employee cannot be deemed the fraud of the agent or principal for the purpose of s 42(1): see [1999] 3 VR 376 at 391-393.]

[5.185]

Notes and Questions

1. The dividing line between notice of an earlier interest (does not constitute fraud) and knowledge of a fraud pursuant to which a person has been deprived of an interest (does constitute fraud) is often a difficult one to draw. Cases often turn on whether a person had sufficient knowledge such that he or she should have made further inquiries to avoid a finding of fraud. Is the person registering “guilty of wilful blindness or voluntary ignorance which according to the authorities is equivalent to actual knowledge and therefore amounts to fraud”? Waimiha Sawmilling Co (in liq) v Waione Timber Co Ltd [1923] NZLR 1137. Whilst this statement has been accepted in Australia (see, for example, Bahr v Nicolay (No 2) (1988) 164 CLR 604), recent Australian cases have made it clear that “personal dishonesty” or “moral turpitude” is necessary: see, for example, Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202; Russo v Bendigo Bank Ltd [1999] 3 VR 376; Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133; Young v Hoger [2001] Q ConvR 54-557; Davis v Williams (2003) 11 BPR 21,313 (NSWCA). For a discussion of these matters, see Hepburn, “Concepts of Equity and Indefeasibility in the Torrens System of Land Registration” (1995) 3 APLJ 41; Toomey, “Certainty of the Title in the Torrens System: Shifting Sands” (2000) 4 FJLR 235 at 236-239. 2. Are you convinced in Russo v Bendigo Bank Ltd [1999] 3 VR 376 by Ormiston JA’s distinction between “dishonesty” and “making a false statement”? Can you envisage any problems which may arise as a consequence of such a distinction? 3. Despite the decisions in the Pyramid and Russo cases, knowledge of an improper execution of a document presented for registration may constitute fraud. In Australian Guarantee Corporation Ltd v de Jager [1984] VR 483, employees of AGC knew that the documents had not been properly attested and they knew the consequences of forwarding such documentation to the Registrar. The presentation of the document to the Registrar constituted a deliberate misrepresentation that the document had been properly executed and was thus fraud. See also National Banking Corporation of Australia Ltd v Hedley (1984) NSW ConvR 55-211 and Hickey v Powershift Tractors Pty Ltd (1999) NSW ConvR 55-889. It is imperative, however, to show that there was knowledge either that a person would be deprived of an interest or that the Registrar would be misled: Russo v Bendigo Bank Ltd [1999] 3 VR 376; Young v Hoger [2001] Q ConvR 54-557; Davis v Williams (2003) 11 BPR 21,313 (NSWCA). In Queensland, the legislature has taken steps to ensure that the identity of particular participants in the conveyancing process is properly established: Land Title Act 1994 (Qld), ss 11A and 11B introduced in 2006, are designed to ensure that the mortgagee adopts particular practices in making certain that 326 [5.185]

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the mortgagor is identical with the person who is the registered proprietor. By s 9A, a Land Title practice manual is established and practices as to reasonable steps to be taken in this regard are set out. Encouragement to comply is provided in s 189(1)(ab) which provides that there is no entitlement to compensation from the assurance fund if the deprivation, loss or damage can be attributed to the person’s failure as mortgagee to take the steps required under s 11A or 11B. The introduction of electronic conveyancing systems may lessen the types of problems encountered in the current systems but other problems concerning identification may emerge: see O’Connor, “Information, Automation and the Conclusive Land Register” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 249-276. 4. Ormiston JA referred to a possibility of “accumulation or aggregation of matters or factors” in order to prove fraud. The question as to whether different elements of knowledge in a number of employees or officers of one entity can be combined to infer a dishonest state of mind has been considered in a number of cases. In what circumstances and in what manner is such aggregation permitted? See Australian Guarantee Corporation Ltd v de Jager [1984] VR 483 and Macquarie Bank Pty Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 extracted at [5.200] and [5.245] respectively. 5. In the Pyramid case, Hayne JA considered that Pyramid should have made inquiries concerning the execution of the mortgage and yet its failure to do so did not constitute “wilful blindness”. What further element needed to be proved in order to demonstrate the requisite “wilful blindness”? 6. Although the High Court in Bahr v Nicolay (No 2) and more recently in Bank of South Australia v Ferguson (1998) 192 CLR 248 (see [5.190]) made it clear that some forms of equitable fraud may fall within the statutory concept of fraud, a number of recent State Supreme Court decisions have reaffirmed that statutory fraud under the Torrens system requires some “personal dishonesty” by the registered proprietor. See Note 1 above.

Bank of South Australia Ltd v Ferguson [5.190] Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 High Court [Ferguson, the registered proprietor, borrowed money from the bank for the purpose of growing potatoes on his land. The loan was secured by a registered mortgage to the bank. The venture failed, Ferguson defaulted in his repayments and the bank sought possession. Ferguson argued (and was successful at first instance and in the Full Court of the South Australian Supreme Court) that the bank’s title was defeasible because of the bank’s fraud.] BRENNAN CJ, GAUDRON, MCHUGH, GUMMOW AND KIRBY JJ (footnotes omitted) By whichever path the matter be approached, it is apparent that the primary judge and the majority in the Full Court were in error in dismissing the Bank’s claims. As we have indicated, within the meaning of the Act, the Bank was the registered proprietor of the mortgage. In its terms, s 69I required identification of the rights and remedies which, as a person “defrauded”, Mr Ferguson would have had if the land were not under the provisions of the Act. The legislation thus recognises the principle, propounded in an established line of cases dealing with Torrens system legislation, that an equity arising from the conduct of a registered proprietor before or after registration may be enforced against that registered proprietor notwithstanding the indefeasibility of registered titles. [5.190]

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Bank of South Australia Ltd v Ferguson cont. Section 69I operates to qualify the general principle of indefeasibility only if the case answers the statutory description of “fraud”. Not all species of fraud which attract equitable remedies will amount to fraud in the statutory sense. The distinction may be illustrated as follows. In some circumstances, equity subjects the interest of a purchaser of unregistered land to an antecedent interest of which the purchaser has notice. However, in respect of land to which the Act applies, registration of a transfer is not fraudulent in the statutory sense required to qualify the operation of the doctrine of indefeasibility, merely because the transferee knows that registration will defeat an antecedent unregistered interest of which the transferee has notice. The points of significance for the present litigation are that (i) statutory fraud embraces less, not more, than the species of fraud which, at general law, founds the rescission of a conveyance; and (ii) statutory fraud is not itself directly generative of legal rights and obligations, its role being to qualify the operation of the doctrine of indefeasibility upon what would have been the rights and remedies of the complainant if the land in question were held under unregistered title. With that in mind, we turn to the salient facts. In 1990, the manager of the Penola branch of the Bank, Mr McMellon, had discussed with Mr Ferguson the possibility of his growing potatoes for supply to a factory for the production of potato chips. This was to be established in the Penola district by a corporation known as “SAFRIES”. Mr Ferguson had previously run cattle and sheep on his property. He made some inquiries and had further discussion with Mr McMellon. Mr McMellon prepared and gave to Mr Ferguson certain bank forms identified by the primary judge as “cash flow documents”. These were completed by Mr Ferguson and returned, together with a “potato budget” prepared by him. Mr McMellon then prepared a document described as a “Statement of Position” (Ex D3), using a bank form which had not been supplied to Mr Ferguson. Mr McMellon forged the signature of Mr Ferguson to that document and forwarded it, together with other documents, to the regional office of the Bank for consideration of approval of the loan. At this stage, Mr McMellon was dismissed. Mr Towner took over from Mr McMellon at the Penola branch and had a meeting with Mr Ferguson. Mr Towner made some pencil notes on the documents which had been returned to him by the regional office. He also discussed with Mr Ferguson the value of the land which was to be used to provide security for the advances sought by Mr Ferguson. Mr Ferguson put the value of the land at $420-$450 per acre, giving a total value of between $520,000 and $577,000, but Mr Towner suggested a value of $900 per acre, giving a total value of $944,100. Mr Ferguson thought this was too high. Mr Towner resubmitted the documents to the regional office supported by a valuation (Ex D5) which indicated a land value of $900 per acre. Exhibit D5 was not prepared on advice or information supplied by Mr Ferguson. Mr Ferguson executed the mortgage on about 5 September 1990 and signed his acceptance of the facility letter prepared by the Bank and dated 10 September 1990. This detailed the accommodation to be provided by the Bank and secured by the mortgage. At this stage, both Mr Ferguson and Mr Towner were unaware of the forged signature to the statement of position. Further, Mr Ferguson was unaware of the pencil alterations made by Mr Towner and believed the secured assets to have a value of between $520,000 and $577,000, not the $944,100 stated in Ex D5. The primary judge held that the forgery of Mr Ferguson’s signature to Ex D3 “was operative” and that it led to the Bank accepting the application to grant Mr Ferguson a loan on the security of a mortgage to be granted by him over his land. His Honour said: I am satisfied on the facts of this case and make a finding that the actions of the [Bank’s] manager had the effect of initial fraud in the first application made by Mr McMellon with the subsequent actions resulting in [Mr Ferguson] being defrauded by his execution of the memorandum of mortgage and acceptance of the facility offer on a false premise. 328 [5.190]

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Bank of South Australia Ltd v Ferguson cont. The result, his Honour found, was that Mr Ferguson was a “defrauded person” within the meaning of s 69I so that he was entitled “to such rights at law or equity as [he] may have on an unregistered mortgage, including any rights or liabilities in contract”. Mr Ferguson had also challenged the existence of the indebtedness secured by the mortgage. The primary judge concluded that the Bank and Mr Ferguson “were not ad idem when the mortgage was executed and the facility offer was accepted”. This was by reason of the fraud associated with Ex D3 and the revision, without Mr Ferguson’s knowledge or agreement, of the valuation of the land. The result was held to be that the Bank could not enforce the obligations under the contract of loan, the performance of which was secured by the mortgage. In the Full Court, Millhouse J (with whom Bollen J agreed) accepted the submission by Mr Ferguson that the “broad picture” (consisting of “the forged signature, the alteration of documents … the increase in the estimate of the value of [Mr Ferguson’s] property”) showed “fraud on the part of the [B]ank”. In his dissenting judgment in the Full Court, Matheson J emphasised that whilst, as a result of Mr Towner’s valuation, the Bank perhaps had been under the mistaken impression that the land was worth $944,100 and whilst Mr Ferguson believed it to be worth between $520,000 and $577,000, no expert evidence had been led by either party to prove the actual value of the land. The value of the land was not a term of the mortgage or of the facility letter. Nor had it been established that in executing the mortgage Mr Ferguson had been under a serious mistake about its contents in relation to a fundamental term. His Honour concluded, in our view correctly, that there had been nothing to prevent a consensus ad idem. Nor, in making his pencil alterations, had Mr Towner fraudulently altered or used any documents. No alteration increased the liability of Mr Ferguson or injuriously affected his legal obligations. With respect to the findings of fraud in relation to Ex D3, Matheson J correctly observed that, for fraud to be operative, it must operate on the mind of the person said to have been defrauded and to have induced detrimental action by that person. This was not the case with Ex D3. Nor had Mr Ferguson given evidence that the contents of Ex D3 were inaccurate or otherwise adverse to his interests. His Honour concluded that Ex D3 was not prepared for, and was not used for the purpose of, and did not have the effect of, harming, cheating or otherwise being dishonest to Mr Ferguson. The statement of position was an internal record only. No one in the Bank, including Mr Towner, had apparently known of the forged signature until it was discovered by Mr Towner in the office of the Bank’s instructing solicitors shortly before he gave evidence at the trial. Exhibit D3 had not deliberately been withheld from Mr Ferguson. Matheson J said: [Mr Ferguson] did not give evidence that he was misled as a consequence of the forging by McMellon of his signature on the statement of position (D3), or that he was induced in any way to do anything by his knowledge or lack of knowledge of that forged signature or the preparation of D3. The forging of his signature was clearly dishonest, and is in no way to be condoned, but I am not persuaded that it had any operative effect upon the decision of [Mr Ferguson] to grant the mortgage or to sign the facility agreement. The forgery was probably designed to speed up the process within the [B]ank. I am not persuaded that there was any intention to defraud [Mr Ferguson]. It is simply not correct to say that McMellon forged [Mr Ferguson’s] signature on D3 to bind [Mr Ferguson] to obligations to the [Bank] and to give security over the said land. In his judgment, Matheson J correctly represented the position. It follows that there is no proper footing for any conclusion that the moneys secured by the mortgage had not been due and owing but unpaid or that the mortgage was liable to be set aside by reason of fraud practised upon Mr Ferguson by the Bank, still less that the mortgage was “void”. Further, even if a case for rescission had been made out, there appears from the facts to have been no reason to deny the application of the [5.190]

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Bank of South Australia Ltd v Ferguson cont. requirement of restitutio in integrum. It is scarcely to be supposed that the land might be relieved of the burden imposed by the registered security and the creditor be left not only unsecured but with an irrecoverable loan. It follows that in this Court the Bank succeeds in its appeal.

Note

[5.195]

See Unic v Quartermain Holdings Pty Ltd [2002] 2 Qd R 660 where Wilson J reiterated the view that in order for fraud to exist in this context, the fraud must operate on the mind of the person said to be defrauded.

Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [5.200] Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 Court of Appeal [A mortgage from Sixty-Fourth Throne Pty Ltd (a trustee company) to Macquarie Bank Ltd was executed. The mortgage was to provide security for a guarantee by the mortgagor of a loan from Macquarie Bank to one Michael Kandy. The guarantee and the mortgage were forgeries. The affixing of the seal and its attestation were undertaken by Michael Kandy and his wife and were unauthorised by Sixty-Fourth Throne. Macquarie Bank undertook a company search of the mortgagor company but did not check the attesting signatures against it. Macquarie Bank knew that the mortgagor was a trustee company and that Michael Kandy did not “own” it. The mortgage was registered and subsequently the mortgagor sought to have the mortgage set aside on the basis that the mortgagee’s title was defeasible because of fraud or alternatively as result of the application of the in personam exception.] TADGELL JA: … Fraud The judge [Hedigan J] declined to and fraud on the part of the appellant for the essential reason that he was not satisfied by the evidence that the appellant had acted dishonestly. In forming his conclusion by reference to that criterion his Honour was unquestionably correct. It is clear beyond argument that “actual fraud, personal dishonesty or moral turpitude lie at the heart of” ss 42, 43 and 44 of the Transfer of Land Act: for example, Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 614, per Mason CJ and Dawson J. Their Honours there referred to part of the oft-cited opinion of Lord Lindley, speaking for the Judicial Committee in Assets Co Ltd v Mere Roihi [1905] AC 176 at 210 that: … by fraud in these [Torrens title] Acts is meant actual fraud – that is, dishonesty of some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud … Mason CJ and Dawson J, in their joint judgment, noted that the authorities do not go so far as to say that all species of equitable fraud stand outside the statutory concept. Deceit need not be shown: an underhand scheme designed to cheat another may be fraudulent towards that other although involving neither representation to nor direct dealing with him. … Lodgment of the mortgage for registration by the appellant with actual knowledge by its servants or agents of the forgery, or lodgment for registration in ignorance of the forgery that was attributable only to wilful blindness or wilful and reckless failure to enquire, in the sense I have mentioned, would 330 [5.195]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. be fraud or akin to it. There is no suggestion, however, that the appellant or any of its servants or agents had actual knowledge before the mortgage was lodged for registration, or indeed before it was registered, of the forgery. An argument put on the appeal but not below was to this effect: that, when determining whether the appellant had been fraudulent, it is permissible to aggregate the knowledge of its individual officers and to impute the sum of it to the corporation in order to establish fraud on the part of the corporation, even though no servant or agent was aware of the forgery or of the facts which ought to have disclosed it. Here, it was submitted that knowledge of the appellant’s officers, particularly Papadopoulos and Munro, and of its solicitors, particularly Tomlinson and Vladeta, was such that, having between them had the means of ascertaining that unauthorised persons attested the affixing of the seal, knowledge of that fact should be imputed to the appellant. Reliance was placed on Re Chisum Services Pty Ltd (1982) 7 ACLR 641, a case of an alleged preferential payment by an insolvent company to the Bank of New South Wales. A question was whether the bank had knowledge that the debtor company was insolvent at the time of the payment. A submission was made for the liquidator that information held by an officer at the head office of the bank and information held by the manager of a branch, each piece of information being insufficient to provide reason to suspect insolvency, might be aggregated to fix the bank with knowledge. I do not think that the case helps the respondent here. Although the bank failed, it was not on the basis of an aggregation of knowledge for, as Wootten J held at ACLR 650: … the reality is that there is no “super mind” identified with the legal personality of the bank, in which the knowledge of various officers can in fact be aggregated for the purpose of reaching a conclusion as to whether the bank acted in good faith. It is not reasonable to assume that something has happened which cannot happen. The respondent also relied on the recent decision of the High Court in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583, where it was said that: A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them. That passage, so it was said on behalf of the respondent, authorises the aggregation of all the knowledge of officers of a corporation in order to determine a fraudulent state of mind of the corporation. The answering submission by counsel for the appellant is in my opinion correct. Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons – including what may properly be inferred – in order to ascertain the mind of the corporation. The argument for the respondent in reliance on Krakowski should therefore be rejected. … There was, in my opinion, no evidence to support a finding of wilful blindness in the sense in which that expression is commonly used in order to indicate a form of cognisance which law and equity alike equate to subjective knowledge from which dishonesty may be inferred. I understand the expression to connote more than a failure to see or look: the adjective is to be given its due value. The compound expression connotes a concealment, deliberately and by pretence, from oneself – a dissembling or dissimulation. In other words wilful blindness connotes a form of designed or calculated ignorance, of which none on the part of the appellant or its agents was proved. That being so, and there being no evidence that the appellant, through any servant or agent, had actual knowledge of the forgery before the mortgage’s registration, a finding of fraud cannot be sustained. [5.200]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. [The in personam claim is considered below at [5.245].

Fraud by agents and employees

Cassegrain v Gerard Cassegrain & Co Pty Ltd [5.203] Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2 [Gerard Cassegrain & Co Pty Ltd were the registered proprietors of Torrens title land. Claude Cassegrain, in breach of his duties as a director of that company caused that land to be transferred to him and his wife, Felicity (the first transfer). Subsequent to this, Claude Cassegrain transferred his interest, for nominal consideration, as co-owner to Felicity (the second transfer). There was no allegation that Felicity knew of the fraud of her husband. The New South Wales Court of Appeal held that Felicity’s title was defeasible either because her husband acted as her agent, or due to the operation of joint tenancy. The High Court allowed the appeal, in part, by Felicity. Her title was not indefeasible due to the actions of Claude – he had not acted as her agent. However, the second transfer could be challenged as she was not a bona fide purchaser for value. [per French CJ, Hayne, Bell and Gageler JJ (footnotes omitted) Torrens title 16 Legislation implementing the Torrens system of land title is not uniform throughout Australia. Care must always be taken, therefore, to consider and apply the particular statute which is engaged. But a central and informing tenet of the Torrens system is that it is a system of title by registration, not a system of registration of title. The title which a registered proprietor has “is not historical or derivative. It is the title which registration itself has vested in the proprietor”. 17 The title of a registered proprietor is not absolutely indefeasible. The RPA, like all versions of the Torrens legislation, provides for circumstances in which a registered title may be defeated or qualified. This case concerns the ambit of the “fraud” exceptions in ss 42(1) and 118(1). 18 Section 42(1) provides that the estate of a registered proprietor is paramount. It provides that, subject to some exceptions which are not relevant to this case: Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register 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. (emphasis added). 19 Section 118(1) provides that: Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows: (d) brought by a person deprived of land by fraud against: (i) a person who has been registered as proprietor of the land through fraud, or (ii) a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud. Because GC&Co transferred the land to Claude and Felicity as joint tenants, it will also be necessary to consider s 100(1) of the RPA. It provides that: 332 [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. Two or more persons who may be registered as joint proprietors of an estate or interest in land under the provisions of this Act, shall be deemed to be entitled to the same as joint tenants. …Agency 32 Much attention was given in argument, both in this Court and in the Court of Appeal, to whether Claude Cassegrain was Felicity’s “agent”. The framing of argument in this way can be traced to the decision of the Privy Council in Assets Company Ltd v Mere Roihi and the well known statement of Lord Lindley that: the fraud which must be proved in order to invalidate the title of a registered purchaser for value ... must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. (emphasis added). Thus much of the argument was framed in terms of whether fraud was “brought home” to Felicity because Claude was fraudulent and was her “agent”. 33 In the present case, Beazley P found that there was sufficient evidence to infer that “Claude was Felicity’s agent for the purposes of directing Mr McCarron [the solicitor] to register the first transfer”. And her Honour held that the consequence of that conclusion was that “the title that Felicity took as registered proprietor jointly with Claude was defeasible as a result of the fraud of her agent”. Likewise, her Honour found that “the probabilities are that Claude acted as [Felicity’s] agent in respect of the second transfer” and that her title as sole registered proprietor was affected by his fraud. 34 Macfarlan JA agreed with Beazley P that Claude acted as Felicity’s agent with respect to the first transfer. But Macfarlan JA rested his conclusion that Felicity’s subsequently acquired interest as sole registered proprietor was defeasible on the footing that, having been registered as a joint tenant through fraud, she “did not shed her (imputed) fraudulent knowledge and character by taking a transfer from her co tenant in whose fraud she was deemed to have participated”. 35 By contrast, Basten JA held that it should not be inferred that Claude acted as Felicity’s agent for the purposes of the transaction which led to their registration as joint tenants. But his Honour held that Claude obtained his title as joint tenant through fraud and that, because Felicity was not a transferee of Claude’s interest bona fide for valuable consideration, GC&Co was entitled to an order that she transfer a half share in the Dairy Farm to it. 36 It has long been recognised that “[n]o word is more commonly and constantly abused than the word ‘agent’”. Close attention, therefore, must be given to what is meant when it is said that Claude Cassegrain was Felicity’s “agent”. 37 At least for the most part, the word “agent” appears to have been used in the Court of Appeal as a term explaining how events happened rather than as a term attributing legal responsibility for those events. The relevant question was treated as one of fact. That is, what inference should be drawn about how and why the registration of a transfer to Claude and Felicity as joint tenants came about? Or, can it be inferred that Felicity knew that Claude was arranging for the transfer of the Dairy Farm to them both as joint tenants? And because the question seems to have been treated as one of fact, reference was made to Blatch v Archer and the proposition that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”. 38 It is important, however, to keep at the forefront of consideration that GC&Co did not allege, and the courts below did not find, that Felicity knew of Claude’s fraudulent conduct. Yet the conclusion that Claude was Felicity’s “agent” was treated by the majority in the Court of Appeal as a sufficient basis for concluding that the fraud exception provided by s 42(1) of the RPA applied and that her title as registered proprietor was defeasible. That is, what was seen as a factual inquiry about whether Claude brought about the transfer to Claude and Felicity as joint tenants with her knowledge (but [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. without her knowing of the fraud) was treated as concluding the legal issue presented by s 42(1). But why that step should be taken was not explained. Rather, the word “agent” was used as a statement of conclusion. And, as has been said in a closely related context, using a word like “agent” is to begin, not end, the relevant inquiry. 39 In Clements v Ellis, Dixon J examined the decision in Assets Company in great detail. But what Lord Lindley meant by his reference to “agents” was not explored then or in later decisions of this Court. It may be thought that the reference to “agents” was intended to do no more than refer to those natural persons through whom the corporation, Assets Company Limited, had acted in acquiring the registered title that it did. That understanding of the reference would be consistent with the discussion of the issue in the Court of Appeal of New Zealand in one of the several cases which were the subject of the consolidated appeals to the Privy Council, but it is not an understanding that would exhaust the meaning given to the dictum, at least inferentially, in later cases. It may also be thought that the reference reflected a view of “deferred” indefeasibility consistent with Gibbs v Messer, but that understanding would not sit easily with what was later said in Frazer v Walker about Assets Company. 40 Instead, the reference to fraud “brought home to the person whose registered title is impeached or to his agents” should be understood, as it was by Street J in Schultz v Corwill Properties Pty Ltd, as posing, in the case of an agent, questions about scope of authority and whether the agent’s knowledge of the fraud is to be imputed to the principal. 41 In the present case, those questions required consideration of why Claude’s knowledge of his fraud should be imputed to Felicity. Concluding that Claude had taken the steps necessary to procure registration of the transfer from the company to Felicity and him as joint tenants showed no more than that Claude had performed tasks that were of advantage to Felicity. It was neither alleged nor found that Claude had acted as Felicity’s agent in any other way, whether by negotiating the transaction with GC&Co or by representing that the price for the land could be met by debiting the loan account. So far as the evidence and argument went, Felicity was no more than the passive recipient of an interest in land which her husband had agreed to buy, but which he wanted (with her acquiescence) put into their joint names. 42 Without more, the conclusion that Claude had taken the steps necessary to procure registration of the transfer from the company to Felicity and him as joint tenants did not show that his fraud was within the scope of any authority she had, or appeared to have, given to him. Without more, it did not show that knowledge of his fraud was to be imputed (in the sense of “brought home”) to her. And in this case, there was nothing more identified, whether in argument or in the reasons of the Court of Appeal. 43 Did her registration as joint tenant bridge that gap? Joint tenancy 44 In the Court of Appeal, Beazley P held that, even if the title which Felicity had held jointly with Claude was defeasible, it did not follow that the title she took on registration of the transfer of Claude’s interest to her was. There was, in her Honour’s view, “no relevant fraud of which Felicity had knowledge such as to impugn her indefeasible title as the sole joint tenant”. By contrast, as already noted, Macfarlan JA held that “Felicity was infected with Claude’s fraud because she and Claude took title from [GC&Co as joint tenants ... [and] joint tenants are treated by the law as in effect one person only” (emphasis added). Basten JA held that it was “preferable in principle to treat the shares of the joint tenants, holding title under the [RPA], prior to any severance, as differentially affected by the fraud of one, to which the other was not party”. 45 The conclusion reached by Basten JA is right. As his Honour said, “[t]he contrary view would impute fraud to a party who was not herself fraudulent”. That observation is reason enough to reject the 334 [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. contrary view. But it is important to demonstrate that the contrary view cannot be supported by general assertions that “the law” treats joint tenants as “in effect” one person. That demonstration must begin in the text of the RPA. 46 Section 100 of the RPA provides for registration as co tenants. Sub sections (2) and (3) deal with proprietors of a life estate and an estate in remainder, and with tenants in common. Their detail need not be noticed. Section 100(1) provides that two or more persons registered as joint proprietors of an estate or interest in land “shall be deemed to be entitled to the same as joint tenants”. What is the effect of the deeming? That question requires reference to some aspects of the general law of real property. 47 In Wright v Gibbons, Dixon J described joint tenancy as “a form of ownership bearing many traces of the scholasticism of the times in which its principles were developed”. And as his Honour’s discussion of the writers shows, the “pedantic, needlessly subtle” thinking of that time was often compressed into maxims: especially “nihil tenet et totum tenet” (he holds nothing and he holds the whole) and “per my et per tout” (for nothing and for everything). But, as Wright v Gibbons demonstrates, those maxims cannot and must not be treated as constituting a complete or wholly accurate description of the legal nature of a joint tenancy. 48 The hinge about which the reasoning of Dixon J turned in Wright v Gibbons was that the maxims (and similar statements by later writers to the effect that joint tenants are “considered by the law as one person for most purposes”) cannot be taken as the premise for deductive reasoning about the effect of a joint tenancy. As Dixon J pointed out, by reference to Coke on Littleton, “[f]or purposes of alienation each [joint tenant] is conceived as entitled to dispose of an aliquot share”. That is because, as Dixon J also said: Logical as may seem the deduction that joint tenants have not interests which in contemplation of law are sufficiently distinct to assure mutually one to another, there are many considerations which show that, to say the least, the consequence cannot be called an unqualified truth. The fact is that the principle upon which the deduction is based must itself be very much qualified. (emphasis added). Only by recognising the necessity to qualify those statements of principle is it possible to account for the cases of forfeiture suffered by, and execution against, one of several joint tenants referred to by Dixon J. 49 Once qualifications of the principle that joint tenants are “considered by the law as one person for most purposes” are admitted to be necessary, bare statement of the principle cannot stand as a premise for deductive argument. It certainly provides no sufficient premise from which a deduction can be drawn about the operation of relevant provisions of the RPA with respect to “[t]wo or more persons who may be registered as joint proprietors of an estate or interest in land under the provisions of [that] Act”. Even under the general law of real property, the deeming which is worked by s 100(1) would not entail that those registered as joint tenants are to be treated for all purposes as though they were the one person. 50 Like so many maxims, great care must be used lest “nihil tenet et totum tenet” or “per my et per tout” be used only as slogans stating an asserted conclusion. But in the present case, particular care must be exercised in applying maxims of the kind described. The issue in this case arises, and can only arise, in the context of a statutory system for title by registration. Questions of indefeasibility of registered title simply do not arise in the general law of real property. And no analogy can usefully be drawn between the issue that must be decided in this case and any issue that can arise in the general law of real property. 51 It is wrong, therefore, to begin the inquiry about the application of the fraud exceptions to ss 42(1) and 118(1) by asking what would follow from the “captivating appearance of symmetry and [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. exactness” of the four unities (of interest, title, time and possession) necessary for the creation of a joint tenancy under the general law of real property. An inquiry of that kind, adverted to by Macfarlan JA, is directed to the nature of the title which a joint tenant would acquire under the general law. 52 It is also wrong to begin by asking only what consequences can be said to follow from s 100(1) of the RPA and its provision that persons registered as joint proprietors “shall be deemed to be entitled to the [relevant estate or interest] as joint tenants”. Instead, the question is how that provision intersects with the provisions of s 42. More particularly, does the deeming effected by s 100(1) require that the fraud of one of the persons registered as joint proprietors denies all those persons the protection otherwise given by s 42(1)? 53 To hold that the deeming effected by s 100(1) denies all persons registered as joint proprietors the protection otherwise given by s 42(1) when one of their number has been guilty of fraud would constitute a significant departure from the accepted principle that actual fraud must be brought home to the person whose title is impeached. Both s 100(1) and s 42(1) take their place in an Act providing for title by registration, not registration of title. Both sections are directed to the consequences of registration and focus upon the position of the registered proprietor, not title in the abstract. Section 42(1) provides that the registered proprietor “shall, except in case of fraud, hold the [relevant estate or interest]” subject to registered interests but otherwise absolutely free from all other interests except those identified in s 42(1)(a)-(d). Section 100(1) provides that persons registered as joint proprietors “shall be deemed to be entitled to the same as joint tenants”. The question here is whether a title acquired by registration is defeasible. 54 No light is shed on that issue by asking what title GC&Co lost as a result of the fraud. The relevant question is whether the title of a registered proprietor is defeasible, not what loss the company suffered as a result of the fraud. Thus, observing that GC&Co was deprived of the whole of its interest in the land by Claude’s fraud is right but irrelevant. And no light is shed on the issue by asking what would have happened if Claude had died before he transferred his interest in the land to Felicity. In particular, noting that, if Claude had died before the second transfer, Felicity would have been entitled to registration under s 101 of the RPA as the surviving joint tenant says nothing about whether, before registration of a survivorship application, her title as joint tenant was defeasible on account of Claude’s fraud. 55 Felicity’s title as joint tenant of the Dairy Farm was not defeasible by showing that Claude had acted fraudulently to deprive GC&Co of its land. His fraud was not brought home to Felicity. Because his fraud was not brought home to her, her title as joint tenant was indefeasible. 56 In light of these conclusions, there is no need to consider GC&Co’s notice of contention. The grounds advanced in that notice were premised on Claude being found to have been Felicity’s agent. 57 There remains for consideration the operation of s 118. Section 118 of the RPA 58 It will be recalled that the primary judge held that, although Felicity derived her title as sole registered proprietor through Claude, and not as a transferee of his interest for valuable consideration, s 118(1)(d) did not apply because Claude was not registered as proprietor of the land through fraud. It will further be recalled that the primary judge treated s 118(1)(d)(ii) as dealing only with “the process by which registration as proprietor” is achieved, a subject said to be narrower and more specific than the fraud exception to s 42(1). 59 All members of the Court of Appeal rightly rejected this interpretation of s 118(1)(d)(ii). Neither s 118 generally nor s 118(1)(d)(ii) in particular should be read as directed only to fraud in the process of registration. Exactly what would fall within fraud “in the process” of registration may be open to debate. But it is not a debate that need be had, because s 118 should be construed in a way which is 336 [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. consonant with the operation of s 42(1). In particular, s 118 must not be read in a way which would preclude action to recover the land in a case where the fraud exception to s 42(1) applies. Hence, the reference in s 118(1)(d)(i) to proceedings brought by a person deprived of land by fraud against a person who has been registered as proprietor of the land through fraud must be read as embracing every kind of fraud which falls within the relevant exception to s 42(1). If actual fraud is brought home to the registered proprietor, s 118(1)(d)(i) is engaged and the general bar to proceedings for the possession or recovery of land against that registered proprietor is lifted. 60 Conversely, but equally importantly, if the fraud exception to s 42(1) does not apply to the person who is registered as proprietor, the general bar to proceedings for the possession or recovery of land against the registered proprietor will apply and the exception provided by s 118(1)(d)(i) will not be engaged. That is, the exception for which s 118(1)(d)(i) provides does not diminish the protection given by s 42(1). It does not enlarge the rights which a person deprived of land by fraud has against the registered proprietor. 61 By contrast, the exception provided by s 118(1)(d)(ii) does enlarge the rights which a person deprived of land by fraud has against a registered proprietor. Unless the registered proprietor is a transferee bona fide for valuable consideration, a person deprived of land by fraud may bring proceedings for the possession or recovery of the land against a person deriving from or through a person registered as proprietor of the land through fraud. But as with s 118(1)(d)(i), the expression “registered as proprietor of the land through fraud” must be read in a manner consonant with s 42(1). 62 Hence, in the present case, Claude, but not Felicity, was registered as proprietor of (an interest in) the land (as joint tenant) through fraud. By the second transfer, Felicity derived from or through Claude an interest as tenant in common as to half. Felicity derived that interest from or through a person registered as proprietor of (an interest in) the land (as joint tenant) through fraud. Felicity was not a transferee of the interest for valuable consideration. Section 118(1)(d)(ii) is thus engaged. Proceedings brought by GC&Co (as a person deprived of the land by fraud) for the recovery of that interest in the land (as tenant in common as to half) lie against Felicity. Conclusion and orders 63 Felicity’s title as joint tenant was not defeasible on account of Claude’s fraud. Claude was not her “agent” in any relevant sense. Nor did it follow from Felicity’s registration as joint tenant that her title was defeasible. Section 100(1) does not require that the fraud of one of the persons registered as joint proprietors denies all those persons the protection otherwise given by s 42(1). The fraud must be brought home to the person whose title is impeached. Claude’s fraud was not brought home to Felicity. 64 But the interest which Felicity derived from or through Claude (an interest as tenant in common as to half) may be recovered by GC&Co Felicity was not a bona fide purchaser for value of Claude’s interest in the land. 65 For these reasons the appeal to this Court should be allowed and there should be orders in the form proposed by Basten JA in the Court of Appeal and sought in this Court by Felicity Cassegrain if her appeal succeeded to the extent these reasons would allow. Orders 2 and 3 of the Court of Appeal of the Supreme Court of New South Wales made on 18 December 2013 should be set aside and, in their place, there should be (a) a declaration that Felicity Cassegrain holds a half interest in the property described in Folio Identifiers 4/792413, 1/798316, 115/754434, 124/754434, 2/720827, 117/ 754434, 118/754434 and 174/754434 on trust for Gerard Cassegrain & Co Pty Ltd absolutely; and (b) an order that Felicity Cassegrain execute a Real Property Act transfer of a one half interest in the property referred to in par (a) to Gerard Cassegrain & Co Pty Ltd. Although the appellant has had only [5.203]

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Cassegrain v Gerard Cassegrain & Co Pty Ltd cont. limited success in her appeal to this Court, she should have her costs of the appeal.

Schultz v Corwill Properties Pty Ltd [5.205] Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576 [Corwill Properties was the registered proprietor of land. Galea, a solicitor acting for both parties in the dispute, forged a mortgage over the property in favour of Schultz. This mortgage was registered, but Galea fraudulently induced Schultz to execute a discharge. This discharge was registered. Schultz claimed that the mortgage, having been registered, was indefeasible. Corwill Properties claimed that the discharge was indefeasible.] STREET J: … I turn, then, to a consideration of whether or not it is open to the parties to go behind the prima facie indefeasible title disclosed on the face of the register. The plaintiff, for his part, claims that the mortgage, having been registered, is indefeasible; the defendant, for its part, claims that the discharge having been registered, the consequent clearing of its title is indefeasible. Both parties seek to go behind the face of the register in challenging the dealing purporting to give rise to an interest adverse to their respective interests. The relevant basis upon which the parties seek in turn to do this is that the dealing in question was tainted by fraud. … For the purposes of s 42, however, a forgery is to be regarded as a fraud. At 211 of their judgment in Assets Co Ltd v Mere Roihi their Lordships said: “… forgery is more than fraud, and gives rise to considerations peculiar to itself.” But the greater includes the lesser. It follows, therefore, that for the purposes of s 42 a forgery is a fraud just as is an act falling within the ordinary meaning of that word. The essential question which must be determined in respect of the grant of the mortgage and its discharge respectively is whether the fraud associated therewith can be “… brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents.” In this extract from their judgment their Lordships encompass two alternative situations. The first is one in which the fraud is actually committed by (“brought home to”) the person whose title is impeached or his agent. And the second is one in which he or his agents have knowledge that a fraud has been committed whereby the previous registered proprietor is being deprived of some or all of his interests. Each of these two concepts is capable of being applied in accordance with settled principles of law. The first, namely fraud on the part of the person whose title is impeached or his agents, involves the application of the ordinary principles governing the responsibility of a principal for the fraud of his agent. If the fraud in question is the immediate act of the person whose title is impeached, then the position is not open to doubt. If, however, the fraud is that of an agent for the person whose title is impeached, the principle of respondeat superior, with all its limitations and qualifications, is applicable. The matter is to be tested by investigating whether or not the principal is, in the particular circumstances under consider-ation, liable to the person who has been defrauded for the acts of the agent. On this topic one need not delve more deeply than the general statement in Bowstead on Agency, 13th ed, p 242: “An act of an agent within the scope of his actual or apparent authority does not cease to bind his principal merely because the agent was acting fraudulently and in furtherance of his own interests. This principle is general, applicable to cases of actual and apparent authority; in tort; in the disposition of property; a similar result even appears in criminal cases. But the mere fact that the principal, by appointing an agent, gives that agent the opportunity to steal or otherwise behave fraudulently does not without more make him liable: the agent must normally be acting within the scope of his actual or apparent authority for the principal to be responsible.” 338 [5.205]

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Schultz v Corwill Properties Pty Ltd cont. The second situation contemplated by the Privy Council in connection with the invalidating effect of fraud is one which involves the person whose title is impeached or his agents having knowledge of the presence of a fraud in the transaction under investigation. In this instance considerations of respondeat superior do not arise: it is knowledge that a fraud has been committed by someone for whom he is not responsible that exposes the title of the registered proprietor to challenge. Such knowledge in the registered proprietor, if existing in him prior to the consummation of the transaction under investigation, is squarely within the exception of fraud in s 42 to which their Lordships referred. The Privy Council have, however, also left open, as a basis for going behind the register, knowledge on the part of the agents of the registered proprietor that fraud has tainted the transaction from which the registered title is about to derive. But (and here I acknowledge that I am putting a gloss upon the words used by the Privy Council), the mere fact that the existence of a fraud is known to an individual who is, in the transaction under consideration, the agent for some purposes of the person whose title is impeached will not of itself affect the indefeasibility of the title when registered. It is not enough simply to have a principal, a man who is acting as his agent, and knowledge in that man of the presence of a fraud. There must be the additional circumstance that the agent’s knowledge of the fraud is to be imputed to his principal. This approach is necessary in order to give full recognition to (a) the requirement that there must be a real, as distinct from a hypothetical or constructive, involvement in the fraud by the person whose title is impeached, and (b) the extension allowed by the Privy Council that the exception of fraud under s 42 can be made out if “knowledge of it is brought home to him or his agents”. This line of reasoning takes one into the well-known field of vendor and purchaser law dealing with the effect on a purchaser of notice of defects in his vendor’s title. Considerations of constructive notice are to be placed aside as not meeting the requirement of knowledge of fraud. If one finds knowledge in the person whose title is impeached, then that meets the requirements of the passage I have quoted from the judgment of the Privy Council. And if one finds, not express knowledge in the principal, but express knowledge in his agent such that, within settled principles, that express knowledge is to be imputed to the principal, that is to say, the person whose title is impeached, then that also will fall within the exception enunciated by the Privy Council. Although the Privy Council has advisedly, as it seems to me, used the word “knowledge” and not the word “notice”, the ordinary principles of vendor and purchaser law relating to the imputation of notice to the purchaser will equally cover the imputation of knowledge for presently relevant purposes. The principle of imputed notice is stated in Williams on Vendor and Purchaser, 4th ed, p 306, in the following terms: “the rule that a purchaser is affected by notice to his counsel, solicitor or other agent, seems to rest on this ground: When a man employs such agents to transact his business he holds them out to the world as standing in his own place and representing himself; in fact, as being identical, for the purposes of the business which he has authorised them to transact, with his own person. He must therefore accept this representation of himself by another, which is the consequence of his own act in employing an agent, as complete for all the purposes of such business, and cannot justly be permitted to sever the identity of person created by him as to repudiate notice or knowledge given to or acquired by the agent, but not in fact communicated to the principal. It is therefore said that, where the relation of principal and agent and the duty of the agent to communicate any matter to the principal have been established, an irrebuttable presumption arises that the agent communicated the matter to the principal; hence evidence is not admissible to prove that the agent did not in fact communicate his knowledge to the principal.” To this rule there is an important exception that has particular relevance to the present case. This exception is stated by Williams immediately following the passage I have just quoted, namely: “The rule is, however, subject to the exception that, if that matter, of which it is sought to affect the principal with notice, is the agent’s own fraud or fraudulent dealing or some equity thereout, or if the agent during the time of his employment as such, and when he acquired the information in [5.205]

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Schultz v Corwill Properties Pty Ltd cont. question, was a party to a scheme of fraud, then the principal is permitted to give evidence to rebut the above presumption and prove his ignorance of the matter; for the supposition that the agent communicated his fraud to the principal is too improbable to be entertained even by a court of equity.” It is in accordance with these principles governing involvement in fraud and knowledge of fraud that in the present case the validity of the mortgage and the discharge fall for decision. I turn, accordingly, to examine the facts surrounding each and to test those facts in the light of these principles. I have already stated my finding that the mortgage was a forgery, the forgery having been committed by Clive Galea, who was at the time the solicitor for Mrs Schultz, the mortgagee. It is clear that Mrs Schultz did not in any way participate in this forgery, or fraud, or have any express knowledge of it. The two questions that arise, therefore, are whether Clive Galea’s fraudulent activities can be “brought home to” Mrs Schultz within the principle of respondeat superior, and whether Clive Galea had, in his capacity as solicitor for Mrs Schultz, knowledge of the forgery in such circumstances that knowledge of it is to be imputed to Mrs Schultz. It is not necessary on either of these two questions to go beyond the general principles I have quoted from the text-books. It was obviously not within Clive Galea’s actual or apparent authority to forge the defendant’s execution of the memorandum of mortgage. He was instructed by Mrs Schultz to act on her behalf in obtaining from the company and registering a valid memorandum of mortgage, providing her with a safe security for the investment of her money. In one sense, perhaps, he forged the defendant’s execution in order to enable him to place on the title a registered mortgage enuring for the benefit of Mrs Schultz. The situation might be likened to his having stolen the mortgage for Mrs Schultz’s benefit. But on ordinary principles of principal and agent Mrs Schultz does not thereby become answerable to the defendant for Clive Galea’s forgery. It was not within the scope of his actual or apparent authority to do this. The forged execution of the mortgage was in furtherance of a felonious abuse by him of his custody of the defendant’s certificate of title. It was an independent activity entirely in furtherance of his own interests and in no way done for or on behalf of Mrs Schultz. I hold that Mrs Schultz was not vicariously tainted by Clive Galea’s forgery. Before leaving this particular aspect I should state that there is no room, when assailing the title of a registered proprietor, for applying the rule that a man is considered to be vicariously responsible for a fraud committed in his name if he later deliberately asserts the validity of and seeks to take benefits under the fraudulently tainted transaction. In certain circumstances adoption by a principal of a fraud committed by his agent, being a fraud for which he, the principal, would otherwise not be liable, will render the principal answerable to the other party to the transaction (see Bowstead on Agency, 13th ed, pp 34-35). But where the efficacy of a registered title is in issue, it is the state of the register which is all-important. It cannot be said of a registered proprietor who relies simply upon the face of the register that he is thereby adopting a fraud for which he would not otherwise be liable on the part of his agent tainting the transaction leading to his becoming registered: this would travel far beyond the limits marked out by the Privy Council in Assets Co Ltd v Mere Roihi as the type of fraud which will permit a successful challenge to the title shown on the register. A registered proprietor relies simply upon the state of the register and not upon the validity or otherwise of the transaction which led to the register being in that state. If, in that transaction, fraud or knowledge of it is brought home to him or his agents, the state of the register will not avail him; otherwise it will. I pass to the second question of whether or not there is to be imputed to Mrs Schultz notice that the mortgage was a forgery. Clearly enough Clive Galea knew at the time he was acting for Mrs Schultz in the taking of the mortgage that the memorandum was a forgery. Did he, however, know this in such circumstances as to impute his knowledge to Mrs Schultz? In my view this question must be answered in the negative. The cases cited in Williams on Vendor and Purchaser amply 340 [5.205]

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Schultz v Corwill Properties Pty Ltd cont. substantiate both the existence and the scope of the exception that the learned author describes to the principle of imputed notice or knowledge. The fraud committed by Clive Galea was a fraud for his own independent benefit. In one sense it was a fraud committed by him at a time when he was acting as Mrs Schultz’s solicitor; in another sense it was a felonious act so far as concerned the defendant, committed by him at a time when he was the secretary of the defendant. But, in the words of Williams, “… the supposition that the agent [Clive Galea] communicated his own fraud to the principal [Mrs Schultz] is too improbable to be entertained even by a court of equity”. Within ordinary principles governing vendor and purchaser I do not consider that the knowledge which Clive Galea had that the mortgage was a forgery is to be imputed to Mrs Schultz. I therefore hold that so far as concerns the mortgage, although it was a forgery, and hence for the purposes of s 42 a fraud, that fraud was not “brought home to the person whose registered title is impeached or to his agents”. Nor was “knowledge of it brought home to him or his agents”. The exception of fraud recognized under s 42 is not made out so as to invalidate the mortgage. The discharge of the mortgage involves considerations in some respects similar to the considerations I have discussed in connection with the procuring of the mortgage. Here again the party whose title is sought to be impeached, in this instance the defendant, was innocent of participation in or knowledge of Clive Galea’s fraudulent activities. That Clive Galea defrauded the mortgagee, the plaintiff, into signing the discharge is not open to dispute. But I do not see that any step taken by Clive Galea in this connection was such as to involve the defendant in vicarious responsibility. Clive Galea had no authority whatever from the defendant to approach the plaintiff for a discharge of the mortgage. It may be conceded that Clive Galea represented that he had such authority, but there was no basis, actual or ostensible, which would implicate the defendant in responsibility for his representations in this regard. The only ground for suggesting that the defendant is in some way responsible for Clive Galea’s fraud on the plaintiff is that, by asserting the validity of the discharge to clear its title, the defendant is now adopting the fraud Clive Galea practised on the plaintiff. I have already stated, in connection with the obtaining of the mortgage, my view that a registered proprietor who simply asserts the indefeasibility of his title as disclosed on the register does not thereby become subject to the operation of this principle of ex post facto adoption. I accordingly discard this as a ground for holding that the defendant is vicariously tainted by Clive Galea’s fraud in procuring the discharge. There being no other basis for making out vicarious responsibility on the defendant in connection with the discharge, I hold that the fraud was not “brought home to” it or to its agent. The final inquiry concerns the possibility that there is to be imputed to the defendant knowledge that the discharge of the mortgage had been procured by a fraud on the plaintiff. Clive Galea undoubtedly had this knowledge. But, even if there were evidence (which there is not) of his having at that time held any office or agency in or for the defendant, his knowledge was not the knowledge of the defendant. Assuming he did have some agency capacity, either as its solicitor or as custodian of its seal and records or otherwise, in determining whether or not his knowledge is to be imputed to the defendant, the inquiry is once again cast back to the operation of the exception described in the passage I have quoted from Williams. The evidence of both directors of the defendant, and of Mr O’Farrell, the secretary, establishes that they had no notice that Clive Galea was dealing in any way whatsoever with the defendant’s land. The supposition that Clive Galea communicated his own fraud to the defendant “is too improbable to be entertained even by a court of equity”. He was engaged in an independent fraudulent activity solely for his own purposes, albeit that his own purposes in this instance involved seeking to restore to the defendant the clear title that he had previously without its authority encumbered. There is no basis for imputing knowledge of his fraud to the defendant. I hold that the exception of fraud available under s 42 does not operate to invalidate the registered discharge of the mortgage. [5.205]

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Schultz v Corwill Properties Pty Ltd cont. Having held that the mortgage, being registered, was indefeasible and that in turn the discharge, being registered, was indefeasible, the consequence is that the defendant’s title to the land must be upheld as being that presently disclosed on the face of the register. In other words, the defendant presently holds an unencumbered fee simple in the land free from any interest therein on the part of the plaintiff. The suit fails, and it will be dismissed.

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Notes and Questions

1. Cf Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576 with Ratcliffe v Watters [1969] 2 NSWR 146; (1969) 89 WN (Pt 1) (NSW). In Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576 Corwill Properties was the registered proprietor of land. Galea, a solicitor acting for both parties in the dispute, forged a mortgage over the property in favour of Schultz. This mortgage was registered, but Galea fraudulently induced Schultz to execute a discharge. This discharge was registered. Schultz claimed that the mortgage, having been registered, was indefeasible. Corwill Properties claimed that the discharge was indefeasible. The court held that the registration of the mortgage and the discharge were both indefeasible. The defendants thereby held an unencumbered fee simple estate in the land. In the Ratcliffe case, a solicitor certified that the person executing a transfer and mortgage as registered proprietor was personally known to him when, in fact, he had only been introduced to him shortly before the certification. It turned out that the person who signed as transferor was an impostor. The true registered proprietor challenged the validity of the mortgage, alleging that the solicitor, as agent for the mortgagees, had handled the transaction in a recklessly indifferent – and therefore fraudulent – manner. Street J held that whilst the solicitor’s conduct was incautious, it was not recklessly indifferent. In any case, Street J specifically refrained from deciding that the test of fraud under the Real Property Act 1886 can be met by recklessly indifferent conduct. 2. Consider again Russo v Bendigo Bank Ltd [1999] 3 VR 376, extracted at [5.180]. Could there be situations where an agent’s fraud is considered to be within the scope of his or her authority and properly ascribed to the principal? 3. Can knowledge of fraud be imputed from agent to principal when the agent does not have actual knowledge but has deliberately “closed his eyes” to the fraud? See Australian Guarantee Corporation Ltd v de Jager [1984] VR 483. Cf the situation where the agent has participated in the fraudulent scheme: see Conlan v Registrar of Titles (2001) 24 WAR 299 and Re Global Finance Group Pty Ltd (in liq); Ex parte Read [1999] WASC 23 (unreported, McKechnie J, 19 May 1999). 4. There are a number of decisions where fraud has been ascribed to the registered proprietor in circumstances where his employee or agent has known that a document presented for registration had not been properly executed. See, for example, Australian Guarantee Corporation Ltd v de Jager [1984] VR 483; National Commercial Banking Corp. of Australia Ltd v Hedley (1984) NSW ConvR 55-211; Hickey v Powershift Tractors Pty Ltd (1998) NSW ConvR 55-889. Where, however, there is no fraudulent intent or “reckless indifference”, fraud is not ascribed to the agent or employee (and consequently the principal) even if the transaction involved a false attestation or execution. See, for 342

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example, Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 extracted at [5.235] where the mortgage was held to be indefeasible in a situation where the bank officer had attested the execution of a forged mortgage by a person who impersonated the mortgagor. See also Ratcliffe v Watters [1969] 2 NSWR 146; (1969) 89 WN (Pt 1) (NSW); Davis v Williams (2003) 11 BPR 21,313. Are the decisions in cases such as Hedley and de Jager reconcilable with the decisions in Ratcliffe and Grgic? 5. Cf also the de Jager and Hedley cases with Peddie v Stein (1998) NSW ConvR 55-379 where Young J held that the title of a registered proprietor is not affected by fraud where, without the authority of the transferor, the transferee’s solicitor inscribes his or her name as attesting witness to the transferor’s signature (which was on the transfer handed to him or her by the transferee) in the mistaken belief that it was a mere formality for someone to record that she or he had witnessed that signature. The solicitor was acting for both parties. 6. See State Bank of New South Wales v Yee (1994) 33 NSWLR 618 where a solicitor who witnessed the signature of a mortgagor in her absence but believing the signature to be valid, was successfully sued by the mortgagee for losses suffered by the mortgagee. Discussed by Behm, “Witnessing Documents – Your Insurance Against Professional Misconduct” (1995) 15 Proctor (Queensland Law Society) 8. 7. Where the fraud is an independent activity of the agent and outside the scope of the agent’s authority, fraud may still be ascribed to the principal on the basis of the rule that a person cannot take or retain the benefit from a fraud committed on his behalf. The benefit would need to be substantial: Kettlewell v Refuge Assurance Co [1908] 1 KB 545; Mair v Rio Grande Rubber Estates Ltd [1913] AC 583; Davis v Williams (2003) 11 BPR 21,313 per Hodgson JA at [37]-[39]. Can the principle expressed by Hodgson JA be reconciled with the comments of Street J in the Schultz case extracted at [5.205]? 8. Consider again Cassegrain – the second transfer was challengeable as the wife had not provided consideration, and she could be liable for ejectment as she was not a for value purchaser from or through her husband. It couldn’t also be said that the first transfer was challengeable as this was also a transaction via, or through her husband. Consider Acland, “Joint tenancy, fraud, agency and volunteers under the Torrens system: Cassegrain v Gerard Cassegrain & Co Pty Ltd” (2015) 4 Prop L Rev 186. The in personam exception [5.215] The in personam exception is a well-established principle which provides that the

concept of indefeasibility does not affect the personal obligations of the registered proprietor. The principle has been set out in a number of cases. In Frazer v Walker [1967] 1 AC 569 at 585, the Privy Council stated: In following and approving in this respect the two decisions in Assets Co Ltd v Mere Roihi and Boyd v Mayor, Etc, of Wellington, their Lordships have accepted the general principle that registration under the Land Transfer Act 1952 confers upon a registered proprietor a title to the interest in respect of which he is registered which is immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle 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. That this is so has frequently, and rightly, been recognised in the courts of New Zealand and of Australia: see, for example, Boyd v Mayor, Etc, of Wellington and Tataurangi Tairuakena v Mua Carr. [5.215]

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Their Lordships refer to these cases by way of illustration only without intending to limit or define the various situations in which actions of a personal character against registered proprietors may be admitted.

Recently the High Court in Bank of South Australia v Ferguson (1998) 192 CLR 248 affirmed the principle. The exception is specifically provided for in South Australia, Queensland and the Northern Territory. (See Real Property Act 1886 (SA), s 71(d) and (e); Land Title Act 1994 (Qld), s 185(1)(a); Land Title Act (NT), s 189(1)(a).) Although the Privy Council refrained from doing so, it is possible to outline the various situations in which the in personam exception may be invoked. These categories, however, are not “closed”. The personal obligations may arise from the registered proprietor’s conduct before or after registration. They may give rise to rights at law or in equity, and they may give rise to proprietary or non-proprietary interests. Langford’s “The In Personam Exception to Indefeasibility of Title” (Adelaide Law Review, Research Paper 1994, No 6) provides an excellent review of the various circumstances and situations giving rise to the in personam exception. Langford argues that the circumstances may be divided usefully into two broad categories: (1) those cases where the registered proprietor has entered into a transaction which gives rise to the obligation, either on its terms, (for example, where the registered proprietor has entered a contract with another person which gives rise to an unregis-tered lease, the obligations under that contract being those of a lessor) or by operation of law; (for example, a contract of sale of land misrepresents the area of land intended by the parties to be conveyed. After the transferee is registered, they may still be obliged to carry into effect any remedy available under contract law to correct the mistake.) and (2) those cases where the registered proprietor has created the obligation by their words or conduct (for example, where the circumstances are such as to give rise to an equitable proprietary estoppel).

Langford makes it clear that both proprietary and non-proprietary rights may be protected under the exception. The dividing line between the fraud and in personam exceptions may not always be clear. The cases of Bahr v Nicolay (No 2) (1988) 164 CLR 604 (extracted at [5.160] and [5.220]) and Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 (extracted at [5.200] and [5.245] provide examples of the difficulties in determining whether one or the other exception is applicable.

Bahr v Nicolay (No 2) [5.220] Bahr v Nicolay (No 2) (1988) 164 CLR 604 High Court [The relevant facts are set out in the extract of this case at [5.160]. This case makes it clear that the exception may be invoked where the registered proprietor purchases property having acknowledged the existence of a prior unregistered interest or right binding on the vendor, and having expressly or impliedly agreed to take subject to that interest or right. However, different views emerged as to the precise nature of the in personam claim.] MASON CJ and DAWSON J: … Neither the two sections nor the principle of indefeasibil-ity preclude a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself: Breskvar v Wall (1971) 126 CLR 376 at 384-385. Thus, an equity against a registered proprietor arising out of a transaction taking place after he became registered as 344 [5.220]

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Bahr v Nicolay (No 2) cont. proprietor may be enforced against him: Barry v Heider (1914) 19 CLR 197. So also with an equity arising from conduct of the registered proprietor before registra-tion (Logue v Shoalhaven Shire Council (1979) 1 NSWLR 537 at 563), so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 134. Provided that this qualification is observed, the recognition and enforcement of such an equity is consistent with the principle of indefeasibility and the protection which it gives to those who deal with the registered proprietor on the faith of the register. … What then was the purpose and effect of cl 4 of the agreement between the first and the second respondents? The matrix of circumstances in which the agreement was made throws up three significant factors. First, the making of an agreement between the first and second respondents which would result in the destruction of the appellants’ existing rights, or allow the destruction of those rights, by registration of a transfer in favour of the second respondents in circumstances whereby the rights became unenforceable would expose the first respondent to liability for breach of contract: see the discussion by Jordan CJ in Queensland Insurance v AMF Insurance (1941) 41 SR (NSW) 195 at 200-201. Secondly, as we have seen, upon registration of such a transfer, the combined effect of ss 68 and 134 would, in the absence of fraud, bring about the destruction of the appellants’ rights. Thirdly, at least until registration of such a transfer, the appellants’ equitable interest under the 1980 agreement, being first in time, had priority over the interest of the second respondents as purchasers under their agreement with the first respondent. Viewed in this setting, cl 4 of the later agreement was designed to do more than merely evidence the fact that the second respondents had notice of the appellants’ rights. If that were the only purpose to be served by the acknowledgment it would achieve nothing. It would enable the second respondents to destroy the appellants’ interest and would leave the first respondent exposed to potential liability for breach of contract at the suit of the appellants. In the circumstances outlined it is evident that the purpose of cl 4 was to provide that the transfer of title to Lot 340 was to be subject to the appellants’ rights under cl 6 of the 1980 agreement in the sense that those rights were to be enforceable against the second respondents. At first glance it might seem that the words of cl 4 are inadequate to achieve this purpose. But an acknowledgment of an antecedent agreement in an appropriate context may amount to an agreement or undertaking to recognize rights arising under that antecedent agreement. And here the inferences to be drawn from the matrix of circumstances are so strong that they necessarily influence the interpretation of cl 4. These inferences provide a secure foundation for imputing an intention to the parties and reading cl 4 as a reflection of that intention: see Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 at 362; Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353 at 376; Reardon Smith Line v Hansen-Tangen (1976) 3 All ER 570 at 574-575; Khoury v GIO (NSW) (1984) 58 ALJR 502 at 507; 54 ALR 639 at 648. In Munro v Stuart (1924) 41 SR (NSW) 203, at 204, Harvey J declined to interpret a clause in a contract in the way in which we have interpreted cl 4. The clause was in these terms: The Property is sold subject to existing tenancies or occupancies and to the conditions and reservations contained in every relative Crown Grant under which it is held. Harvey J, having asked whether the clause could be treated as an agreement between vendor and purchaser that the purchaser would give effect to the existing tenancies and that he would comply with the existing conditions and reservations in the Crown Grant, said “that is not the most natural construction of the clause”. His Honour read the clause as providing that the purchaser was to take the property subject to any existing tenancies for what they may be worth. His Honour seems to have thought that the result would have been otherwise if the purchaser had undertaken “to recognize” the [5.220]

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Bahr v Nicolay (No 2) cont. leases, this being the construc-tion we place on cl 4. In Munro v Stuart no account was taken of the matrix of circumstances, perhaps because the influence which it may have on the construction of a contract was not fully recognized at the time. Brennan J in his reasons for judgment has reviewed the evidence in detail in the course of reaching the conclusion that the parties, including the second respondents, made a collateral contract having an effect similar to the purpose that we have attributed to cl 4. Although we agree that this is the effect of the evidence, it is impermissible to have regard to the negotia-tions leading up to the agreement for the purpose of interpreting it: see Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, pp 352-353. The evidence was admissible on the issue of fraud and on the issue of rectification, matters no longer in issue in this appeal. Whether the oral evidence was admissible to set up a contract collateral to a written agreement for the sale of an interest in land is a question which we do not need to consider. We prefer to base our conclusion on the construction of cl 4 ascertained in the light of inferences drawn from the matrix of circumstances. Granted that the purpose of cl 4 is as we have explained it, what is its legal effect? Is it simply an undertaking to perform the 1980 agreement if called upon so to do by the appellants? Contract scarcely seems to give sufficient effect to what the parties had in mind. A trust relationship is a more accurate and appropriate reflection of the parties’ intention. The appellants submitted that cl 4 creates a trust in favour of them as third parties, in accordance with the principles enunciated in cases such as In re Schebsman; Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83 and Green v Russell; McCarthy (Third Party) [1959] 2 QB 226. However, in the absence of the manifestation of a clear intention to create a trust, the courts have been reluctant to hold that a trust exists. Du Parcq LJ elegantly expressed the traditional attitude when he said [1944] Ch, at 104: It is true that, by the use possibly of unguarded language, a person may create a trust, as Monsieur Jourdain talked prose, without knowing it, but unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention. This reluctance to accept that the parties have created an express trust has induced the English courts to impose what has been described as a constructive trust in order to protect a prior interest from destruction on the registration of a later interest: see Bannister [1948] 2 All ER 133; Binions v Evans [1972] Ch 359; Lyus v Prowsa Ltd [1982] 1 WLR 1044; [1982] 2 All ER 953. Bannister itself was not a third party trust. It was simply a case in which a transferee, who took a transfer as trustee, repudiated his trust and asserted a beneficial title in himself. On the other hand Fullagar J stated a contrary view in Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43, at 67: “It is difficult to understand the reluctance which courts have sometimes shown to infer a trust in such cases.” His Honour was referring to contracts whereby a benefit is promised to a third party. We agree with his Honour’s comment. If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason why in a given case an intention to create a trust should not be inferred. The present is just such a case. The trust is an express, not a constructive, trust. The effect of the trust is that the second respondents hold lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement. Even if we had not reached this conclusion, we would not have regarded the registration of the transfer in favour of the second respondents as destroying the appellants’ rights. Having regard to the intention of the parties expressed in cl 4 of the later agreement, the subsequent repudiation of cl 6 of the 1980 agreement constituted fraud. The case therefore fell within the statutory exception with the 346 [5.220]

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Bahr v Nicolay (No 2) cont. result that the appellants’ prior equitable interest prevails over the second respondents’ title, the second respondents taking with notice of that interest … WILSON and TOOHEY JJ: … It is nearly a century since, in Gibbs v Messer [1891] AC 248 at 254, the Privy Council described the Torrens System in these terms: The object 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. That end is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title. That statement still stands as an exposition of the nature and purpose of the Torrens System, though “bona fide” must be equated with “in the absence of fraud”, and “indefeasibility” is a word that does not appear in all the Torrens statutes of this country. Nevertheless, in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker [1967] 1 AC 569 at 585 made it clear that: “this principle 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”. Sir Garfield Barwick, who was a member of the Privy Council in Frazer v Walker, commented in Breskvar v Wall at 384-385: Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title. This vulnerability on the part of the registered proprietor is not inconsistent with the concept of indefeasibility. The certificate of title is conclusive. If amended by order of a court it is, as Barwick CJ pointed out at 385, “conclusive of the new particulars it contains”. Returning to Frazer v Walker, the Privy Council said at 585, of claims in personam: The principle must always remain paramount that those actions which fall within the prohibition of sections 62 and 63 may not be maintained. The reference to ss 62 and 63 is a reference to the Land Transfer Act 1952 (NZ), roughly corresponding with ss 68 and 199 of the Act. The point being made by the Privy Council is that the indefeasibility provisions of the Act may not be circumvented. But, equally, they do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the registered proprietor after registration: Barry v Heider (1914) 19 CLR 197. And we agree with Mahoney JA in Logue v Shoalhaven Shire Council (1979) 1 NSWLR 537 at 563 that it may arise from conduct of the registered proprietor before registration. The evidence leads irresistibly to the following conclusions.The second respondents understood through their agent Callard that the first respondent would not sell Lot 340 unless they agreed to be bound by the obligation in cl 6 which required the first respondent to resell to the appellants. The second respondents bought Lot 340 on the understanding common to vendor and purchasers that they were so bound and cl 4 was included to give effect to that understanding. Clause 4 may have been, of itself, insufficient for that purpose but the second respondents’ letter of 6 January 1982 and their two offers of 8 January 1982 put beyond doubt their acknowledgement of their obligation to the appellants. [5.220]

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Bahr v Nicolay (No 2) cont. By taking a transfer of Lot 340 on that basis, and the appellants’ interest under cl 6 constituting an equitable interest in the land, the second respondents became subject to a constructive trust in favour of the appellants: Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044; [1982] 2 All ER 953; Binions v Evans [1972] Ch 359 at 368. If it be the position that the appellants’ interest under cl 6 fell short of an equitable estate, they nonetheless had a personal equity enforceable against the second respondents. In either case ss 68 and 134 of the Act would not preclude the enforcement of the estate or equity because both arise, not by virtue of notice of them by the second respondents, but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of their contract with the first respondent……. BRENNAN J: [Reconsider the extract of the judgment of Brennan J at [5.160]].

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Notes and Questions

1. Bahr v Nicolay (No 2) (1988) 164 CLR 604 is significant in that it stands for the proposition that the person relying on the exception does not have to be a party to the transaction which led to registration. In what way, if any, does the Bahr decision impinge upon the doctrine of privity of contract? Consider the comments of the High Court in Trident General Insurance v McNiece (1988) 165 CLR 107. As Langford in “The In Personam Exception to Indefeasibility of Title” (Adelaide Law Review, Research Paper 1994, No 6), pp 145-146 commented: The separate majority judgments emphasised that it will not be appropriate to insist upon privity in every case. Mason CJ and Wilson J, in particular, asserted that the imposition of a trust in these circumstances, to enable C to enforce B’s obligations directly, may circumscribe the freedom of the parties to vary their contractual arrangements. Their Honours reasoned that it is incongruous that the courts should be compelled to import the mechanism of trust to ensure that a third party can enforce a contract where the intention of the contracting parties is clearly that the third party should benefit from performance of that contract. The logical conclusion is that the intention of the parties included that the third party be able to sue the promisor. Toohey J delivered a judgment to similar effect.

The use of the trust, pursuant to the Bahr principle, to aid recovery by a third party to a contract, is an avenue the courts may be increasingly willing to use to prevent an unconscionable reneging: see Symbion Pathology Pty Ltd v Healthscope Ltd [2006] ANZ ConvR 347; [2006] VSC 191. 2. Tooher in “Muddying the Torrens Waters with the Chancellor’s Foot” (1993) 1 APLJ 1 discusses the way in which “… the case has opened the door for sentiments of unconscionability to creep into what was formerly an ‘equity-free’ zone” (at 4). At 19-20 she comments on this issue (footnotes removed): The underlying rationale for recognising rights in personam is that the current registered proprietor is not permitted to rely on his or her registered title to escape the consequences of his or her actions that give rise to legal or equitable rights in another person. This includes trusts, both express and implied which equity has traditionally enforced against the holder of the legal title. However, recent judicial developments in the area of remedial constructive trusts, have foreshadowed the use of the in personam exception, to prevent 348 [5.225]

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the unconscionable conduct of a registered proprietor. This aspect of the decision in Bahr’s case is a reflection of the expansive effect and flexibility of using trust doctrines as remedial devices. The recognition of some in personam claims in equity against the registered proprietor arising from conduct prior to registration have occurred despite legislative and judicial acknowledgement that … [i]n all systems of land it is usual and necessary to modify and indeed largely to negative the normal rules as to notice, constructive notice, or inquiry as to matters possibly affecting the title of the owner of land. Certainly, the courts have theoretically accepted that the recognition and enforcement of in personam claims must not involve conflict with the provisions contained in the various versions of ss 42 and 43. Upholding this view has not always been easy in practice. Potential difficulties are particularly acute where the claims against the registered proprietor are based on either a pre-existing contract or a trust or fiduciary relationship with the claimant, arising from conduct before registration. … Although some aspects of the facts were unusual, the scenario in Bahr’s case was not novel. There was no privity of contract nor a readily identifiable trust relationship between the claimants (Bahrs) and the registered proprietors (Thompsons). However, the registered proprietors had taken with express notice of the claimants’ interest. In the absence of fraud, or other relevant statutory bars, one would have expected that the dispute would have resolved by reference to s 43 which provides that notice does not amount to fraud. This view could have been supported by existing authorities and thus the Thompsons’ title could have been found to be indefeasible. However, the High Court appeared reconciled to the fact that a decision in favour of the Thompsons would have been unsatisfactory in the circumstances. The court was unanimous in finding that the Thompsons’ registered title was defeasible on the basis that the Bahrs could sustain an in personam claim against them. This obliged the Thompsons to sell the property to the Bahrs according to the terms which had been agreed upon between the Bahrs and Nicolay. However, there were divergent views as to the source of this remedy. In practical terms, it is arguable that the in personam exception has been extended due to the increased readiness of the High Court to grant equitable relief. The effect of s 43 has been correspondingly diminished. Assessing the impact of this result requires an analysis of the divergent processes by which members of the High Court applied the in personam exception. A common thread running through each of the judgments is the imposition of equity’s most expedient tool-the trust, either express or constructive.

Vassos v State Bank of South Australia [5.230] Vassos v State Bank of South Australia [1993] 2 VR 316 Supreme Court of Victoria [The plaintiffs (Peter Vassos and his daughter Anne Pettinato) were the registered proprietors as tenants in common with Tommy Vassos. Peter asked Tommy to refinance the original $130,000 mortgage to Sandhurst Trustees. After making a couple of repayments through an investment company called FHI Group Pty Ltd, but not having any documentation, the plaintiffs discovered that their signatures had been forged to a mortgage, indemnity and guarantee which had been provided as security for a $500,000 loan from the defendant bank. The mortgage to Sandhurst Trustees had been discharged and the defendant’s mortgage had been registered. Hayne J held that the defendant could not recover against the plaintiffs under the guarantee and indemnity agreement because the plaintiffs were not parties to that agreement. His Honour further held that the bank’s title was indefeasible. HAYNE J: ……The plaintiffs contended that if the bank’s title was indefeasible they never-theless had a personal right against the bank: a right to have either the whole mortgage or alternatively the [5.230]

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Vassos v State Bank of South Australia cont. mortgage insofar as it affected their interests as tenants in common, discharged upon payment of the amount that had been secured by the Sandhurst Trustees mortgage. … Here the question is whether mortgagors have any rights in personam against a mortgagee whose title I have held not to be defeated by the fact that the plaintiffs’ signatures on the instrument were forged. … The plaintiffs in the present case submitted that they are to be taken as having agreed to pay the bank the amount that the bank paid to Sandhurst Trustees, together with interest and that accordingly they are entitled to a discharge of the bank’s mortgage upon their tendering that amount. [Mercantile Mutual Life Insurance Co Ltd v Gosper] also concerned a forged instrument. In 1982 Mrs Gosper gave a mortgage over a property that she owned and later varied that mortgage to increase the amount that it secured. In 1988 her husband applied for a loan from Mercantile Mutual Life Insurance Co which approved the loan on terms that the existing mortgage would be transferred to it and varied to take account of the additional loan. A transfer of mortgage and variation of mortgage were registered but it was later found out that Mr Gosper had forged all the signatures required of his wife in connection with the transfer and variation and had acted entirely without her knowledge or consent. Cohen J held that Mrs Gosper was entitled to redeem the mortgage disregarding the forged variation … The Court of Appeal dismissed the defendant’s appeal from the decision of Cohen J. The majority of the court (Kirby P and Mahoney JA) held that the plaintiff had a personal equity against the defendant entitling the plaintiff to compel discharge of the mortgage on payment of the amount secured by the original, genuine, mortgage but may have differed in their identifica-tion of how that equity arose. Mahoney JA considered that the mortgagee had used the plaintiff’s certificate of title in breach of obligations it owed the plaintiff and that the use of the certificate in that way was a necessary step in securing registration of the forged variation of mortgage. His Honour held that where the registration of the forged instrument had been produced by such a breach by the new owner, that was sufficient to create a personal equity against the new owner: at 48 to 49. Kirby P, at 37, while agreeing with this analysis, may be read as expressing a wider view: that the plaintiff should be restored to the position repre-senting the legal relationship that existed before registration of the forged instrument because she then had an equity of redemption (and thus an equitable interest in the land) which should be protected because the forged instrument did not affect the position as between plaintiff and defendant: at 37. However this may be, I consider that as Mahoney JA said: It is proper to accept that, on the existing state of the authorities, the mere fact of forgery of the instrument does not establish a “personal” equity: at 47. (See also Meagher JA, at 52.) Much turned in Gosper’s Case on the fact that there had been a variation of a mortgage when on any view the original mortgage bound the mortgagor. The present case is very different. I consider it of the first importance to recall that the bank’s title as mortgagee here is not defeated by the fact of forgery. The bank acquired that title innocent of any fraud or knowledge of fraud. Its title is as mortgagee to secure all amounts owed by any of the mortgagors including amounts owed by any of the mortgagors as guarantors of FHI Group. Of course two of the three mortgagors never assented to become surety for FHI Group or to give the bank a mortgage as security for any such indebtedness but in no case where the signature of a mortgagor has been forged will that mortgagor have assented to pay the debt secured by the mortgage. If, as the plaintiffs contended, the fact of lack of assent of the mortgagor gives an in personam right to a discharge, then every mortgagor whose signature was forged would be entitled to compel the mortgagee to discharge the mortgage on the basis that the mortgagee was not entitled to demand any more than had been agreed to be paid and the 350 [5.230]

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Vassos v State Bank of South Australia cont. “mortgagor” had never agreed to pay anything. That flies in the face of indefeasibility of title for without any fault of any kind on the part of the mortgagee he could always be compelled to discharge his security and his title obtained by registration could always be set aside at the suit of the defrauded party. Such a conclusion again appears to hark back to the views expressed by Dixon J in Clements v Ellis – views which, as I have said, have been rejected by the High Court in Breskvar v Wall and later cases. The bare fact that a party has not assented to the transaction recorded in an instrument registered under Torrens system legislation does not, in my opinion, give that person a right enforceable by in personam action to have the transaction reversed. For my part I consider it is clear that more than the bare fact of forgery (and thus an absence of assent) must be shown to found any in personam action of the kind spoken of in Frazer v Walker and subsequent cases. As Mahoney JA points out in Gosper there has been no comprehensive definition of “personal” equity for these purposes: at 45. Again as his Honour points out it may be possible to discern in the authorities two suggestions about the content of the expression “personal equity” in this context: that the interest must not be inconsistent with the terms or policy of the legislation and that “personal” equities arise only from acts of the new owner: at 45; Breskvar v Wall, at 384-385. However whatever the limits may be on such “personal” equities the very language used to describe the right and the reference to the remedies being “in personam remedies” is a clear reference to the remedies being available in circumstances where equity would act, that is, in cases which equity would classify as unconscionable or unconscientious. In the present case, for reasons to which I will refer later, it may well be that the bank did not act without neglect but there is in my view no material which would show that the bank acted unconscionably. There was no misrepresentation by it, no misuse of power, no improper attempt to rely upon its legal rights, no knowledge of wrongdoing by any other party. It obtained a mortgage, apparently regular on its face but which was in fact forged. Even if by making reasonable enquiries the bank could have discovered the fact of the forgery I do not consider that that fact alone renders its conduct unconscionable. I do not consider that the plaintiffs have any in personam right against the bank; all that they have shown is the mere fact of forgery of the instrument.

Grgic v ANZ Banking Group [5.235] Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202 Court of Appeal [The plaintiff was the registered proprietor. His son and daughter-in-law obtained the duplicate certificate of title to the property, arranged for someone to impersonate the plaintiff and went to the ANZ and obtained a loan on the security of the plaintiff’s property. Whilst at the bank arranging the loan the impersonator of the plaintiff was asked if he wished to take the documentation away and seek independent advice. He answered in the negative and he signed the mortgage, forging the plaintiff’s signature to the mortgage. The manager’s assistant signed as a witness certifying that “the mortgagor was personally known to him”. The manager signed on behalf of the bank, certifying in so doing that the mortgage was correct for the purposes of the NSW Torrens statute. The court considered whether the title of the registered mortgagee was defeasible under either the fraud or the in personam exceptions.] POWELL JA: … Much though one must sympathise with Mr Grgic Snr because of the plight in which he finds himself as the result of the cruel fraud which has been practised upon him and the ANZ, I regret that I am unable to accede to Mr Lindgren’s submissions. [5.235]

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Grgic v ANZ Banking Group cont. Despite the passage of some ninety years since Lord Lindley, when delivering the opinion of the Judicial Committee in Assets Co Ltd v Mere Roihi [1905] AC 176 at 210, said: By fraud in these acts is meant actual fraud, that is, dishonesty of some sort, not what is called constructive or equitable fraud-an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having conse-quences in equity similar to those which flow from fraud. Further, … the fraud which must be proved in order to invalidate the title of a registered purchaser for value, … must be brought home to the person whose registered title is impeached or to his agents and the many cases which have been decided in that period of ninety years, the position still remains that, for the purposes of s 42 of the Act, “fraud” comprehends actual fraud, personal dishonesty or moral turpitude on the part of the registered proprietor of the subject estate or interest or of that registered proprietor’s agents: see Bahr v Nicolay [No 2] (at 614) per Mason CJ and Dawson J; (at 631-632) per Wilson J and Toohey J. Although it is now accepted that not all species of equitable fraud stand outside the concept of “fraud” which has been adopted for the purposes of s 42 of the Act (see, for example, Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 273-274 per Kitto J; Bahr v Nicolay [No 2]) those species of “equitable fraud” which are regarded as falling within the concept of “fraud” for the purposes of s 42 of the Act are those – as for example, a collusive and colourable sale by a mortgagee company to a subsidiary (Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (at 273-274)) – in which there has been an element of dishonesty or moral turpitude on the part of the registered proprietor of the subject interest or on the part of his or its agent. With great respect to the arguments which Mr Lindgren in his inimitable way, has so earnestly pressed upon us, it seems to me that the facts in the present case fall far short of establishing that there has been “fraud” in the relevant sense on the part of the ANZ or its officers Mr Jospe and Mr Sercombe. While it may be – and probably is – possible, with the benefit of hindsight, to say that Mr Jospe and Mr Sercombe were less meticulous than they might otherwise have been in seeking to establish that the person who was introduced to them as Mr Grgic Snr was in truth the registered proprietor of the subject property, there is not the slightest evidence that either Mr Jospe or Mr Sercombe was seeking, on behalf of the ANZ, to take an unfair advantage of Mr Grgic Snr. On the contrary, as the diary note which I have set out (see at 206C-G above) would seem to make clear, Mr Sierra was offered the opportunity to take the guarantee mortgage away in order that he might read it and take independent legal advice in respect of it before he executed it. Nor, so it seems to me, does Mr Sercombe’s attestation of the apparent signature of Mr Grgic Snr, either, on its own, or, without formally identifying himself as an employee of the ANZ, or Mr Jospe’s certification of the mortgage, constitute “fraud” for the purposes of s 42 of the Act. I am disposed to the view that the phrase “personally known” does not require that degree of intimacy for which Mr Lindgren contends. But even if it does require that degree of intimacy, the fact of Mr Sercombe’s attestation could not, in my view, constitute “fraud” unless it could be shown, either, that he knew that Mr Sierra was not Mr Grgic Snr, or, that, in signing the attestation, he was acting recklessly without caring whether or not Mr Sierra was Mr Grgic Snr. Far from that being so, it is, I believe, clear – indeed, as I have indicated earlier, the case was conducted on behalf of Mr Grgic Snr upon this basis – not only that Mr Sercombe believed that Mr Sierra was Mr Grgic Snr, but there was available to him material – including the form of mortgage which Mr Grgic Snr had apparently signed in respect of the proposed loan from the CBA – which was available for comparison with the signature which Mr Sierra was to place on the mortgage which Mr Sercombe had had prepared. The same observations, so it seems to me, may be made in respect of Mr Jospe’s certification of the mortgage as correct for the purposes of the Act. So far as concerns Mr Lindgren’s submission that Mr Sercombe was under an obligation to disclose that he was an employee of the ANZ is concerned I can but say that I am unable to interpret the 352 [5.235]

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Grgic v ANZ Banking Group cont. provisions of s 36(1D)(b) and s 107(1) as precluding attestation by a person who, although not a party, was an employee of a party, to an instrument: see, for example, Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557; [1966] 1 NSWR 255. In the circumstances, it being well-established that 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 (Assets Co Ltd v Mere Roihi (at 210); Mayer v Coe) and that a less than meticulous practice as to the identification of persons purporting to deal with land registered under the provisions of the Act does not constitute a course of conduct so reckless as to be tantamount to fraud (Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 496 at 500; [1969] 2 NSWR 146 at 149) this first ground of attack upon the ANZ’s title as mortgagee of the subject property must fail. As will, I think, be apparent from the outline of his submissions which I have recorded above, Mr Lindgren accepts that, in a case such as is this, “a personal equity” sufficient to justify the removal of a mortgage from the Register, does not arise from a mere fact of forgery of the mortgage and that something more is needed. Although Mr Lindgren sought to derive a broader approach to the question of what is “a personal equity” from some of the observations of Mahoney JA in Mercantile Mutual Life Insurance Co Ltd v Gosper (at 45 to 49) and Garofano v Reliance Finance Corporation Pty Ltd (at 59,661), in common with Meagher JA (Garafano v Reliance Finance Corporation Pty Ltd (at 59,662-59,663)) I am of the view that the expressions “personal equity” and “right in personam” encompass only known legal causes of action or equitable causes of action, albeit that the relevant conduct which may be relied upon to establish “a personal equity” or “right in personam” extends to include conduct not only of the registered proprietor but also of those for whose conduct he is responsible, which conduct might antedate or postdate the registration of the dealing which it is sought to have removed from the Register. The question thus is, whether it can be said that in the circumstances of the present case Mr Grgic Snr has made out one or other of the causes of action suggested by Mr Lindgren in his submissions. In my view it cannot. So far as the suggested action for deceit is concerned, it is my view that, contrary to what Mr Lindgren has submitted, neither Mr Sercombe nor Mr Jospe was privy to the putting forward of a document which they knew to be false, nor was either of them privy to the putting forward of a document as to the truth or falsity of which they cared not. Nor, so it seems to me, can it be said that the conduct of Mr Sercombe and Mr Jospe was misleading and deceptive for the purposes of s 52 of the Trade Practices Act 1974 (Cth). Quite apart from the fact that, as I have earlier recorded, Mr Grgic Snr’s counsel at the hearing before Lusher A-J conducted the case for Mr Grgic Snr on the basis that the ANZ was as much a victim of the fraudulent scheme as was Mr Grgic Snr himself, it is my understanding that, in a case in which a person seeks to invoke the provisions of s 52, and s 82 of the Trade Practices Act 1974 (Cth) he must establish that there was a statement, or conduct, directed to him, which statement or conduct was misleading, or deceptive, in the relevant sense and further that he relied upon that statement or conduct when determining what action he would take: see, eg, Gould v Vaggelas (1985) 157 CLR 215 at 236-238 per Wilson J; Sutton v A J Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 at 240-241. It is clear from what I have earlier recorded that there was no such statement or conduct on the part of the ANZ or its officers directed to Mr Grgic Snr. Nor, so it seems to me, can Mr Grgic Snr rely upon any supposed action for breach of statutory duty. It seems to me that the provisions of ss 36, 107, 108 and 117 of the Act are not such as to reveal any intention on the part of the legislature to confer upon any person, who may have been deprived of [5.235]

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Grgic v ANZ Banking Group cont. land or of any estate or interest in land by reasons of non compliance with the provisions of those sections or of some one or more of them, a right to have the Register rectified so as to restore to him title to the land, estate or interest of which he has been deprived. On the contrary, the provisions of ss 126, 127 and 128 of the Act would indicate that, in such a case, the remedy of the person deprived of his estate or interest is limited to an action for the recovery of damages against one or other of the persons referred to in s 126(2) of the Act, or, in an appropriate case, against the Registrar-General as nominal defendant: see, for example, Saade v Registrar-General (1993) 68 ALJR 98; 118 ALR 219. Finally, it seems to me that, even if, as I am prepared to do, one is prepared to proceed on the basis that, in the circumstances, the ANZ came under a duty to Mr Grgic Snr to exercise reasonable care in ascertaining that the apparent mortgagor was in fact the registered proprietor of the land and otherwise so to act as not to interfere with the rights of Mr Grgic Snr, the facts do not establish that Mr Sercombe and Mr Jospe fell short of exercising the relevant degree of care. Not only was Mr Sierra introduced to them by the ANZ’s known customers, Mr Grgic Jnr and his wife, as Mr Grgic Jnr’s father, but, as I have earlier indicated, Mr Sierra had with him not merely the certificate of title, but the form of mortgage which Mr Grgic Snr had apparently earlier signed in relation to the proposed loan to Mr Grgic Jnr and his wife by the CBA, and, Mr Sierra was offered the opportunity to take the proposed new form of guarantee mortgage away so that he might consider it and take legal advice in respect of it before signing it. For these reasons, it seems to me that the second ground of attack upon the bank’s title as mortgagee must also fail. In the normal course, the only orders which, in my view, would now be called for would be orders that the appeal be dismissed and that Mr Grgic Snr pay the ANZ’s costs of the appeal. However, during the course of the hearing of the appeal, we were informed that the amount now secured by the mortgage exceeded what was envisaged would be the likely sale price of the subject property. In the circumstances, therefore, it seems to me that there ought also to be made a declaration, that notwithstanding that the subject property stands charged with the moneys secured by the bank’s mortgage, Mr Grgic Snr is not liable to the ANZ on the personal covenants contained in that mortgage … [Meagher JA and Handley JA agreed with Powell JA.]

[5.240]

Notes and Questions

1. In Mercantile Mutual Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 Mrs Gosper, the sole registered proprietor of land, gave a mortgage over the property to secure a $205,000 loan. A variation of mortgage – increasing the secured amount to $265,000 – was registered three years later. The mortgagee transferred the mortgage to Mercantile Mutual Life Insurance Co Ltd (MMLI), who retained Mrs Gosper’s certificate of title. Mr Gosper then forged his wife’s name to a further variation of mortgage that increased his wife’s liability by $285,000. In 1986, without Mrs Gosper’s authority, MMLI produced the certificate of title to procure the registration of the forged variation. Mrs Gosper brought an action to have the register amended to reverse the effect of the variation. This would mean that she could discharge the mortgage upon repayment of $265,000. MMLI argued that, in the absence of any fraud on its part, its title was indefeasible so that the mortgage could only be discharged upon repayment of the whole sum. The New South Wales Court of Appeal (Meagher JA dissenting) held in favour of 354 [5.240]

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Mrs Gosper on the basis that she had a personal equity that was enforceable against MMLI. The approaches of both judges of the majority, Mahoney JA and Kirby P have been criticised. See, for example, Sonter, “Case Note: Mercantile Mutual Life Insurance Co Ltd v Gosper” (1992) 15 UNSWLJ 546 at 549-550. Butt argues that the only reasonable explanation of the Gosper case is that in addition to the forgery, there was an unauthorised use of the certificate of title by the registered mortgagee, giving rise to the personal equity against it: see Butt, Land Law (6th ed, Thomson Reuters, Sydney, 2010), p 789. How was Hayne J able to distinguish the Gosper case from the facts before him in Vassos v State Bank of South Australia [1993] 2 VR 316? Cf the Gosper case with Ginelle Finance Pty Ltd v Diakakis (2004) NSW ConvR 56-064 (facts in Gosper distinguished from those in Ginelle on the basis that there was a pre-existing relationship between mortgagor and mortgagee in Gosper). Do you think that Gosper has been confined to its own facts, and would be unlikely to be followed? 2. For an examination of the question of whether an interlocutory injunction should be granted to protect an in personam right, see Coomber v Curry (1993) V ConvR 54-464. 3. The Vassos and Grgic cases emphasise that more than the bare fact of forgery must be shown to establish a right enforceable by an in personam action. (See also Garofano v Reliance Finance Corporation Ltd (1992) NSW ConvR 55-640 (NSWCA); Public Trustee v Paradiso (1995) 64 SASR 387.) There has been a tendency in some cases to suggest further that instruments void for reasons other than forgery, cannot give rise to in personam rights. See, for example, Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 452 and Boyd v Mayor of Wellington [1924] NZLR 1174. In the Palais case, after compulsorily acquiring Palais Parking Station’s (PPS) land, the Director-General of Medical Services published a Notice of Acquisition in the Government Gazette, and served this Notice upon the Registrar-General. The Registrar went on to cancel PPS’s certificate of title, and issued a new certificate in the name of the Director-General. It was subsequently held that the Director-General had no legal power to acquire the land, and the Notice of Acquisition was void and ineffectual. Thus the issue was whether PPS could invoke the in personam exception to have the land transferred back to it. The court held that it did not: the title of the Director was indefeasible. It is arguable that cases such as the Palais case and Boyd v Mayor of Wellington [1924] NZLR 1174 should have given rise to a successful in personam claim against the registered proprietor. Where a transaction, such as a resumption of land pursuant to statute, has not been performed in accordance with the relevant statutory provisions, it seems that the previous proprietor should have a right in personam to have the land retransferred. Courts faced with this problem have tended to assume that such a result would detract from the concept of immediate indefeasibility of title and have been concerned to reinforce the notion that registration of a void instrument can confer an indefeasible title. It is suggested that the result posited does not concern the issue of indefeasibility of title: rather, it explains a situation where an exception to indefeasibility of title, the in personam exception, is applicable. See Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict between Purchasers and Prior Interest Holders” (1997) 21 MULR 460 at 493-494. 4. Robinson states that the current legal position is unsatisfactory, and suggests that a defrauded registered proprietor should be entitled to a new statutory cause of action: Robinson, “Claims In Personam in the Torrens System: Some General Principles” (1993) [5.240]

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67 ALJ 355 at 360-362. See also Low, “The nature of Torrens indefeasibility: understanding the limits of personal equities” (2009) 33(1) Melbourne University Law Review 205; Wu, “Beyond the Torrens Mirror: a framework of the in personam exception to indefeasibility” (2008) 32(2) Melbourne University Law Review 672; Edgeworth and Moses, “Taking it Personally: ebb and flow in the Torren System’s in personam exception to indefeasibility” (2013) 35 Sydney Law Review 107; Carruthers and Skead, “Exploring the Fundamentals: indefeasibility, in personam, proprietary estoppel and Van Dyke v Sidhu” (2014) 22 APLJ 187.

Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [5.245] Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 Court of Appeal [The facts are set out at [5.200].] TADGELL JA … The claim in personam The question of law that occupied the greatest time on appeal, and as I would gather at first instance, was whether the respondent was entitled to a remedy in personam, not dependent on a finding of fraud, which could lead to the declaration that the mortgage was void and the consequential orders that the learned judge made in favour of the respondent against the appellant. I refer without elaboration to the leading modern references to the availability, in an appropriate case, of a claim in personam founded at law or in equity to defeat a title acquired by registration under the Torrens system: Frazer v Walker [1967] 1 AC 569 at 585; Breskvar v Wall (1971) 126 CLR 376 at 384-385; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 637-638, 652-653. Along with these authorities it is useful to consider, for contemporary illus-tration of the application of the principle of defeasibility on which the Torrens system of title is built: Vassos v State Bank of South Australia [1993] 2 VR 316 (Hayne J); Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 at 735-737 per Gleeson CJ, and Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd (1998) 1 VR 188. In the last of these this court at 196, proceeded on an assumption, because of a concession by counsel, that “… the expressions ‘personal equity’ and ‘right in personam’ encompass only known legal causes of action or equitable causes of action …”: Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 222-223 per Powell JA. In Garofano v Reliance Finance Corporation Ltd (1992) NSW ConvR 55-640; Meagher JA, with whom Priestley JA agreed, had expressed a similar view: speaking of a so-called “personal equity” of the kind referred to in Frazer v Walker, he said “I cannot see what that expression is meant to cover except known legal causes of action (for example, deceit) and known equitable causes of action (for example, undue influence).” I respectfully share that sentiment. Counsel for the respondent before us made no concession such as that made in the Scorpion Hotels case, and indeed expressly asserted that a known legal or equitable cause of action need not be made out as a prerequisite to the relief that the respondent claimed. He offered no argument to support the assertion but submitted that equity would not allow reliance under the Transfer of Land Act on a registration that had been obtained as a result of unconscionable conduct. Counsel abstained, no doubt wisely, from offering a definition of unconscionable conduct but submitted that the evidence disclosed it in this case on the part of the appellant. It was, as he said, “woven into the facts of the case”, and he relied on the facts as found by the judge to indicate as much. Counsel for the respondent relied before us in any event on what he submitted were “two known equitable causes of action”. The first was what he described as the principle in Barclay’s Bank Plc v O’Brien [1994] 1 AC 180, and the second relied for its support on the contention that the appellant had in the circum-stances become a constructive trustee for the respondent. Both of these heads of claim had been relied on before Hedigan J, and they were the two, alone out of a number, that his Honour regarded as possibly affording a basis for relief in personam against the appellant. Hedigan J formulated the two heads in this way: 356 [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. (1) that since the Bank had notice and knowledge, actual or constructive, that Heatherdale Road was a trust property and that the plaintiff was trustee of it, [and] notice and knowledge, actual or constructive, that the Kandys were not directors of the plaintiff but that both of the Tafts were, and since the Bank entrusted to Michael Kandy the execution of the guarantee and the creditors mortgage, it is subject to the surety’s equity entitling a court to set the mortgage aside; (2) that the bank was either a knowing recipient of trust property or a knowing participant in a breach of trust, pursuant to both limbs of Barnes v Addy. In the event the learned judge upheld the respondent’s contention as to the first head and that was the foundation for the relief he gave as against the appellant. Although his Honour made some comments about the second head, he did not find it necessary to express a conclusion in respect of it, having already found for the respondent under the first. In finding for the respondent on the first head as he had formulated it, Hedigan J concluded at 129 that: … the bank did act unconscionably with respect to the interests of the guarantor/ mortgagor in this transaction. As my earlier finding indicates, that conclusion is not a finding of fraud but it is a finding that [the bank] acted with such disregard of the facts known to it as to amount to want of probity, primarily based upon wilful blindness – moral obtuseness of the kind referred to in Consul Developments and Royal Brunei Airlines … and at 140: In my opinion the events constituting fraud by Michael Kandy to which I have referred and of which the first defendant had notice raise an equity which is enforceable by the plaintiff against the first defendant. His Honour indicated that he based his conclusion on findings of fact which he expressed at 130-134 as follows: The bank officer handling the transaction, Mr Papadopoulos, was an experienced and senior officer who worked closely with his superior, Munro. As part of the bank’s policy to seek out lending opportunities at the highest level, Papadopoulos with his superior’s knowledge and approval, sought out Michael Kandy as an active and prosperous commercial property buyer who was likely to be a profitable customer. The bank knew that if business was done with Kandy any advance would be substantial and that the bank would want first class security. Bank officers made enquiries about Michael Kandy before meeting him and more detailed ones after meeting him, including enquiries from his existing bankers, ANZ. It formed a favourable view of him on the most slender of information which was really no more than opinion. The first list of securities provided by Michael Kandy did not include Heatherdale Road which was only put forward in February when MBL demanded further security. Kandy told Papadopoulos and probably Munro, when the Heatherdale property, owned by the plaintiff, was introduced that the Tafts owned Sixty-Fourth Throne but that he controlled it. Kandy was not then a customer of the bank, no funds having been advanced; however, neither of these two bank officers sought from Kandy at any time any details of what constituted that control, even though Papadopoulos believed that the Tafts were the directors and that Michael Kandy was not. I find that neither Papadopoulos or Munro passed this information and belief on to their solicitors. By April MBL had received a copy of the Trust Deed which constituted Sixty-Fourth Throne a trustee of Heatherdale Road. By that date the bank was aware that the security property was a trust property. Moreover, the bank’s belief through at least one of its officers that the Tafts were directors was at least in part confirmed by the 1989 Sixty-Fourth Throne accounts which the bank was in possession of and which disclosed Pincus Taft as director and company secretary and Mrs Taft as director. [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. The transaction was an unusual one, not simply on account of its size, which was nearly $40m. The bank was in effect an equity participant in the transaction, the advance passing so far beyond its ordinary prudential guidelines that MBL brought in Heaths as a secondary lender which would share the greater part of the $4 million fee which was charged to Kandy for the increased risk. The bank knew throughout that Kandy could not service the loan, that is, the interest payable on it, from his earnings as a solicitor. It therefore capitalised the interest and put in place arrangements to secure any income stream coming from security properties. This included Heatherdale Road which the bank knew was the only asset of the plaintiff and that it was let to Ballycanew. Thus, there was, on the face of it, no apparent benefit to Sixty-Fourth Throne or the beneficiaries of the trust in putting up the property. On the contrary, there appeared to be a positive detriment, namely the loss of its income stream. No enquiry was made by the bank about this at any time. The bank never sighted any written authorisation for it to obtain rent or income. The bank or its solicitors prepared all documents. These imposed obligations on all security givers to make their own enquiries about the use to which the borrower, Kandy, would put the funds borrowed, to obtain their own commercial and property advice as to the value and possible increase in value of the properties bought and to provide a Certificate of Independent Legal Advice concerning the transaction and documentation. The bank waived this latter requirement at a very late stage in relation to the plaintiff (as a corporate guarantor), deciding to accept as sufficient Board resolutions approving the transaction. Unaware of the fraud being practised by Kandy because neither its officers nor its solicitors correctly performed their duties the bank did not insist upon independent legal advice being obtained and certified with respect to Sixty-Fourth Throne and failed to inform Sixty-Fourth Throne that all corporate guarantors were relieved from giving it. This did not matter since Kandy passed no information of any kind to the two directors of Sixty-Fourth Throne but the bank’s failure to deal with this aspect specifically is relevant to the assessment of its probity. The bank’s solicitors had been told by Michael Kandy that Sterling & Sheink were Sixty-Fourth Throne’s solicitors, as well as the solicitors for other security givers. The bank was aware that insurance and occupancy details in relation to Heatherdale Road were, for the purposes of this transaction provided by Mr. D. Pomeroy and Jonathan Sheink. It was aware that Pomeroy and possibly Sheink were co-owners with Michael Kandy of two of the companies giving security, Twin Cities and Kemroy. Notwith-standing that those persons thereby had some personal rather than professional interest in the effectuating of the transaction, no step was taken to confirm that Pomeroy and Sheink had the authority of the company other than from Kandy, whose statement was the sole source of the belief that he controlled Sixty-Fourth Throne. The bank’s solicitors obtained company searches that disclosed that Michael Kandy and Lisa Kandy had been directors but were no longer directors of Sixty-Fourth Throne, and that the Tafts were directors. The solicitors failed to act on this at any time, notwithstanding that it was relevant not only to the issue of whether or not Kandy was an officer of the company or authorised by the company with respect to the transaction but also showed that Michael Kandy had been a director of Sixty-Fourth Throne at an earlier time, thus enabling him to have copy documents in relation to the trust, the lease and the assignment of the lease. Neither the bank nor the bank’s solicitors addressed any communication at any time to the corporate address of Sixty-Fourth Throne. The bank was aware that security, and thereby the beneficiaries’ interests might be wholly lost if the guarantee was called on. All of the guarantee and mortgage documents were given to the borrower Kandy to procure execution. Neither Papadopoulos nor Munro made any arrangement to put in place any method by which to check who executed the mortgage and guarantee on behalf of Sixty-Fourth Throne, although Papadopoulos knew and believed that the Tafts were directors. Neither Papadopoulos, Munro or Tomlinson attended the settlement. The bank’s solicitors and possibly the bank, later became aware that the Kandys had not indicated the capacity in which they were attesting the fixing of the seal (that is they had not purported to execute as 358 [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. directors) before the mortgage was registered. The requisition from the Titles Office had gone to WMM who referred it to WMS. Sterling & Sheink intervened without any request for them to do so from the bank or its solicitors. Notwithstanding that, the bank permitted registration to be completed. The combination of these matters, particularly the knowledge of the bank that the Tafts were the owners of Sixty-Fourth Throne, believing they were the directors and that Kandy had asserted unverified unexplained control, coupled with the bank’s knowledge that the Sixty-Fourth Throne held the property on trust with no apparent benefit in the transaction, lead me to the conclusion that, that there was unconscionable conduct on its part. The learned judge appears to have acceded to an argument along the lines that a party having constructive notice of facts who does not act towards another as equity would expect a party with such notice to act towards that other may be regarded as engaging in unconscionable conduct, and therefore amenable to equitable relief at the suit of the other. His Honour appears to have been persuaded that Barclay’s Bank Plc v O’Brien [1994] 1 AC 180 supported such an argument, and something similar was submitted for the respondent on the appeal. It was put to us – to refer to the respondent’s written outline of argument – that O’Brien’s case supports the conclusion that the appellant, “as a creditor in a surety and third party mortgage transaction”, having had notice of Kandy’s fraud upon the respondent “and having failed to make reasonable enquiries or to take such steps as were reasonable in the circumstances, must take title subject to the respondent’s rights”. I cannot accept the argument. The essential facts in Barclay’s Bank Plc v O’Brien were these. A husband and wife, joint proprietors of their matrimonial home, signed a legal second charge in favour of a bank to secure the husband’s indebtedness upon his guarantee of debts of a company in which he had, but the wife had not, a direct pecuniary interest. The wife did not read the charge document before signing, having been induced to sign by the husband’s misrepresentation that the security was limited to £60,000 for only three weeks, whereas it was in fact unlimited. After the husband’s default a registrar of the County Court made an order for possession against the wife and a judge dismissed an appeal, holding that the bank could not be responsible for the husband’s misrepresentation. The Court of Appeal upheld the wife’s appeal and an appeal by the bank to the House of Lords failed. Lord Browne-Wilkinson, who gave the leading opinion, took it to be axiomatic (at 191 and 195) that one who has been induced to go surety by the principal debtor’s misrepresentation has an equity to set aside the transaction as against the debtor, which equity is enforceable as against the creditor if the debtor was acting as the creditor’s agent or if the creditor had actual or constructive notice of the surety’s equity. The House rejected, as the Court of Appeal had, a conclusion that the husband had acted as the bank’s agent, leaving for decision the key question whether the bank had had notice of circumstances which gave rise to the wife’s equity against the husband. The principle applied was stated at 195-196 by Lord Browne-Wilkinson as follows: Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later if the acquirer of the later knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it. The bank was held to have had constructive notice of the husband’s misrepresentation to the wife and of the wife’s equity arising from it. The chief foundation for that conclusion was the bank’s actual knowledge of the relationship between debtor and surety. To that was to be added the bank’s further knowledge that the charge had been given over the matrimonial home to secure the debts of a company in which the husband was interested but in which the wife had no direct pecuniary interest. [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. These facts were said to be such as to put the bank on inquiry as to the circumstances in which the wife had agreed to stand as surety: the bank, having taken no reasonable steps to ensure that the wife was aware of the risk of giving the charge, could not be heard to say that it was unaware of the possibility that she had a right to set aside her agreement on the ground that it had been wrongfully procured. Lord Browne-Wilkinson at 198, laid some emphasis on the relationship of the debtor and surety as co-habitees but indicated that the principle he was applying was not so confined: “… in a case where the creditor is aware that the surety reposes trust and confidence in the principal debtor in relation to his financial affairs, the creditor is put on inquiry in just the same way as it is in relation to husband and wife.” Counsel for the respondent sought to assimilate the position of the bank in O’Brien’s case to that of the appellant here. It does not appear from the report that the mortgage with which O’Brien’s case was concerned was one that had been registered pursuant to legislation comparable with the Transfer of Land Act. Whether or not the mortgage was of that character, the case is no authority for the view that the equitable principle it illustrates is applicable to defeat an interest deriving from registration under legislation of that kind: the question was simply not considered. For the respondent it was contended at first instance and on appeal that the equitable principle is capable of application here. Hedigan J accepted the contention and proceeded to apply the principle to a case where there had been registration under the Transfer of Land Act. There appears to be no authority directly in point, but his Honour referred to two decisions at first instance of State Supreme Courts in which O’Brien’s case has been noticed. In Burke v State Bank of New South Wales (1995) 37 NSWLR 53 Santow J applied it to fix a mortgagee with constructive notice of circumstances in which the mortgage had been unconscientiously procured from his parents by the debtor. That, however, was evidently not a case in which the mortgagee relied on registration of the mortgage. In HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368, J D Phillips J did consider O’Brien’s case in the context of a dispute about the enforceability of a registered mortgage but ultimately he had no need to deal with the present point. The few other recent Australian decisions in which O’Brien’s case has been noticed did not concern interests in Torrens title land. If the doctrine of constructive notice were held to apply generally to the ordering of priorities under the Torrens system it would, in effect, introduce into the scheme of title by registration the notion of priority determinable by reference to the doctrine of the bona fide purchaser for value without notice, a doctrine at odds with the Torrens system. As will appear, I find it unnecessary to pursue the tantalising question of the place, if any, of the doctrine of constructive notice in the Torrens system. It is in any event undesirable to do so here, the question having been barely broached in argument. I consider in any event that the knowledge had by the appellant, and the notice which the respondent seeks to attribute to it, do not raise a claim in personam such as to impeach the appellant’s title to the registered mortgage. Assuming that the appellant knew or was to be fixed with notice of the identities of the directors of the respondent, the question remains whether that avails the respondent here. The assumption evidently made by the judge, and by counsel for the respondent on appeal, was that a “personal equity” or “right in personam” would, by reference to that knowledge or notice, be made out as against the appellant, along the lines of the equity of the wife in O’Brien’s case, which would defeat the appellant’s title to the mortgage derived by its registra-tion. I do not accept that this is so. O’Brien’s case proceeded on the footing that there was competition between (a) the right of the bank to enforce the mortgage and (b) a right of the wife as against the husband to set aside the debtor-surety transaction – a right that she sought to enforce against the bank or, perhaps more accurately, a right that she sought to enforce in a manner that would displace the right of the bank. The question was whether the one right or the other should have priority, and it was held that priority should be determined by reference to the doctrine of notice. In the present case, by comparison, there is in truth no tension 360 [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. between two competing rights. The appellant has title to the mortgage by virtue of registration but the respondent has no claim in personam for which it can seek priority ahead of the appellant’s title. There is, as against the respondent, no mortgage save that which the registration creates. Before registration the respondent needed no remedy, either at law or in equity, to get rid of the mortgage: it was null and void. Before registration was effected the respondent may have had a right in personam as against the appellant to restrain the registration of the mortgage, had the respondent been aware of it: cf Mayer v Coe [1968] 2 NSWR 747. Leaving aside the question of any constructive trust – a matter I shall consider separately – the evidence stops short of indicating that, after registration, the respondent had any equity or equitable right, or other right in personam, against the appellant that might defeat the title which registration conferred. It was argued that the respondent derived a remedy because the appellant had notice that the directors of the respondent had not attested the affixation of the common seal. The judge’s reasons for accepting the argument, and the respondent’s submissions before us, depended on the notion or assumption that, if the appellant’s officers or its solicitors had checked the evidence available to them of the identification of the respondent’s directors against the sealing clause on the Heatherdale Road mortgage, they would have discovered a discrepancy. It is then said that the respondent derived a remedy because the appellant had notice that the directors of the respondent did not attest the affixation of the common seal. Notice on the part of the appellant of that kind, however, could not of itself create a right of the respondent against the appellant: at best it could confer priority to a right that the respondent had against the appellant over a right that the appellant had against the respondent. O’Brien’s case does not authorise the conclusion that constructive notice confers an equitable right or interest in favour of one person against another to whom the notice is attributed. As the passage at 195-196 from the opinion of Lord Browne-Wilkinson quoted above makes clear, the case proceeded on the footing that the wife had a right as against the husband (the principal debtor) to set aside the debtor-surety transaction and the question was whether that right prevailed over the bank’s right to enforce the mortgage. Although at one stage Lord Browne-Wilkinson at 195 spoke of a wife’s right to set aside the debtor-surety transaction being “enforceable against third parties (for example against a creditor)”, I take him to have meant that the wife’s entitlement, in the circumstances, was that her right should have priority over the rights of third parties – that is, that the rights of third parties with notice were subject to the right of the wife, or were postponed to it. The argument for the respondent accepted by the judge assumes that, having had the means to compare the attestation clause on the mortgage with the information about directors of which it had notice, the appellant owed the respondent an obligation of some kind to make the comparison. In my judgment no such obligation was owed. An intending purchaser or mortgagee owes no duty to investigate the vendor’s or mortgagor’s title: Ashburner’s Principles of Equity, p 61; Agra Bank Ltd v Barry at 157, per Lord Selborne; Bailey v Barnes [1894] 1 Ch 25 at 35, per Lindley LJ. Similarly, a creditor owes no duty of care to an intending surety: Lord Browne-Wilkinson said as much in O’Brien’s case at 193; and the notion that the bank owed the wife any special duty, or that she was entitled to any special equity as against the bank, was expressly rejected: at 195. The contention that the respondent derived a claim in personam by virtue of the principle applied in O’Brien’s case depends on a misapprehension of that case and should in my opinion fail. Constructive trustee? According to the formulation by Hedigan J of the second of the two heads on which the respondent relied before him and which his Honour considered to warrant attention, the submission to him was that the appellant was either a knowing recipient of trust property or a knowing participant in a breach of trust. The appellant was said thereby to have become a constructive trustee and to be liable to [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. account to the respondent for the mortgage of the Heatherdale Road property. The argument was evidently said below to depend on an application of the principles referred to in the well-known obiter dictum of Lord Selborne LC in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252: The responsibility of a trustee] may no doubt be extended in equity to others who are not properly trustees, if they are found … actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. In this court the argument was somewhat differently based. According to the respondent’s written outline, the submission was that the appellant had “acquired its proprietary interest and, or alternatively, participated in the fraud of Kandy, dishonestly or with the requisite knowledge to constitute it a constructive trustee”. This new formulation abandons the basis, said to have been relied on below, that the appellant knowingly participated in a breach of trust. The abandonment presumably recognises the difficulty inherent in establishing in this case a liability of that kind, which is essentially an accessory liability. There was no breach of trust on the part of the respondent as trustee, and thus there was a want of the prerequisite to accessory liability: Royal Brunei Airlines Sdn. Bhd v Tan [1995] 2 AC 378 at 382, 384, per Lord Nicholls of Birkenhead; and whatever label be put on Kandy’s conduct it did not constitute a breach of trust. To reject – as I have – allegations against the appellant of fraudulent conduct, including wilful blindness, necessitates also a rejection of the submission that the appellant was constituted a constructive trustee on account of dishonesty on its part. That leaves for consid-eration the submission that the appellant acquired its proprietary interest, or participated in Kandy’s fraud “with the requisite knowledge” to fasten it with liability. The submission prompts two questions: First, what is “the requisite knowledge”? Secondly, did the appellant have it? The appellant plainly enough knew at material times that the Heatherdale Road property was property subject to a trust, yet the respondent does not now contend that this knowledge alone was enough to constitute the appellant a constructive trustee. The burden of the respondent’s submission was that the appellant knew enough, or had notice of enough, to warn that Kandy was acting, or might be acting, either fraudulently or contrary to the interests of the beneficiaries of the trust, and yet failed to take the steps that an honest person would have taken in the circumstances. This is really to allege again, in other words and in another context, that the appellant was dishonest; and in so far as the respondent relies on dishonesty on the part of the appellant it cannot, in my opinion, succeed. The liability of persons, not being appointed trustees, for loss to trust property by virtue of their “knowing assistance” or “knowing receipt” – called by Lord Nicholls in the Royal Brunei case “the conventional shorthand” – has been the subject of perennial difficulty and a good deal of recent debate … [Tadgell JA considered several cases and academic comments on the issue and continued:] The argument for the respondent appears to assume that the acquisition by a mortgagee, in that capacity, of a proprietary interest following registration of a forged instrument of mortgage in respect of property that is subject to a trust amounts to a receipt by the mortgagee of trust property. If it were so, it might be possible to treat the holder of the registered proprietary interest as a constructive trustee arising from “knowing receipt” of trust property. As it seems to me, however, there is neither room nor the need, in the Torrens system of title, to do so. If registration of the mortgagee’s interest is achieved dishonestly then the registra-tion, and with it the interest, are liable to be set aside not because, on registration, the registered holder became a constructive trustee but because s 42(1) 362 [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. recognises that fraud renders the interest defeasible. If, on the other hand, the registration is not achieved by fraud the Act provides, subject to its terms, for an indefeasible interest. Those terms allow, it is true, 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 what is called a constructive trust. There may be room for debate whether, even under the general law system of title, a mortgagee in the appellant’s circumstances would be accountable as a constructive trustee: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 707B-E, per Lord Browne-Wilkinson; and cf Professor Peter Birks, “Equity in the Modern Law: An Exercise in Taxonomy” (1996) 26 UWALR 1, especially at 19-20 and 40-41. However that may be, to recognise a claim in personam against the holder of a mortgage registered under the Transfer of Land Act, dubbing the holder a constructive trustee by application of a doctrine akin to “knowing receipt” when registration of the mortgage was honestly achieved, would introduce by the back door a means of undermining the doctrine of indefeasibility which the Torrens system establishes. It is to be distinctly understood that, until a forged instrument of mortgage is registered, the mortgagee receives nothing: before registration the instrument is a nullity. As Street J pointed out in Mayer v Coe at 754, the proprietary rights of a registered mortgagee of Torrens title land derive “from the fact of registration and not from an event antecedent thereto”. In truth, I think it is not possible, consistently with the received principle of indefeasibility as it has been understood since Frazer v Walker and Breskvar v Wall, to treat the holder of a registered mortgage 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 in my opinion fail. I had completed writing the above, but for reasons beyond my control could not publish it, before the delivery on 23 June this year of the decision of Hansen J in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd (1998) 3 VR 16. I have since read with advantage the extensive discussion by his Honour of the potential liability as constructive trustee of one who receives trust property in respect of which there has been a breach of trust. In that case a mortgagee was found to have acted dishonestly in taking the mortgage. That is sufficient to distinguish the case from this. Hansen J appears to have decided or assumed also that a mortgage of Torrens title property which is subject to a trust, if dishonestly obtained, amounts to receipt by the mortgagee of trust property so as to attract the so-called principle of the first limb of Barnes v Addy. Whatever may be the position where a Torrens title mortgage is dishonestly obtained in respect of property that is subject to a trust, it is not this case. For the foregoing reasons the appellant has in my opinion established the defence raised pursuant to s 42(1) of the Transfer of Land Act that its title to the mortgage is indefeasible despite the forgery. ASHLEY AJA [His Honour found that there was no fraud and then considered the in personam exception.] In personam remedies Absent statutory fraud, Sixty-Fourth Throne cannot have relief against registration of the mortgage except if an in personam remedy is available to it. The learned judge below found that such a remedy was available. That finding is challenged in this appeal. According to Frazer v Walker [1967] 1 AC 569 at 585 the indefeasibility principle “in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or equity, for such relief as a court acting in personam may grant”. That simple proposition (the principle existed, in substance, long before Frazer) has given rise to a torrent of judicial and text writing. Some things, at least, are clear. A right enforceable in personam is not a right upon the property the subject of registration per se. It is a personal right against the registered proprietor, even though it may require that person to deal with the property in a particular way. The principle extends to known legal and [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. equitable causes of action. It focuses upon the conduct of the registered proprietor and also those for whose conduct he is responsible. That conduct might ante date or post date registration of the pertinent dealing. Further, it can probably be said that the conduct must be such as should be described as unconscionable or unconscientious, as those words are now understood in the law. But that is not to say that conduct which merits such a description will give rise to an in personam right in the absence of a known legal or equitable cause of action. There is substantial authority to the contrary. It was submitted for Sixty-Fourth Throne that it is enough that conduct of the registered proprietor be unconscionable or unconscientious; and that the existence of a known legal or equitable cause of action is not obligatory in order that an in personam remedy be available. I do not accept that submission. The weight of authority is against it. Moreover, in so far as unconscionable or unconscientious conduct is characteristic of circumstances in which an in personam remedy will lie, it appears to me unnecessary to travel outside known legal and equitable causes of action in order to provide a remedy against such conduct. To say that there must be a known legal or equitable cause of action to found an in personam remedy should not, in my opinion, be used in a de facto way to obliterate the existence of the exception. The indefeasibility principle is deeply, and understandably, entrenched in the law. But I consider that it would be wrong to obliterate the exception in order to leave the principle, in substance if not in legal theory, wholly unscathed. The necessary balance is in my respectful opinion disclosed by the judgment of Wilson and Toohey JJ in Bahr v Nicolay (No 2) at 637-638; see also the judgment of Mason CJ and Dawson J at 613 and the judgment of Brennan J at 653- 655, in the latter of which his Honour set out concisely and clearly the footing upon which he considered that the intervention of equity – by the erection of a constructive trust as a response to unconscionable conduct – was required. The resolution in Bahr accorded with the approach of the High Court in Baumgartner v Baumgartner (see Mason CJ, Wilson and Deane JJ at 147-149 and per Toohey J at 151-153) and in Muschinski v Dodds (1985) 160 CLR 85. In each of those two cases (they involved the acquisition of real property – and thus the taking of title – at different stages in the course of domestic relationships) there having been unconscionable denial by a registered proprietor of a beneficial interest held by another, a constructive trust was imposed, it offering protection to the holder of the beneficial interest. Intermeddling with trust property: assistance and receipt A constructive trust may be imposed where: (1.) A person who has not himself received trust property knowingly assists the trustee in a breach of trust; (2.) A person receives trust property with knowledge that it is trust property which is being transferred in breach of trust. In the former case, in Australia, the law appears to be that actual knowledge (within which description should be included a state of wilful blindness or contrived ignorance) of the fraudulent or dishonest design must be possessed by the person assisting, whereby it can be said that such person is a participant in the dishonest activity. That is the effect of the judgment of Stephen J in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 409-412. Barwick CJ agreed in the reasons of Stephen J. The matter is not, however, quite clear cut. Gibbs J at 398 appears to have accepted a somewhat wider formulation (his Honour’s reference to inability to recognise impropriety by reason of “moral obtuseness” is well-known), so also McTiernan J, dissenting at 386. … [I]n Australia, the law appears to be that stated by Stephen J in Consul. So stated, and other difficulties for the respondent put to one side, neither the findings of the learned trial judge nor the evidence 364

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. could support a conclusion that Macquarie knowingly assisted in a breach of trust. For reasons earlier stated the findings of recklessness and wilful blindness made by his Honour, do not, in my opinion, take the respondent far enough. In Consul, Stephen J cited at 410 part of the dissenting judgment of Jacobs P in the New South Wales Court of Appeal in the decision then under appeal. Thus: … The point of the difference between the person receiving trust property and the person who is made liable, even though he is not actually a recipient of trust property, is that in the first place knowledge, actual or constructive, of the trust is sufficient, but in the second place something more is required, and that something more appears to me to be the actual knowledge of the fraudulent or dishonest design, so that the person concerned can truly be described as a participant in that fraudulent dishonest activity. Stephen J went on at 410: It is not clear to me why there should exist this distinction between the case where trust property is received and dealt with by the defendant and where it is not; perhaps its origin lies in equitable doctrines of tracing, perhaps in equity’s concern for the protection of equitable estates and interests in property which comes into the hands of purchasers for value. His Honour did not have to decide whether the distinction was rightly made; nor the limits of constructive knowledge (or notice). But he dealt with the question in issue by showing that cases in which constructive notice had characteristically been brought into play had been receipt cases; and that, several notable exceptions apart, assistance cases had reiterated the need for actual knowledge of dishonest design. That a distinction does exist in the treatment of receipt and assistance cases is, I consider, apparent. Many cases and texts point up the distinction. A few examples: Stephen J in Consul, wondered why the distinction existed, and provided a tentative answer. Sir Clifford Richmond highlighted the distinction, by reference to cases and texts, in Westpac Banking Corporation v Savin [1985] 2 NZLR 41 at 63 and seq. I refer also to the extensive consideration of authority by Hansen J in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd (1998) 3 VR 16; to Charles Harpum “Liability for Intermeddling with Trusts” (1987) 50 MLR 217, and to Simon Gardner, “Knowing Assistance and Knowing Receipt: Taking Stock” (1996) 112 LQR 56. The weight of authority is, I consider, in favour of constructive knowledge and construc-tive notice of breach of trust (sometimes in the cases a distinction is drawn between knowledge and notice, and sometimes it is not) being pertinent when the possible liability of a recipient of trust property is under consideration. … I consider it very important that trust property, and thereby beneficiaries, are given such protection as the law can legitimately afford. A number of rationales have been advanced why relief is given in receipt cases. Each has its judicial and text supporters. Some say that relief in receipt cases is essentially restitutionary. Others adopt the rationale that equity is concerned for the protection of equitable estates and interests in property. The perspective of others again focuses upon avoidance of unconscientious conduct. None of these suggested bases is, I consider, opposed to giving a broad application to constructive knowledge and notice principles in cases of receipt of the type now under discussion. I do note, however, that over reliance upon the restitutionary rationale in a trust context (albeit in respect of resulting trusts) was criticised by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 708-709. (His Lordship also made some observations about knowledge in the context of constructive trusts, saying that no trust arises in the case of “innocent receipt” – a concept which itself invites problems of analysis in that context.) In the present case, some matters are clear. First, the imposition of a constructive trust in a case of receipt of trust property in breach of trust is an example of an in personam remedy. Secondly, the [5.245]

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. property the subject of the mortgage was trust property. Thirdly, Macquarie knew well before the transaction was completed that it was trust property. Fourthly, the transaction involved a land dealing (a matter which Gardner posits may be of importance, as bringing in to play the rigours of constructive notice appropriate to general law land). Fifthly, the transaction was unauthorised by Sixty-Fourth Throne, trustee of the trust. It did not know of the transaction, but by Kandy’s actions the trustee became dispossessed of trust property to the disadvantage of the beneficiaries. Sixthly, the property was received by Macquarie for its own benefit. The question which then arises is whether the in personam remedy which might possibly attach in the circumstances is denied by the indefeasibility principle. I cannot accept that this is so. The argument to the contrary, developed by Tadgell JA, is, as I understand it, that because receipt in the case of this forged mortgage was effected by the act of registration of the mortgage, and because, absent fraud, registration rendered title indefeasible, then absent dishonesty (read fraud) there is no room for application of the remedy; to apply the remedy would be to permit a backdoor undermining of the indefeasibility principle. To accept such a position is, in my respectful opinion, effectively to deny the operation of a remedy which squarely falls within the in personam exception to indefeasibility, an exception which undoubtedly exists as a basis for indirect attack upon registration separate from the direct attack available by reliance upon statutory fraud. The approach accepts that, speaking generally, improper receipt of trust property can give rise to a constructive trust. But it says that, in the case of a dealing with trust property which is Torrens system land, recourse to imposition of such a trust is in part unnecessary; for dishonest receipt will constitute statutory fraud. Otherwise the possible scope of the remedy is denied application. The consequence of that approach is that the full range of operation of the particular remedy is emasculated. The proposition that an equity may be recognised and enforced so long as it involves no conflict with the indefeasability provisions has not prevented the High Court from imposing constructive trusts so as to recognise equities in cases where the transfer of real property was effected at different stages in the course of events giving rise to the equities: thus Bahr, Muschinski and Baumgartner. In my opinion this court is not obliged to, nor should, deny the applicability of the constructive trust remedy in a case such as this. It is one thing to say (in the context of transfer) that, absent fraud, a potential transferee is not to be affected by notice, actual or constructive, of any trust. It is a quite separate matter to say that such a person is to be unaffected by notice, actual or constructive, of a breach of trust. Likewise, I consider, by analogy in the case of a mortgage of land. Moreover, it has been said that the purpose of indefeasibility is to protect a transferee from defects in the title of the transferor; not to free the transferee from interests with which he has burdened his own title. To deny the applicability of the in personam remedy now under discussion would not, I think, achieve that outcome. It was not part of the respondent’s case to say that it had committed a breach of trust. Rather, in contending that Macquarie had acquired its interest in the land “dishonestly or with the requisite knowledge to constitute it a constructive trustee”, it focused upon knowledge which it sought to show had put Macquarie on notice that Kandy was or might be acting fraudulently or otherwise to the detriment of the trust, and thus the beneficiaries. Kandy was not the appointed trustee of the trust property; nor did he act on the trustee’s behalf in his dealings with Macquarie. He worked a fraud upon the trust, just as he worked a fraud on Macquarie. The trustee did not, by its own actions, commit a breach of trust by delivering trust property to Macquarie. But the effect of Kandy’s actions, nominally on behalf of the trustee, was to produce the same actual outcome. In my opinion the remedy of imposition of a constructive trust based upon receipt of trust property ought to comprehend that situation, if the facts otherwise suffice. If it is right to say, having regard to circumstances to which I earlier referred, that the concept of constructive notice should here be given a broad application, so as to extend to cases in which a 366

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Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd cont. reasonable, honest man would have had knowledge of circumstances telling of the wrongful disposition of trust property by Kandy’s actions, then in my opinion a finding adverse to Macquarie was properly to be made. That was the conclusion tentatively reached by the learned trial judge … [ASHLEY AJA considered the facts and continued.] The circumstances to which I have adverted reveal a disgraceful tale of mismanagement by Macquarie, which appears to have elevated form over substance when it thought that it had an attractive customer in its sights; and which, by its officers and agent, did not heed the clearest possible indications that it might very well be that trust property was being dealt with to the detriment of the trust. Macquarie ought be held accountable because its officers and solicitor agent were in possession at relevant times of information such as would tell a reasonable and honest person in their respective positions of the wrongful disposition by Kandy of trust property. Moreover, if it be relevant, Macquarie by its officers and solicitor agent was at relevant times in possession of information which at the very least must have put such a reasonable and honest person on enquiry – an enquiry which must have revealed Kandy’s fraud. I should add this: in my opinion Macquarie’s solicitor agent, considered alone, had in his possession information which in fact disclosed an apparently improper dealing with trust property. I consider that, in the present context, there should be no bar to a solicitor agent’s knowledge (or notice) being taken to be that of the corporate recipient of trust property. Such an imputation is made in other contexts involving, inter alia, dealings with land. The issue was discussed, in the context of a constructive trust, by Megarry V-C in Re Montagu’s Settlement Trusts. The Vice-Chancellor expressed doubt that knowledge, as distinct from notice, could be imputed in such a case. But he did not resolve the matter, most particularly in the case of the knowledge of a company. My own view is, I think, consistent with that adopted by Hansen J in Koorootang at 115-116 … [Ashley AJA found that the principle in the Barclays Bank case was inapplicable.]

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [5.250] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 High Court of Australia [This case arose out of a joint venture between the two litigants. The local council required the amalgamation of some adjoining land to allow the development to go ahead. The wife of the controller of the appellant, his daughters and companies associated with hims purchased the adjoining land. An offer was made to purchase the respondent’s interest in the joint venture land. When this offer was rejected, the appellant sought to appoint a trustee over the joint venture’s land and the respondent cross-claimed for a constructive trust over the land owned by the wife, daughters and associated companies. One argument was whether indefeasibility should attach to the interests held be the wife, daughter and associated companies. GLEESON CJ, GUMMOW, CALLINAN, HEYDON, CRENNAN JJ (footnotes omitted) … Indefeasibility The Court of Appeal’s reasoning. The four units in the names of Mr Elias and his family in No 15 are land held under the Real Property Act. So is No 13, in the name of Lesmint. Subject to irrelevant exceptions, s 42(1) of that Act provides: Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of [5.250]

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Farah Constructions Pty Ltd v Say-Dee Pty Ltd cont. 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 …. According to the Court of Appeal, it was contended that s 42(1) enabled Mrs Elias and her daughters to take upon registration an estate free of any claim by Say-Dee to their units, and that the fraud exception did not apply. Beyond recording a submission by Say-Dee that this point had not been the subject of any pleading or submission to the trial judge, the Court of Appeal did not deal with the fraud point. The Court of Appeal went on: However, the principle of immediate indefeasibility from registration is subject to any personal obligation by which the registered proprietor might be forced in personam to deal with the registered title in some particular manner. The Court of Appeal quoted Frazer v Walker: [T]his principle 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. The Court of Appeal then said: A further fallacy in Farah’s argument is that if it applies to Mrs Elias and the two daughters, then it must also apply to Mr Elias and Lesmint, each of whom became registered for an estate in fee simple in a unit in No 15 and the whole of No 13 respectively. It is not suggested by Farah that indefeasibility of title prevents a declaration that Mr Elias and Lesmint hold their interests in No 13 and 15 on constructive trust. If this be so, then the same principle applies to Mrs Elias and the two daughters where they have benefited from and are in receipt of an interest in the property the acquisition of which constituted a breach by their husband and/or father of his fiduciary duties. Accordingly, in my opinion, Mrs Elias and her daughters as well as Mr Elias and Lesmint hold their respective interests in Nos 13 and 15 on a constructive trust. Pleading difficulty. Can the relevant appellants rely on s 42(1) in this Court in view of the state of the pleadings? Say-Dee itself pleaded one matter necessary to support the contentions which the appellants wished to advance in relation to s 42(1), namely that Lesmint, Mr Elias, Mrs Elias and the two daughters are registered proprietors respectively of No 13 and the units in No 15. The more difficult problem stems from the appellants’ wish to negate the existence of fraud in the s 42(1) sense and personal equities in the Frazer v Walker sense. Fraud has been made a relevant issue in relation to Say-Dee’s desire that this Court consider the second limb of Barnes v Addy. Further, as noted above, although Say-Dee did not plead that the conduct of Farah was a dishonest and fraudulent design, a question appears to have arisen before the trial judge and the Court of Appeal as to whether Mrs Elias and her daughters were dishonest, and both the trial judge and the Court of Appeal recorded that one issue was whether the cross defendants were knowing participants in Farah’s breach of fiduciary duty. Say-Dee has been permitted to deploy arguments in relation to those areas in this Court. Say-Dee’s whole case in all courts has rested on claimed personal equities. In these circumstances there can be no unfairness in permitting Mrs Elias and her daughters in this Court, as they did in the Court of Appeal, to rely on s 42(1) and to seek to negate fraud and personal equities, which for other purposes Say-Dee relies on. For the same reason there can be no unfairness in permitting Mr Elias and Lesmint to do the same, despite their having abstained from doing so in the Court of Appeal and at the trial. Fraud. “Fraud” in s 42(1) means “actual fraud, moral turpitude”. The findings above negate actual fraud or moral turpitude not only on the part of Mrs Elias and her daughters, but also on the part of Mr Elias; and Lesmint is in the same position as Mr Elias. Even if the Court of Appeal’s factual findings about disclosure were not reversed, Mr Elias’s non-disclosures cannot be described as amounting to “actual fraud”, and the other parties are in no worse position. 368 [5.250]

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Farah Constructions Pty Ltd v Say-Dee Pty Ltd cont. In personam exception. An exception operating outside the language of s 42(1) can exist in relation to certain legal or equitable causes of action against the registered proprietor. So far as Say-Dee was relying on Barnes v Addy, it was certainly alleging a recognised equitable cause of action. In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd Tadgell JA (Winneke P concurring, Ashley AJA dissenting) held that a claim under Barnes v Addy was not a personal equity which defeated the equivalent of s 42(1) in Victoria, namely the Transfer of Land Act 1958, s 42(1). Tadgell JA said: [H]ere it is not possible to escape the circumstance that, if there was a “knowing receipt” by the appellant, it was a receipt by virtue of registration under the Transfer of Land Act. He continued: The argument for the respondent appears to assume that the acquisition by a mortgagee, in that capacity, of a proprietary interest following registration of a forged instrument of mortgage in respect of property that is subject to a trust amounts to a receipt by the mortgagee of trust property. If it were so, it might be possible to treat the holder of the registered proprietary interest as a constructive trustee arising from “knowing receipt” of trust property. As it seems to me, however, there is neither room nor the need, in the Torrens system of title, to do so. If registration of the mortgagee’s interest is achieved dishonestly then the registration, and with it the interest, are liable to be set aside not because, on registration, the registered holder became a constructive trustee but because s 42(1) recognises that fraud renders the interest defeasible. If, on the other hand, the registration is not achieved by fraud the Act provides, subject to its terms, for an indefeasible interest. Those terms allow, it is true, 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 what is called a constructive trust … [T]o recognise a claim in personam against the holder of a mortgage registered under the Transfer of Land Act, dubbing the holder a constructive trustee by application of a doctrine akin to “knowing receipt” when registration of the mortgage was honestly achieved, would introduce by the back door a means of undermining the doctrine of indefeasibility which the Torrens system establishes. It is to be distinctly understood that, until a forged instrument of mortgage is registered, the mortgagee receives nothing: before registration the instrument is a nullity. As Street J pointed out in Mayer v Coe … the proprietary rights of a registered mortgagee of Torrens title land derive “from the fact of registration and not from an event antecedent thereto”. In truth, I think it is not possible, consistently with the received principle of indefeasibility as it has been understood since Frazer v Walker and Breskvar v Wall, to treat the holder of a registered mortgage 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 in my opinion fail. That reasoning, with which four judges in the Full Court of the Supreme Court of Western Australia agreed in LHK Nominees Pty Ltd v Kenworthy, and with which Davies JA agreed in Tara Shire Council v Garner, applies here. In that latter case, however, Atkinson J (McMurdo P concurring), in deciding whether a claim was arguable on the pleadings, disagreed with Davies JA and with the majority in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd. Atkinson J and McMurdo P preferred the dissenting judgment of Ashley AJA in that case, the dicta of Hansen J in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd, where the indefeasibility point was not argued, and where in any event there was dishonesty; and the dicta of de Jersey J in Doneley v Doneley, where indefeasibility was not argued either. The essential point on which Ashley AJA differed from the majority in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd was put thus: The proposition that an equity may be recognised and enforced so long as it involves no conflict with the indefeasability [sic] provisions has not prevented the High Court from [5.250]

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Farah Constructions Pty Ltd v Say-Dee Pty Ltd cont. imposing constructive trusts so as to recognise equities in cases where the transfer of real property was effected at different stages in the course of events giving rise to the equities. He referred to Bahr v Nicolay (No 2), Muschinski v Dodds and Baumgartner v Baumgartner. Earlier, Ashley AJA had said that the “necessary balance” between personal equities and indefeasibility was “disclosed by the judgment of Wilson and Toohey JJ in Bahr v Nicolay (No 2)”. However, as Pullin J pointed out in LHK Nominees Pty Ltd v Kenworthy, in those cases “the defendant was the primary wrongdoer, attempting to ignore an obligation to share or convey the land with or to the plaintiff. In none of those cases was the defendant a party who merely had notice of an earlier interest or notice of third party fraud.” There is no analogy between the constructive trusts involved in those cases and that which can arise from application of the first limb of Barnes v Addy. Although the Court of Appeal referred to Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd on another point, it did not refer to that case or LHK Nominees Pty Ltd v Kenworthy in relation to indefeasibility. It ought to have followed those cases. The Court of Appeal’s suggestion that if Mrs Elias and her daughters obtained indefeasible title, Mr Elias and Lesmint would also do so, and that that is absurd, is erroneous. There is no absurdity unless fraud is established against Mr Elias and Lesmint, and this was not done. Had it been done, s 42 would not have assisted them. Hence the registered proprietors prevail over Say-Dee even if they are volunteers.

[5.255]

Notes and Questions

1. See Moore, “Equity Restitution and In Personam Claims under the Torrens System: Part 2” (1999) 73 ALJ 712 at 712-713. See also Wilson, “Unconscionability and Fairness in Australian Equitable Jurisprudence” (2004) 11 APLJ 1 where the author discusses how the English courts, in cases such as Barclay’s Bank plc v O’Brien [1994] 1 AC 180 and Royal Bank of Scotland v Etridge (No 2) [2002] AC 773, have taken a different approach to the same types of problem. See also Atkin, “Knowing Receipt following Farah Constructions Pty Ltd v Say-Dee Pty Ltd” (2007) 29(4) Sydney Law Review 713; Harding, “Barnes v Addy claims and the indefeasibility of Torrens Title” (2007) 32(2) Melbourne University Law Review 343; Butt, “Indefeasibility and “Knowing Receipt of Trust Property”” (2002) 76 ALJ 606; Weir “An Australian View: the Queensland Land Title Act” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 295–309 at p 307. Cf Chambers, “Indefeasible Title as a Bar to a Claim for Restitution” [1998] Restitution Law Review 126; Moore, “Equity Restitution and In Personam Claims under the Torrens System: Part 2” (1999) 73 ALJ 712. 2. See also Koorootang Nominees Pty Ltd v ANZ Banking Group Ltd [1998] 3 VR 16 and HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368. 3. Consider also the case of registration through mistake. The registered proprietor may be liable to a claim in personam if the conduct of the registered proprietor resulted in the dealing, through which he or she became registered, being subject to rectification for mistake. Lukacs v Wood (1978) 19 SASR 520; Tutt v Doyle (1997) 42 NSWLR 10. Cf Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606; State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398; Tanzone Pty Ltd v Westpac Banking Corp (1999) NSW ConvR 55-908 (reversed on another point: 370 [5.255]

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Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521). In White v Tomasel [2004] 2 Qd R 438 the Queensland Court of Appeal considered the in personam exception in the context of registration of a transfer pursuant to a court order subsequently set aside on appeal. In finding the in personam exception applied and that thus the registered proprietor’s title was not indefeasible, the court seemed to be acknowledging there may be circumstances where the exception may operate without an element of unconscionability. See Christensen and Duncan, “Indefeasibility of Title – a Bar to Restitution after Reversal of a Judgment on Appeal?” (2005) 11 APLJ 81 where the authors argue that the judgment of Davies JA in dissent is clearly more in line with accepted authority and is to be preferred over the majority judgments. See also Case Note, “Torrens Title: Indefeasibility Affected by “Equities” – What is an Equity?” (2005) 79 ALJ 30 and more generally Papamatheos, “What are the Juridical Bases of Reversal of Judgment Restitution?” (2004) 25 ABR 268. 4. Consider whether the specific exception to indefeasibility of “an equity arising from the act of the registered proprietor” which exists in Queensland and the Northern Territory leads to a different application of the in personam principle in those jurisdictions.

Parker v Mortgage Advance Securities Pty Ltd [5.260] Parker v Mortgage Advance Securities Pty Ltd [2003] QCA 275 DAVIES JA: (footnotes omitted) … The appellant was at all relevant times the registered proprietor of a house property at 3 Williams Street Buderim. On 16 April 1999 she executed a registrable mortgage over the property to the respondent to secure an advance of $34,500. The advance was apparently in fact made to a man called Stumer with the appellant’s consent. The mortgage was registered on 27 May 1999. There was default in repayment of the money advanced and on or about 22 March 2000 the respondent served a Notice of Exercise of Power of Sale on the appellant in respect of the land. The action which the appellant sought leave to commence against the respondent, which is now in liquidation, was one to set aside the mortgage either on the ground that she did not have the legal capacity to execute the mortgage (non est factum) or on the basis that the deed of loan and the mortgage which secured it were obtained by unconscionable conduct. The learned primary judge was not satisfied that, on either basis, the appellant established that there was a serious question to be tried. Non est factum There was some medical support for the contention that, at the time the appellant executed the mortgage she did not have the mental capacity to understand it, namely two reports from Dr Mulholland a psychiatrist dated 14 December 2000 and 10 October 2002 although, as counsel for the respondent has pointed out, there are some weaknesses in this evidence not the least of which is that Dr Mulholland did not see the appellant until December 2000, more than a year and a half after the transaction sought to be set aside and, in the meantime, the appellant had apparently suffered a second stroke in January 2000, her first stroke upon which Dr Mulholland’s report was based having occurred in January 1999. Nevertheless in my opinion the appellant would have an arguable case, on the evidence so far adduced, that when she executed the mortgage she did not have the mental capacity to understand it. A more serious problem is that, unless the claim based on unconscionability succeeds, the respondent, on registration of the mortgage, obtained indefeasibility of title as mortgagee and that [5.260]

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Parker v Mortgage Advance Securities Pty Ltd cont. that indefeasibility included the covenant to repay the mortgage sum and the power of sale conferred on a mortgagee under s 83 and s 84 of the Property Law Act 1974: Land Title Act 1994 s 78. Such indefeasibility is subject only to fraud by the registered mortgagee and to any equity arising from the act of the registered mortgagee. Whatever may have been the conduct of others involved in the transaction which gave rise to the execution of the mortgage, it was not even contended that there was any fraud attributable to the respondent. Nor, unless there is some equity against it arising from unconscionable conduct on its part, was there any equity against it. It is to that question that I now turn. Unconscionability It may be accepted that the respondent did not know anything of the appellant’s mental state at the time she executed this mortgage. Nor was it submitted that there were facts from which it ought to have known this. The appellant’s contention was rather that it was arguable that there were facts known to the respondent on the basis of which it was unconscionable of it to proceed to enter into the loan transaction and take the mortgage from the appellant without making further inquiry which would have revealed that advantage had been taken of her vulnerability. Those facts known to the respondent were, according to Mr Diehm, who appeared for the appellant, the following: 1

that the whole of the loan was to be paid to Stumer, apparently to be spent on Stumer’s new panel shop (Stumer was a panel beater);

2

that the only security for the loan was to be provided by the appellant and by her daughter Ms Hume, but not by Stumer notwithstanding that he owned real property which could have been mortgaged;

3

that the loan, totalling $34,500 was to be advanced on that security notwithstanding that Stumer disclosed having $20,000 in cash;

4

that the appellant was 81 years of age and a pensioner. She was also described in the application as an investor but the only asset which she owned was the house property the subject of the mortgage;

5

that it did not appear that the appellant had any income which could service the loan; and

6

that the loan was to be at an interest rate of 28 per cent reducible only to 20 per cent for prompt payment.

On the basis of those facts Mr Diehm submitted that this was known by the respondent to be an improvident loan secured by a mortgage of a very old woman of her only asset. Moreover, he submitted that the above circumstances in which it was obtained arguably required further inquiry by the respondent before taking such a mortgage. The relevant principles applicable to these facts are not in doubt. What the appellant must show, in order to succeed in her claim, is knowledge or means of knowledge by the respondent of some condition or circumstance affecting the appellant’s ability to make a judgment in her own best interest, and unconscionable advantage taken by the respondent of that condition or circumstance. Mr Clothier, for the respondent, relied heavily on a certificate provided to the respondent from a solicitor, who was independent of the respondent, to the effect that the mortgage was executed in her presence; that she explained the effect of the mortgage to the appellant before it was executed by the latter and that the appellant stated to her that she had read the document, understood its effect and her obligations under it, approved the conditions of the document and signed the document voluntarily; that she explained to the appellant that to understand the risk in giving the mortgage she should have an understanding of the financial accommodation which the mortgage secured and 372 [5.260]

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Parker v Mortgage Advance Securities Pty Ltd cont. advised her to obtain independent financial advice; and that to the best of her knowledge, information and belief the appellant signed the mortgage voluntarily having appeared to understand its terms and after stating to her that she did understand its terms. The form of the certificate gives some cause to doubt the care with which the certifier satisfied herself about any of the above matters. It was in a standard form, appropriate whether the borrower was male or female or a company. And it was incorrectly executed, the solicitor signing only as a witness to the signature of the appellant. Nevertheless Mr Clothier pointed out, accurately, that the respondent had no direct contact with the appellant in this transaction, it having been handled through a broker and, in those circumstances he submitted, the respondent was entitled to rely upon this certificate from the solicitor notwithstanding its defects. It is true that the certificate was provided by a solicitor whom the respondent knew was independent of it. But what the respondent did not know, and made no attempt to ascertain, was whether that solicitor was independent of Stumer. The transaction had about it the hallmarks of one in which a person, weakened at least by age, was prevailed upon by a younger and stronger person to mortgage her property in an improvident way for the benefit of that younger and stronger person. It is therefore arguable, in my opinion, that the respondent, knowing what it did, was unconscionable in proceeding with the transaction which included the mortgage without making inquiry as to whether the appellant had entered into this transaction independently of any influence exerted over her by Stumer. For that reason I think that the learned primary judge erred in refusing the application. [Williams JA and Jerrard JA agreed with the judgment of Davies JA.]

[5.265]

Notes and Questions

1. Parker v Mortgage Advance Securities Pty Ltd [2003] QCA 275 is an example of how equitable doctrines such as duress, undue influence and unconscionable dealing may affect the indefeasibility of a registered proprietor’s title pursuant to the in personam exception (or where appropriate, the fraud exception). For another example see ANZ Banking Group Ltd. v Dzienciol [2001] WASC 305 where a number of the equitable principles including special disability and unconscionable dealing were discussed in the context of a dispute where the registered mortgagee made a claim for possession. 2. The High Court affirmed in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 that there is another separate doctrine, pursuant to which a married woman who gives a guarantee to a third party to secure her husband’s debts, has a right, in certain circumstances, to set aside the surety against the third party (usually a mortgagee). If the wife does not understand the nature and effect of the transaction, does not gain any benefit from the transaction and the lender understands the wife may repose trust and confidence in the husband and has not ensured she seek independent advice, then in the view of the High Court, it is unconscionable for the creditor to rely on the guarantee. Undue influence per se need not be proved. If the guarantee, or part of it, comprises a mortgage of Torrens land, the application of the doctrine may give rise to a right enforceable in personam against the registered mortgagee’s title. The difficulties in reconciling Torrens principles concerning the conclusiveness of the Register and general equitable principles are clearly highlighted in this area. For a discussion of these matters, see Griggs, “Torrens Title: Arise the Registered and Unregistered, Befall the Legal and Equitable” (1997) 4 Deakin LR 35; Moore, “Equity, Restitution and In Personam Claims [5.265]

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under the Torrens System” (1998) 72 ALJ 258 (Moore, pt 1); Moore, “Equity, Restitution and In Personam Claims under the Torrens System: Part two” (1999) 73 ALJ 712 (Moore pt 2); Toomey, “Certainty of Title in the Torrens System” (2000) 4 FJLR 235; Griggs, “In Personam, Garcia v NAB and the Torrens System – Are They Reconcilable?” (2001) 1 QUTLJJ 76; Stevens and O’Donnell, “Indefeasibility in Decline: the In Personam Remedies” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 141-156; Wilson, “Unconscionability and Unfairness in Australian Equitable Jurisprudence” (2004) 11 APLJ 1; Wright T, “The Special Wives’ Equity and the Struggle for Women’s Equality” (2006) 31 Alt LJ 66-69 at 87. Further, it appears the Garcia principle may be able to be extended to other long-term and publicly declared relationships, with a similar basis of trust and confidence (Kranz v National Bank (2003) 8 VR 310). See also Liu v Adamson (2004) NSW ConvR 56–074; ANZ Banking Group Ltd v Alirezai (2004) Q ConvR 54-601. Cf Watt v State Bank of NSW [2003] ACTCA 7. See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.375]. Volunteers

Conlan v Registrar of Titles [5.270] Conlan v Registrar of Titles (2001) 24 WAR 299 [The complex facts of this case arose out of a pooled mortgage scheme whereby investors were induced to contribute. The finance broker who organised this scheme was guilty of equitable fraud. One issue before the Western Australian Supreme Court was whether the investors were volunteers, and importantly whether indefeasibility affects a volunteer] OWEN J … Does Indefeasibility Affect a Volunteer? There is conflicting authority on the question whether a volunteer obtains an indefeasible title on registration. It is essentially a matter of statutory interpretation. Those who contend that indefeasibility extends to volunteers argue that s 68(1) is the paramount provision of the TLA and the other sections (at least for the purposes of the doctrine of indefeasibility) are ancillary to it. Section 68(1) contains an express exception for volunteers in relation to portions of land that are, by wrong description of parcels or boundaries, included in a certificate of title. Section 199 also contains express exceptions to the protection afforded to a registered proprietor against ejectment. In relation to two of them, s 199(iv) and (v), there is express reference to the position of a volunteer. These express and specific exceptions would be otiose if there were a general implicit exception which applied to volunteers. This, it is argued, is inconsistent with the existence of an unstated general exception. The notice provisions in s 134 are concerned only with the effects of notice of a prior unregistered interest and say nothing about any lack of consideration. Section 134 is merely ancillary to the main indefeasibility provision. It does not control the effect of s 68 on an issue that is not directly addressed in it. Counsel for the applicants pointed to the many sections in the TLA which, either in the section heading or the body, mention “purchase”, “purchaser”, “bona fide” and “valuable consideration”. This, counsel submitted, indicated a legislative intention that only purchasers for valuable consideration would acquire an indefeasible title. However, in a careful analysis of the relevant provisions of the TLA, 374 [5.270]

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Conlan v Registrar of Titles cont. counsel for the Registrar developed the argument that these provisions do not indicate a legislative intent to that effect. I am indebted to counsel for the analysis and adopt it. I will summarise the argument on the sections to which counsel for the applicant referred. • Section 19 is a repealed provision which, while it was in force, provided that an endorsement of notice of survivorship on a registration of a grant of fee in joint tenancy for any public purpose would be made by the Registrar. I do not think it assists the applicant. • Section 42 is another transitional provision concerned with the bringing of land into the Torrens system. It authorises the Commissioner to accept a memorial of the registration of a lease as proof of its contents without the need to call for the lease document. The section provides that unless the memorial discloses “a right of renewal or purchase” no such right shall be assumed to have existed. The import of this section is to permit reliance on the memorial rather than on the underlying contractual document. It has nothing to say about the difference between volunteers and those who have given consideration. It simply deals with a particular form of contract, namely, a lease, which contains a particular contractual provision, namely an option to renew or to purchase. • Sections 46 and 47 refer to sales by a court or pursuant to an order of the court. It is highly unlikely that a court would order that land be gifted. I think the section assumes a sale. • Section 52(4) provides that the person named in a certificate of title or in an instrument purporting to affect land as a proprietor or having estate or interest or power in relation to the land that is the subject of a certificate or instrument shall be deemed to be the registered proprietor of the land or to have the estate or interest or power in relation to the land. In my view this is simply one of the indefeasibility provisions of the TLA. It does not contain, either expressly or by implication, a qualification limiting its application to a situation where value has been given. • Section 67 deals with a situation where a proprietor of land brings an action for specific performance of damages against a person “who may have contracted to purchase such land”. Again, that is a particular situation in which there is a contract to purchase. It does not mean (or imply) that a registered proprietor cannot take advantage of the doctrine of indefeasibility unless that proprietor has given value. It focuses on the conclusive nature of the certificate of title, in so far as the proprietor is concerned, in the nominated situation, namely where there has been a contract to purchase land. • Section 78 is concerned again with a transfer by a sheriff or the Magistrate of a Local Court or mortgagee to a purchaser of any land or for the purpose of rectifying or cancelling a certificate. All that it does is to place on a judgment debtor, mortgagor, mortgagee or proprietor having custody of a certificate or instrument an obligation to deliver it up to the Registrar on demand. Once again, I do not find any support in this provision for the proposition that indefeasibility does not apply to volunteers. • Section 83T(3)(f) relates to action under a crown lease under s 261 of the Land Administration Act 1997. That provision provides that where the holder of the crown lease is insolvent the person who is administering the estate of the insolvent may sell the lease to a purchaser who would be qualified to hold it under the terms of the legislation. This has nothing to say about the issue here under discussion. • Sections 108, 110 and 128 are all concerned with sales by mortgagees and have nothing to say about volunteers. • Section 133, which deals with sales a writ of fi fa or decree or order of the Supreme Court, contains a specific limited volunteer’s exception. An express exception of this nature would be unnecessary if there were a general exception. [5.270]

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Conlan v Registrar of Titles cont. • Section 183 is, in essence, an administrative means giving effect to a vesting order made by the Commissioner. It refers only to the a “sale” where the purchase price has been paid in full but the conveyance has not been completed because the vendor is dead or resides out of the jurisdiction. In that context it is not surprising that the section refers to (and is limited to) a purchase where the consideration has been paid. After all, it has some of the hallmarks of the administrative mechanisms necessary to give effect to a decree of specific performance. • Section 201 relates to the right of a person deprived of title to land by fraud or similar misfeasance to obtain compensation. Relevantly, the right is limited to the value of consideration actually received once the land has been transferred bona fide and for value. That is logical when the particular situation to which the section refers is considered. But again, it does not require the TLA to be interpreted in such a way that the doctrine of indefeasibility is of more limited application than the express provisions of the legislation seem to suggest. I turn now to the authorities in which this issue has been considered. So far as concerns the submissions on behalf of the applicant, the starting point is the dicta of Kitto J in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 572: A provision that a person is not to be affected by notice of prior interests has no application to him so long as he remains unregistered. For the same reason, it has no application even to one who has become registered, if he acquired his estate or interest as a volunteer. It is only a person having a legal estate or legal interest acquired for value whose position is prejudiced by his having received, before paying his money, direct or constructive notice of an outstanding equitable interest. This is so even under the Real Property Act (NSW) for a registered interest is not (as was suggested in the course of the appellant’s argument) some special kind of statutory interest - it is a legal interest, acquired by a statutory conveyancing procedure and protected from competition to the extent provided for by the Act, but having, subject to the Act, the nature and incidents provided by the general law. So all the provision does which I have quoted from s 43 is to protect against notice of any trust or unregistered interest a legal estate acquired for value. However, as counsel for the Registrar pointed out, in that passage Kitto J was dealing with a person who did not hold a registered interest and who sought to rely on the statutory provision which is equivalent to s 134. The fact that this section did not protect volunteers in the factual situation which applied in IAC (Finance) Pty Ltd says little about whether other provisions of the TLA might operate to protect the volunteers. I will return to IAC (Finance) Pty Ltd a little later. Before leaving the early High Court decisions I should mention Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555. There are comments in the case about the position of volunteers. However the context in which those remarks occur involved an unregistered transfer. Dixon J was discussing equitable interests, not legal interests, under the Torrens system. In dicta at 599 – 600 his Honour left open the wider question of the application of the indefeasibility provisions to volunteers when he commenced a passage with the phrase “if [the Torrens] system allows a volunteer to acquire an indefeasible right …” (my emphasis). In King v Smail [1958] VR 273 a husband and wife were registered as the proprietors of land as joint tenants. The husband executed a transfer of his interest in the land to the wife by way of gift. Before the transfer was registered the husband executed a deed of arrangement under the bankruptcy legislation. The trustee lodged a caveat claiming an equitable interest in the land under the terms of the deed of arrangement. In proceedings by the wife to remove the caveat the question was whether the trustee had an interest which had priority over the registered title of the wife. Adam J held that s 42 of the Victorian Act (which is equivalent to s 68) did not give the wife priority because she was a volunteer and the doctrine of indefeasibility only protected bona fide purchasers for value. Adam J said, at 276: 376 [5.270]

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Conlan v Registrar of Titles cont. Although s 42 of the Transfer of Land Act 1954 in itself affords no ground for distinguishing between the volunteer and the purchaser for value and would appear to give paramount effect to registered title in either case, other sections in the Act draw a distinction between the volunteer and the purchaser for value and appear to justify the conclusion that upon the registration of dealings subsequent to initial registration under the Act, it is purchasers for value only who were intended to have the benefit of s 42. His Honour then conducted an analysis of other provisions of the Act in much the way that I have set out above, although reaching the opposite conclusion to that which I have reached. Adam J was particularly influenced by s 43, which is in similar terms to s 134. He said, at 277 - 278: The protection given by s 43 to a registered proprietor, ie the legal owner of land, against the consequences of notice actual or constructive of trusts or equities affecting his transferor has point where the legal owner is a purchaser for value. A purchaser for value has by virtue of this section the immunity from prior equities of a bona fide purchaser of the legal estate without notice under the general law. On the other hand, to confer on a mere volunteer immunity from the consequences of notice would be illusory, for as already stated the volunteer was, on well-settled rules of equity, subject to equities which affected his predecessor in title whether with or without notice of such equities. I pause to note that King involved a transaction that was, arguably, voidable under the Victorian equivalent to s 89 of the Property Law Act 1969 as being a voluntary alienation done with intent to defraud creditors. I mention this only because it may be thought there is a policy reason in favour of denying to volunteers the protection of indefeasibility to prevent fraudulent transactions of this nature. Of course, if the transferee had knowledge of the fraudulent intent it would not be protected in any event. In other situations statutory provisions such as s 89 of the Property Law Act 1969, ss 120-122 of the Bankruptcy Act 1966 and ss 565-567 of the Corporations Law are adequate to prevent deliberate abuse. It is not necessary to import a further exception to s 68 in order to achieve that objective. In Bogdanovic v Koteff (1988) 12 NSWLR 472 the Court of Appeal in New South Wales came to the opposite conclusion. B had lived in a house with SK in circumstances which led her to claim she had an equitable interest in the property. SK died leaving a will in which he left all his property (including the land) to K. A transmission application was registered as a result of which K became the sole proprietor of the land. The question was whether, as a volunteer (he having taken the land under the terms of SK’s will), K could claim an indefeasible title free from any equity or equitable interest that B might be able to establish. The Court answered the question in the affirmative. Priestley JA (with whom Hope JA and Samuels JA agreed) referred to Frazer and Breskvar and said, at 480: The broad proposition arrived at by Adam J in King, that a registered proprietor, being a mere volunteer does not obtain a title free from prior equities, must, following Breskvar, be replaced by a formulation based on what the High Court said in that case. There is such a formulation in Windeyer J’s reasons. After referring to what Torrens himself said in his 1862 handbook on the Real Property Act of South Australia to the effect that his system left each freeholder in the same position as a grantee direct from the Crown, Windeyer J went on, at 400: This is an assertion that the title of each registered proprietor comes from the fact of registration, that it is made the source of the title, rather than a retrospective approbation of it as a derivative right. I say that only to emphasize that the doctrine of an indefeasible title arising by registration was seen as the very essence of the Torrens system from its beginning. In the present case, the decision of the Privy Council in Frazer v. Walker (1967) 1 AC 569 recognizes that the registered proprietor has the legal property in the land, subject only to equities and such interests as the Act expressly preserves. Similar statements were made by other members of the court, see Barwick CJ (at 385), Menzies J (at 397), Walsh J (at 405) and Gibbs J (indirectly) (at 413). [5.270]

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Conlan v Registrar of Titles cont. In Rasmussen v Rasmussen [1995] 1 VR 613 H became the registered proprietor of certain farming lands as a beneficiary under a will. E claimed an interest in the lands under a “common interest constructive trust”. The court upheld the claim. One of the questions which then arose was whether H was protected by the doctrine of indefeasibility. Coldrey J noted the conflict between King and Bogdanovic and to the conclusion in the latter that in light of Frazer and Breskvar, King could no longer be regarded as good law. His Honour then said, at 632 - 634: It is to be noted however that Breskvar and Frazer were each concerned not with the situation of a mere volunteer but with that of a purchaser for value. In neither case was the judgment of Adam J considered by the court. Moreover, in the High Court decision of Bahr v Nicolay, which is not cited in Bogdanovic, there are passages in various of the judgments that appear to confine the protective operations of the relevant Transfer of Land Act sections to purchasers for value. (Again there is no reference to King v Smail). ………… In my view the reasoning in the High Court decisions does not destroy the principles enunciated in King’s case. That case is a careful reasoned judgment and, with respect, I prefer it to that of the New South Wales Full Court in Bogdanovic. It is to be noted that Bogdanovic contains no discussion of the rationale for distinguishing between the indefeasibility of title of a purchaser for value as distinct from a mere volunteer. …………. Whilst granting the importance of what has become known as the “paramountcy provisions” of the Torrens statutes (for example s 42), there is an overriding principle of fairness which ought to permit a person whose equity in land will be defeated by the actions of the penultimate registered proprietor in donating such land to a volunteer to enforce that equity in the land against such volunteer albeit that the volunteer has become the registered proprietor of it. A distinction in the application of the indefeasibility provisions to a bona fide purchaser for value and a mere volunteer is, in my view, both rational and principled. On the one hand it recognises the desirability of commercial certainty in property transactions and on the other allows full play to equitable precepts. Consequently I regard the decision of Adam J in King v Smail as correctly stating the law in Victoria and accordingly I do not regard the plaintiff’s claim as defeated by the circumstance that the defendant is now the registered proprietor of the disputed property. I will return to the consideration of Bahr in a moment. Just in passing I should say that it is hardly surprising that Bahr was not cited in Bogdanovic. Bahr was heard in September 1987 and the decision handed down on 15 April 1988. Bogdanovic was heard in November 1987 and the decision handed down on 19 April 1988. The next relevant decision is Valoutin Pty Ltd v Furst (1998) 154 ALR 119. Although decided in the Federal Court it, too, is a decision on the Victorian legislation. I do not need to describe the facts and I should mention that the comments about indefeasibility are obiter. Finkelstein J, having referred to King, Bogdanovic and IAC (Finance) Pty Ltd, said, at 136 - 137: When it is accepted, as it must be, that s 43 does not relieve a volunteer from equities which affected his transferor it is difficult to see why s 42 should be held to give that protection. Such a view would be inconsistent with the structure and text of the Transfer of Land Act. It should also be noted that King v Smail was followed by Coldrey J in Rasmussen v Rasmussen [1995] 1 VR 613 in preference to Bogdanovic. In my view King v Smail correctly states the law. There are a couple of other decisions to which I can make passing reference. There is a bland statement by Hodgson CJ in Eq in Silvera v Savic (1999) 46 NSWLR 124 at 136 that “it is clear that the indefeasibility provisions of the Real Property Act 1900 do operate in favour of volunteers”. However, the point was not necessary for the decision and it is not developed. It may well have been a recognition of the binding effect (in New South Wales) of Bogdanovic. Counsel for the applicants also sought to draw comfort from the decision of Olsson J in Adelaide Congregation Jehovah’s Witnesses Inc; 378 [5.270]

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Conlan v Registrar of Titles cont. Pegasus Leasing Ltd v Official Trustee in Bankruptcy for the Estate of Griggs, unreported SCt of SA (Olsson J); No 733 of 1993; 20 October 1996. His Honour said, at 99: “It is clear from a reading of the section (and well established by authority) that indefeasibility is not conferred on a mere volunteer”. The section to which his Honour was referring is the equivalent to s 68. However, a close reading of the relevant section of the South Australian legislation reveals that the proviso is in materially different terms to that contained in s 68 of the TLA. The decision is therefore of limited utility so far as concerns the proper interpretation of the TLA. I think the critical point is the recognition in Frazer that s 68 is the paramount provision of the TLA and that sections such as s 134 are ancillary to it. King was decided at a time when this was not necessarily received doctrine. At the time there was a respectable body of opinion to the effect that these other sections of the Act governed (or at least were relevant to) the broad import of the indefeasibility doctrine: see, for example, Clements v Ellis (1934) 51 CLR 217 at 241 - 245. As Priestley JA pointed out in Bogdanovic, following Breskvar there can be no doubt that Frazer represents the orthodox construction of this central tenet of the Torrens legislation. It follows also from the dicta of Mason CJ, Dawson and McHugh JJ in Leros at 418 (which I have already set out) to the effect that, a registered title is free from unregistered interests that would have conflicted with the proprietor’s estate unless the prior unregistered interest falls within the exceptions to indefeasibility of title mentioned in s 68. I return to Bahr, and to the reliance placed on it by the trial Judge in Rasmussen. I think it is important to recognise what Bahr was about. It was about the nature of fraud as it applies to the Torrens system and about in personam rights under that system. In other words it was about an express exception contained in s 68 and about a further exception that is not mentioned in the legislation but which is well recognised in the authorities. True it is that in the passages from Bahr that are mentioned in Rasmussen their Honours made reference to “dealing with” the registered proprietor, a concept that may be seen as more apt to a transaction for value. But that is the situation with which the court was confronted in Bahr (as, I accept, it was in Frazer and Breskvar). However, in Bahr there is express recognition of both Frazer and Breskvar and nowhere is there to be found any dissent from, or query about, the fundamental principle of paramountcy that emerges from those two authorities (among others). I am not sure that resort to general notions of fairness as a means to read down the paramount import of s 68 (an approach that commended itself to the trial judge in Rasmussen) is appropriate. After all, the doctrine of indefeasibility is not absolute: see Vassos v State Bank of South Australia [1993] 2 VR 316 at 322. But there are very good reasons for construing the legislation according to its tenor and limiting the exceptions to those for which the legislature has made express provision and those that are recognised by clear judicial authority, such as the preservation of the in personam claim. In my view there is some (admittedly limited) scope within the recognised exceptions to import notions of fairness. But as the fact situation of this case demonstrates, totally innocent people are going to be hurt by the resolution of the legal issues and their application to the disaster that others have foisted on them. There is no way that the questions raised by this case can be answered without some of the investors, through no fault of their own, being unable to recover all or some of the money they have invested. Accordingly, to use general notions of fairness as a means of implying further exceptions into the statutory scheme is apt to raise as many questions as it will answer. I am conscious of the words of Mason CJ and Dawson J in Bahr at 615: … we agree with Higgins J. in Stuart v. Kingston when his Honour said (at p 345) that there was much to be said for the view, expressed by Stawell C.J. on the equivalent Victorian provision, that the section should be “construed strictly” and the exception “liberally”. The section restricts, in the interests of indefeasibility of title, rights which would exist otherwise at law or in equity. [5.270]

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Conlan v Registrar of Titles cont. Nonetheless, indefeasibility is at the heart of the Torrens system. As was said in Franzon at 620 - 621 “the protection of the registered proprietor is paramount”. This was reiterated in a note in (1992) 66 ALJ 507 where the author said: “Public confidence in the Torrens system depends on the rock-solid effect of registration”. The principle of indefeasibility is well understood by lawyers and by the commercial community. In my view it must be given the utmost respect and should be applied according to its tenor. Another way of putting the same point emerges from a note under the title “Indefeasibility and sleights of hand” in (1992) 66 ALJ 596. In a comment on Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 (a case in which a registered proprietor was held not to be bound by a forged variation of a registered mortgage which had increased the principal sum) the author said: … registration of the variation should have resulted in [the registered proprietor] being bound by the (new) personal covenant to pay the (increased) principal. This may seem a harsh result. But indefeasibility of title - at least “immediate” indefeasibility of title - is a harsh doctrine. That is the whole point. Any other approach diminishes the effectiveness of registration and compels that very investigation into the history of transactions and titles that Sir Robert Torrens was at pains to abolish. Before I leave the authorities, I wish to say a little more about IAC (Finance) Pty Ltd. Kitto J predicated his conclusion that s 134 did not protect a volunteer on the notion that, once registered, the legal interest is of the same nature as a legal interest in land under the general law, thus importing concepts that apply to old system land. Even if that be correct (and following the affirmation of the paramountcy of s 68 it may fall to be reconsidered one day) it does not compel the conclusion that indefeasibility cannot apply to a volunteer. In this respect I think it is significant that in Bogdanovic the court left open the question whether knowledge of B’s interest by K before he became registered would enable B to assert her rights against K. To the extent that it is necessary to examine the other provisions of the TLA to ascertain whether there is a legislative intention to exclude volunteers from the benefits of indefeasibility, I find compelling the proposition that the critical provisions contain their own express recognition of the position of a purchaser for value. These provisions would be otiose if there were a general, unstated, exception concerning volunteers. So far as concerns the other sections to which reference was made, I repeat what I have already said. Almost all of them cater for situations in which a transaction for value would inevitable arise. For example, sales by a mortgagee, under execution and by an insolvency administrator. They have nothing to say about the general approach of the Torrens system to volunteers. Looking at the other sections of the TLA there is at least one provision that might be taken as exhibiting an intent to make a want of consideration irrelevant (subject, of course, to express exceptions). Section 85 provides that “every transfer or other instrument shall be deemed of the same efficacy as if under seal” once it has been signed and registered. It is trite law that one of the consequences of a document being executed under seal is that a lack of consideration is not fatal to its enforceability, although it may be a circumstance relevant to whether equitable relief is available. In HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368 JD Phillips J noted, at 388, that a consequence of the Victorian equivalent of s 85 was that a want of consideration became irrelevant on registration. I am not sure how far this argument can be extended and I mention it more as a makeweight. In my view the doctrine of indefeasibility can apply to the holder of a registered interest where the proprietor has become registered through a voluntary transaction. If the registered interest is to be defeated it must be attacked according to one of the exceptions recognised by the TLA or at law. It follows that I find compelling the reasoning in Bogdanovic. With very great respect to the judicial officers who have expressed a different view I am unable to agree with them. I should refer, in conclusion, to an article by P Radan entitled “Volunteers and Indefeasibility” which is to be found in 380 [5.270]

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Conlan v Registrar of Titles cont. (1999) 7 Australian Property Law Journal 197. The reasoning contained in the article was of great assistance to me in crystallising my own views. I am indebted to the author accordingly.

[5.275]

Notes and Questions

1. Section 180 of the Land Title Act 1994 (Qld) and s 183 of the Land Title Act (NT) appear to settle the position in Queensland and the Northern Territory by providing that “[t]he benefits of this Division [concerning consequences of registration] apply to an instrument whether or not valuable consideration has been given”. Cf Washington Construction v Ashcroft [1982] Qd R 776, where the court followed the decision in King v Smail [1958] VR 273. 2. Coldrey J’s view in Rasmussen v Rasmussen [1995] 1 VR 613 was that “… the distinction in the application of the indefeasibility provisions [between purchasers for value and volunteers] … recognises the desirability of commercial certainty in property transactions and on the other [hand] allows full play to equitable precepts”. The volunteer issue probably does most often arise in the “family” situation where the need for protection of vulnerable family members is clear. In King v Smail [1958] VR 273 the decision relied upon by Coldrey J for deciding that volunteers should not gain the protection of the indefeasibility provisions, concerned a family situation too but in this case there were also third party creditors involved. What competing policy considerations might arise? Consider the fact situation as described in the Rasmussen judgment. See also Valoutin Pty Ltd v Furst (1998) 154 ALR 119 and Lansen v Olney (1999) 100 FCR 1. See Radan, “Volunteers and Indefeasibility” (1999) 7 APLJ 197 where the decisions and policy issues are discussed. 3. In Official Receiver v Klau; Ex parte Stephenson Nominees Pty Ltd (1987) 74 ALR 67, Fisher J in considering the indefeasibility of a company’s registered mortgage, stated “[t]he company can be said to have taken the mortgage bona fide, but it is also necessary for it to establish that such was taken for valuable consideration. If it fails, then it is a volunteer and the courts have frequently been willing to go behind the register and deny the protection of the Real Property Act 1900 to volunteers. I refer in particular to … King v Smail”. His Honour continued later “[on the facts] the company should be regarded as a volunteer not providing valuable consideration for the grant of the registered estate. Its otherwise indefeasible title may be subject to an action of a personal character arising out of this circumstance”. Does Fisher J agree with the principle from King v Smail? 4. Consider the impact, if any, of the High Court decision in Corin v Patton (1990) 169 CLR 541 on the debate concerning indefeasibility of title for volunteers. 5. In State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398 and in Medical Benefits Fund of Australia Ltd v Fisher [1984] Qd R 606, the argument that a volunteer does not acquire an indefeasible title was not raised. Cf Bogdanovic v Koteff (1988) 12 NSWLR 472 with Allen v Snyder [1977] 2 NSWLR 685. See Atherton, “Donees, Devisees and Torrens Title: The Problem of the Volunteer under the Real Property Acts” (1998) 4 Aust J Leg Hist 121. [5.275]

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6. In King v Smail the court wanted to ensure that the registered volunteer could not, by simple registration, defeat the interests of the husband’s creditors. Consider whether this remains a concern in view of the “claw-back” provisions in the bankruptcy legislation: see Bankruptcy Act 1966 (Cth), ss 115 – 116, 120 – 123. Overriding legislation [5.280] Like any Act of Parliament, a Torrens system statute may be overruled or effectively

repealed by later legislation. This fact is particularly significant in the context of the indefeasibility provisions, since it is possible for a later Act to: 1

create rights and charges that are enforceable against the registered proprietor; or

2 destroy an existing registered interest. This fact, coupled with the fact that the exception may be invoked where the later statute expressly or impliedly overrides the Torrens statute (Miller v Minister of Mines [1963] AC 484 at 498) lends considerable support to the assertion that the overriding legislation exception “pose[s] perhaps the greatest single threat to public confidence in the Torrens system” (Butt, Land Law (6th ed, Thomson Reuters, Sydney, 2010), p 798). An example of how this can occur can be seen in s 74M of the Environmental Management and Pollution Control Act 1994 (Tas). This section states: Nothing in section 40 of the Land Titles Act 1980 [the indefeasibility section] affects the validity of a notice or prejudices or affects the operation of a notice.

The starting point is the judgment of Dixon J in the South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603 at 625, where his Honour stated that “[i]f the later enactment contains clear language from which it is plain that its provisions were intended to apply to land under the [Torrens System] and to apply in a manner inconsistent with [the relevant Torrens statute], then they must operate according to their meaning”. Thus two questions must be asked. First, does the later Act apply to Torrens land? Secondly, does the Act operate in a manner inconsistently with the Torrens statute? With respect to the first question, the exception cannot be invoked if the later Act does not apply to Torrens land. The court will only go on to the second stage if, after examining the purpose of the statute, it decides that the Act does apply to Torrens land. In relation to the second question, the answer depends on the nature of the later Act and its construction.

Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd [5.285] Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd [2008] NSWCA 6 [The Koompahtoo Local Aboriginal Land Council (“Koompahtoo”) transferred to KLALC Property and Investment Pty Ltd (“KLALC”) two parcels of land vested in it under the Aboriginal Land Rights Act 1983. KLALC executed third party mortgages of the respective parcels to LKM Capital Ltd (“LKM”). The transfer and mortgage of the Sanpine land were registered, but the transfer and mortgage of the Paramount land were not registered. Koompahtoo claimed that the transfers and mortgages were ineffective in that s 40 of the Aboriginal Land Rights Act 1983 prevented a sale unless done in accordance with this Act. LKM claimed that it had effective mortgages. One basis was that the registration of the land to the KLALC and the mortgage to LKM gave it an indefeasible title within the paramountcy provisions of the Real Property Act 1900.] 382 [5.280]

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Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd cont. GILES JA: … KLALC obtained an indefeasible title to the Sanpine land The Real Property Act provides in s 42 that, with exceptions not presently relevant, the registered proprietor of an estate or interest in land holds it subject to other estates or interests recorded in the register but free from all other estates or interests that are not so recorded. In the well-known words of Barwick CJ in Breskvar v Wall (1971) 126 CLR 376 at 385, recently adopted by Gummow and Hayne JJ in Black v Garnock [2007] HCA 31 at [10], “The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration”: see also at [75] per Callinan J. Obtaining title by registration has recently been fully considered by this Court in City of Canada Bay Council v F&D Bonaccorso Pty Ltd [2007] NSWCA 351. The Local Government Act 1993 provided by s 45(1) that a council “has no power to sell, exchange or otherwise dispose of community land”. Community land was sold and the transfer was registered. It was held that the transferee obtained an indefeasible title by registration, notwithstanding that the sale was in contravention of s 45(1). The issue, in brief, was whether s 45(1)’s invalidity through lack of power precluded obtaining title by registration. The Court asked at [75] 75 The critical question is whether s 45(1) of the LG Act, being a later enactment, prevails over the RP Act. To adopt what Ormiston JA in Horvath regarded as the determinative issue (at 655 [28]), the question to be resolved is this: does a transfer of land in breach of s 45(1) of the LG Act deny the conclusive nature of the third respondent’s title to the land comprising Chapman Reserve? Is such a breach so inconsistent with the indefeasibility provisions of the RP Act that s 45(1) must prevail over those provisions? As Ormiston JA observed (at 655 [29]), such an inconsistency would only be relevant and prevalent in its consequence if it works an implied repeal pro tanto of the relevant provision of the RP Act. The legislature must, by enacting s 45(1), have intended that that provision was one with which the indefeasibility provision of the RP Act could not stand. The Court answered the question in the negative. The sale in contravention of s 45(1) was open to challenge until registration, but s 45(1) did not impliedly repeal pro tanto or otherwise prevail over the indefeasibility provisions of the Real Property Act and upon registration those provisions had effect. The Court said at [88] that … the two sets of provisions can stand together. There was no implied repeal by s 45(1) of the LG Act of the indefeasibility provisions of the RP Act. The careful terms of s 45(1) merely deny to a council the power to sell or otherwise dispose of community land. It neither declares any transfer (let alone a registered transfer) of such land to be void and of no effect nor does it invalidate or render unlawful the acquisition of the title to the land obtained by the purchaser or disposee. In these circumstances in our opinion it is impossible to discern a legislative intent that s 45(1) was to operate to deny to a transferee of community land the benefit upon registration of indefeasibility of title. The Court’s detailed consideration canvassed the arguments and authorities the subject of submissions in the present case. Two members of the present bench, Tobias JA and Young CJ in Eq, were parties to the decision. Although judgment was given in City of Canada Bay Council v F&D Bonaccorso Pty Ltd after the Court reserved its decision in the present case, the consideration is fully in point. It would be pointless to repeat the exercise; if its reasoning governs the present case, City of Canada Bay Council v F&D Bonaccorso Pty Ltd should be followed.

[5.285]

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Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd cont. The parties were invited to provide written submissions on the application of City of Canada Bay Council v F&D Bonaccorso Pty Ltd in these appeals, and written submissions were received. In my opinion, on the reasoning in that case KLALC obtained title by registration notwithstanding s 40 of the Act. Koompahtoo submitted that s 40 of the Act should not be “construe[d] in the shadow of indefeasibility by assuming that the doctrine of indefeasibility pervades”, but rather that the question is “why indefeasibility should apply in light of emphatic terms of s 40(2) of the [Act]”. I do not think that an assumption one way or the other should influence the determination of whether s 40(2) prevails over the indefeasibility provisions. However, it is proper to recall the importance of the register in the Torrens system as providing the underlying legitimacy of title to land under that system. As Kirby J observed in Queensland Premier Mines Pty Ltd v French [2007] HCA 53 at [14], the important public policy underlying the old system is “that the land title register should be sufficient of itself to inform those concerned about the nature and extent of any outstanding interest in relation to the land”. Section 40 of the Act differs from s 45(1) of the Local Government Act, in that it is not expressed in terms of lack of power. It is provided in s 40D(1) that land may not be dealt with except in accordance with the Division, and in s 40D(2) that any dealing in contravention of the Division is void. There is qualified power to deal with land, but with the express statement that a contravening dealing is void. The substance of the two provisions, however, is the same. Section 40(1) leaves “may not” up in the air, a prohibition rather than a lack of power, and s 40(2) states the result of a disposal contrary to the prohibition. The result is that the sale, exchange, lease, disposal or mortgage of, or other dealing with land, is void, but (as considered more fully hereafter) it is not declared that the registration of the transactional document is void. In City of Canada Bay Council v F&D Bonaccorso Pty Ltd at [88] the Court noted that s 45(1) did not declare any transfer to be void, but a sale without power contrary to s 45(1) may well have been a void transaction (see at [58], [83]). More to the point in the present case is that s 40(2) declares the transaction to be void, not the title obtained by registration of that transaction. That reasoning was also at the heart of the reasoning in City of Canada Bay Council v F&D Bonaccorso Pty Ltd. Looking at the substance of the matter, s 40 of the Act is no more irreconcilable with the indefeasibility provisions of the Real Property Act than s 45(1) of the Local Government Act. Koompahtoo relied on the difference between s 40 of the Act and s 45(1) of the Local Government Act, and submitted that s 40(2) “is specifically concerned with the invalidation of interests created in land”. In its submission, the references in s 40 to sale, exchange, lease, disposal, mortgage or other dealing with land extended to the registration of the transactional document; “sale”, for example, included the registration giving effect to the sale, and “dealing” was itself apt to refer to the registration of the transactional document. It relied in this connection on British American Cattle Co v Caribe Farm Industries Ltd (1998) 1 WLR 1529, but there what was declared void included any certificate of title evidencing title; in referring to a dealing with land, I do not think s 40 means registration of an instrument. It is pertinent that s 40(1) is in terms of an Aboriginal Land Council dealing with land: it certifies the transaction (of sale etcetera) by the Aboriginal Land Council, short of the act of registration, equivalent to the transaction identified in s 45(1) of the Local Government Act’s statement that a council has no power to sell, exchange or otherwise dispose of community land. Nor in my view are the subject-matters of the respective legislation such that what was said in City of Canada Bay Council v F&D Bonaccorso Pty Ltd is inapplicable in the present case. The purposes of the Act include providing for land rights for Aboriginal persons and the vesting of land in Aboriginal Land Councils and its management. Restrictions on disposal of land by Aboriginal Land Councils, lest land vested in them for the benefit of Aboriginal persons be disposed of without appropriate approvals or improvidently, are important. Koompahtoo contrasted this with the “diffuse purposes” of the Local Government Act focussed on the establishment and management of councils. But it is important that councils retain land classified as community land, in City of Canada Bay Council v F&D Bonaccorso Pty 384 [5.285]

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Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd cont. Ltd a public park, for the benefit of residents in the locality and others. Perhaps in the Act there is a specific focus on Aboriginal persons whereas the Local Government Act is concerned with community members more generally, but I do not think that there is purposive reason to regard s 40 of the Act as more apt to repeal pro tanto or otherwise prevail over the indefeasibility provisions of the Real Property Act.

[5.290]

Notes and Questions

1. In Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, legislation rendered an option to renew in a lease void. It was argued that registration of the lease under the Torrens statute conferred indefeasibility on the lease and the covenant to renew, despite the invalidating statute.Two of the five High Court justices, Gibbs and Menzies JJ, decided the case on the basis of overriding statutes – the invalidating statute being later in time, overrode the Real Property Act 1900 (NSW). 2. Even if the statutes are inconsistent, there must be an initial finding that the facts of the particular case, require an application of the overriding statutes exception in order for the matter to be resolved: Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472. In the Hillpalm litigation the issue arose as to whether a condition in a development consent issued by the local council for a two-lot subdivision, could be enforced against a subsequent registered proprietor of the burdened land. At first instance and in the New South Wales Court of Appeal, it was held that the planning statute and the Torrens statute were inconsistent and as the planning statute was later in time, its provisions prevailed; thus the registered proprietor’s title was not indefeasible. On appeal, the majority of the High Court, however, interpreted the facts so that the issue of overriding statutes did not arise. McHugh ACJ and Hayne and Heydon JJ found on the facts that the council had not actually imposed a condition; that, in the final analysis, the subdivision had been allowed to proceed without the imposition of the condition requiring creation of an easement. The majority found further that even if such a condition had been imposed, it would not have been enforceable against a subsequent owner of the burdened land, as it would have been a condition relating only to the subdivision of the land: the subsequent owner had not undertaken the subdivision and orders restraining or remedying breaches of the relevant planning legislation could not be made against persons who were not actually in breach of the Act. If, however, a consent condition relating to the ongoing and continuing use of the land had been imposed, the High Court stated “[t]here would then be a real and lively question about how the two statutory schemes (the scheme under the EPAA and the Torrens system for which the Real Property Act provides) were to be reconciled, and questions of implied repeal or amendment might arise.” (at 491) It has been argued that the High Court decision provides some break on the use of the overriding statute exception as a means of undermining indefeasibility of the registered proprietor’s title. See Griggs, “Hillpalm Pty Ltd v Heaven’s Door Pty Ltd” (2005) 11 APLJ 244. The statute in question was interpreted narrowly and arguably the majority decision “implicitly [supported] the paramountcy of indefeasibility.” Note, (2005) 79 ALJ 143 at 145. See also Edgeworth. “Indefeasibility and overriding statutes: an attempted solution” [5.290]

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(2009) 83(1) ALJ 655; Lewis and Schroeder, “Indefeasibility of title and overriding statutes: determining which prevails in the event of an inconsistency” (2008) 16(2) APLJ 147. 3. Consider also the possible effects of “privatization” legislation in relation to indefeasibility of title: see Broadcast Australia Pty Ltd v Minister assisting the Minister for Natural Resources (Lands) (2004) 221 CLR 178. 4. In Brown & Austrust Ltd v Commonwealth Bank of Australia (1993) 173 LSJS 145 (at first instance; on appeal (1994) 63 SASR 188), the principle in the South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603 was applied to a fact situation where the interest in land, which overrode the registered interest, was a private interest. At that time s 9(4A) of the Retirement Villages Act 1987 (SA) provided that a charge created by s 9(4) ranked in priority to any other mortgage, charge or encumbrance over the land to which the charge relates. Section 9(4) provided that the rights of a resident to repayment of a premium were a charge on the land. In this case, the party with the rights under s 9(4) and (4A) sought to assert those rights against the registered mortgagee. The judgment of Debelle J at first instance was approved by the Full Court. Debelle J stated: Mr Morcombe also referred to the long established principles of lending and to what he called the sanctity of the mortgage registered under the Real Property Act. If the Parliament intends to interfere with the priority enjoyed by registered mortgage, it must do so in clear terms. Fundamental principles concerning the operation of the Real Property Act should not, he said, be altered except by express provision. For the reasons I have given, I believe the terms of s 9(4A) are such an express provision. I turn to the provisions of s 6 of the Real Property Act. Section 6 provides: No law, so far as inconsistent with this Act, shall apply to land subject to the provisions of this Act, nor shall any future law, so far as inconsistent with this Act, so apply unless it shall be expressly enacted that it shall so apply “notwithstanding the provisions of the Real Property Act, 1886”. The operation of s 6, where a later enactment is inconsistent with the Real Property Act but does not include the formula prescribed by s 6, was considered in South Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603; see also Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 33-35. In such a case, where the provisions of the Act exhibit a manifest intention to prevail over the provisions of the Real Property Act and there is any inconsistency between them, the latter prevails: see South Eastern Drainage Board (SA) v Savings Bank of South Australia at 616 and at 624-626; Travinto Nominees Pty Ltd v Vlattas at 33-35. To adopt the words of Dixon J in the South Eastern Drainage Board Case (at 625) the Retirement Villages Act, which is the later enactment, contains clear language from which it is plain that its provisions were intended to apply to land under the Real Property Act and to apply in a manner inconsistent with the Real Property Act. It is not possible to reconcile the provisions. Notwithstanding the failure to include the formula prescribed by s 6 of the Real Property Act, the provisions of the Retirement Villages Act must operate according to their meaning. The provisions of s 9(4A), therefore, prevail over the provisions as to priority of registered mortgages contained in the Real Property Act.

(See now s 19(3) – (6) of the Retirement Villages Act 1987 (SA) to similar effect. Section 19(4) now, however, specifically provides that charges under the Retirement Villages Act 1987 are to rank in priority to Torrens mortgages.) 386

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Forgery, insufficient power of attorney or disability [5.295] In South Australia, s 69(b) (formerly numbered s 69II) of the Real Property Act 1886 (SA) provides: The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications: … Forgery or disability (b) in the case of a certificate or other instrument of title obtained by forgery or by means of an insufficient power of attorney or from a person under some legal disability, in which case the certificate or other instrument of title shall be void: Provided that the title a registered proprietor who has taken bonafide for valuable consideration shall not be affected by reason that a certificate or other instrument of title was obtained by any person through whom he claims title from a person under disability, or by any of the means aforesaid.

Section 69(b) appears to provide a specific exception to indefeasibility of title where the certificate of title is obtained by forgery. However, in Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247 at 260, O’Loughlin J held that the provision should be read as if it were expressed in the following terms: Provided that the title of a registered proprietor who has taken bonafide for valuable consideration shall not be affected by reason that a certificate of title was obtained: (a) By any person through whom he claims title from a person under some legal disability; or (b) By any of the means aforesaid (namely by forgery or by means of an insufficient power of attorney).

That is, his Honour, interpreted the provision in such a manner that immediate indefeasibility results where the title is obtained by forgery or by means of insufficient power of attorney. Moore criticised this interpretation (see Moore, “Interpretation of the Real Property Act” (1989) 11 Adel LR 405) and in Rogers v Resi-Statewide Corporation Ltd (1991) 101 ALR 377, von Doussa J accepted the argument propounded by Moore and found that s 69II (now s 69(b)) did, with respect to forgery, set out a system of deferred indefeasibility. The Full Court of the Supreme Court of South Australia had the opportunity to consider the issue again in Arcadi v Whittem (1992) 59 SASR 51.

Arcadi v Whittem [5.300] Arcadi v Whittem (1992) 59 SASR 515 Full Court SA Sup Ct [Arcadi, the registered proprietor of land, relied on Gagliardi for financial advice and assistance. After suggesting that Arcadi set up a family trust, Gagliardi persuaded Arcadi to sign two blank pieces of paper and to give him the title deeds. Zoneff, a close associate of Gagliardi, obtained a loan from Whittem by handing over the title deeds and a mortgage seemingly executed by Arcadi. Zoneff obtained an additional loan four days later on the security of a second mortgage given by Arcadi. It transpired that Arcadi’s signature on the first mortgage was forged, and that the two signed sheets of paper were used to “manufacture” the second mortgage. Although Whittem had instructed a solicitor, Nield, to register the mortgages, registration was stopped some time later by an interim injunction granted to Arcadi.] DEBELLE J (with whom Matheson J agreed): [His Honour held that Arcadi’s interest should not be postponed to that of Whittem, and continued:] [5.300]

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Arcadi v Whittem cont. I turn to the question whether the failure of the solicitor Nield to effect registration of the mortgage amounted to negligence. The answer to that question turns on whether Whittem would have acquired an indefeasible interest if the mortgage had been registered before the injunction was ordered on 21 March 1986. The answer to that question in turn depends on the meaning and effect of s 69(I) and (II) of the Real Property Act. … Section 69(II) has no equivalent in Torrens system legislation in any other State. It has been considered on two occasions only. The first was in Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247, where O’Loughlin J held that in the case of forgery, s 69(II) did not incorporate the principle of deferred indefeasibility. … Thus, on his interpretation, a registered proprietor who is also a bonafide purchaser for value has an indefeasible title notwithstanding that he acquired his title by means of a forged document. The views of O’Loughlin J were not necessary for his decision and can fairly be characterised as obiter dicta. In Rogers v Resi-Statewide Corporation Ltd (1991) 29 FCR 219, von Doussa J came to the contrary conclusion that s 69(II) confers deferred indefeasibility in the case of forgery. Central to his Honour’s reasoning is the Second Reading Speech on the Bill which introduced s 69(II) into the Real Property Act. von Doussa J concluded that the mischief identified by the Second Reading Speech was the need to protect innocent persons who had no means of protecting themselves by tracing the deception. In his view, s 69(II) was introduced to cure the mischief by qualifying the indefeasibility of title which the recipient of a void instrument would otherwise obtain upon registration and s 69(II) should be so construed. With respect, I do not think that the reference in the Second Reading Speech should override the plain meaning of the words in s 69(II). The proviso to s 69(II) is expressed in such a way as to protect a registered proprietor who acquires his title bonafide for value by means of a forged instrument or an insufficient power of attorney but, in the case of a registered proprietor who takes an interest bonafide for value from a person under disability, there is no protection. In the latter case, indefeasibility is deferred to a registered proprietor who takes bonafide for value from the person who claims title from the person under disability. This interpretation is dictated by the syntax of s 69(II). The insertion of a comma after the word “disability” and the disjunctive use of the word “or” indicate that the adverbial phrase “by any of the means aforesaid” is intended to qualify the verb “obtained”. Such an interpretation of s 69(II) is consistent with the scheme of the exceptions to indefeasibility contained in s 69 which preserves the title of a registered proprietor who has taken his title bonafide and for value in consequence of a transaction tainted by fraud or error or wrongful dealing. In particular, the scheme of s 69(I) and (II) is to defeat the interest of a fraudulent party or forger or any volunteer taking from them but not to defeat a party acquiring an interest bonafide for value. More significantly, if s 69(II) is not interpreted in this way, then a registered proprietor who has taken bonafide for value in consequence of a fraudulent transaction is in a better position than that of a registered proprietor who has taken bonafide for value in consequence of a forgery. Forgery is but one species of fraud: R v Ritson (1869) LR 1 CCR 200 at 203 and 203-204; Brott v The Queen (1992) 173 CLR 426, per Brennan J (at 430-431). When used in s 69(I) fraud means personal dishonesty or moral turpitude: Stuart v Kingston (1923) 32 CLR 309, per Knox CJ (at 329) and per Starke J (at 359). It includes a designed cheating of a registered proprietor out of his rights: Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265, per Kitto J (at 273-274). See generally also Assets Co Ltd v Mere Roihi [1905] AC 176 at 212. Fraud as it is used in s 69(I) is therefore wide enough to include forgery. As Street J observed in Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt 1) NSW 529 at 537 when referring to s 42 of the Real Property Act 1900 (NSW), the New South Wales equivalent of s 69(I): 388 [5.300]

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Arcadi v Whittem cont. “It follows … that for the purposes of s 42 a forgery is a fraud just as is an act falling within the ordinary meaning of that word.” See also Australian Guarantee Corporation Ltd v de Jager [1984] VR 483 at 495 and National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477. It would, therefore, be quite anomalous if an innocent purchaser under a fraudulent transaction was in a better position than an innocent purchaser under a forged instrument. The instant case is an example of a forgery which is also a fraud within the meaning of s 69(I). It is a forgery because, among other things, the document was completed in an unauthorised manner: R v Bateman (1845) 1 Cox CC 186; Brott v The Queen (supra), per McHugh J (at 446). But the signature of the registered proprietor is not a forgery. The circumstances of this case might, therefore, be fairly characterised as a fraud within the meaning of s 69(I) rather than a forgery within the meaning of s 69(II). The line between fraud and forgery may often be a thin one. The question whether the title of a registered proprietor who takes bonafide and for value is immediately indefeasible by virtue of s 69(I) or defeasible by virtue of s 69(II) should not depend on how the transaction is characterised. I respectfully disagree with von Doussa J when he says (in Rogers at 225) that the inclusion in s 69(II) of three classes of case where, under the general law, the instrument or title would be void suggests that the legislature intended to treat each of these cases in a similar way. The fact that there is deferred indefeasibility in one case only of the three instances provided for in s 69(II) indicates, in my view, a parliamentary intention to give a greater degree of protection to minors and others under a disability. A further reason why it is not possible to rely too heavily on the Second Reading Speech, in this respect at least, is the fact that one of the main purposes of the Torrens system legislation is to make it unnecessary for a person acquiring an interest in land to satisfy himself that the signature of the person conveying the interest is genuine. Section 267 of the Real Property Act requires an instrument under the Act to be attested by a witness who is personally known to the person executing the instrument. Those who may witness the instrument are limited to the classes of persons nominated in s 267. If that witness does not personally know the person executing the interest, a longer form of proof of attestation is required: see s 268. This is a particular feature of the Torrens system designed to avoid fraud and forgery: Australian Guarantee Corporation Ltd v de Jager (supra) at 497. In many cases of forgery, both the registered proprietor and the person acquiring an interest will be innocent victims of the forger. Neither will be aware nor have any reason to be aware of the forgery. The Second Reading Speech suggests that a person acquiring an interest has an obligation to inquire as to the validity of every signature on the instrument, an obligation which does not lie easily with the provisions of ss 267 and 268. For these reasons, I think that s 69(I) confers immediate indefeasibility. Had Nield registered the mortgage, Whittem would have acquired an indefeasible interest as mortgagee. [OLSSON J delivered a judgment agreeing with the interpretation of von Doussa J in the Rogers case.]

[5.305]

Notes

1. Nield’s application for special leave to appeal to the High Court was refused: (1993) 67 ALJR 514. The court held that an appeal would involve the construction of a Torrens System Act that had no equivalent except in the Northern Territory, and that the issue “turn[ed] to a significant extent upon punctuation and syntax and … involve[d] no real question of principle”. Importantly, however, the court went on to state its preference for the construction favoured by Debelle and Matheson JJ. [5.305]

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2. The Full Court’s decision was noted in: Wikrama-Nayake, “Immediate and Deferred Indefeasibility: The Story Continues” (1993) 67 LIJ 733 and followed in Tsirikolias v Oakes (1993) 169 LSJS 249 and Public Trustee v Paradiso (1995) 64 SASR 387 (Full Court). See Wright, “Forgery and the Real Property Act 1886 (SA)” (1994) 16 Adel LR 227. Prior certificate of title or folio and erroneous description of land [5.310] A registered proprietor’s title is defeasible against the interest or estate of a registered proprietor claiming the same land under a prior folio of the Register. (Real Property Act 1900 (NSW), s 42(1)(a); Transfer of Land Act 1958 (Vic), s 42(1)(a); Land Title Act 1994 (Qld), s 185(1)(e); Real Property Act 1886 (SA), s 69(e); Transfer of Land Act 1893 (WA), s 68(1); Land Titles Act 1980 (Tas), s 40(3)(b); Land Titles Act 1925 (ACT), s 58(1)(a); Land Title Act (NT), s 189(1)(d). See Land Title Act 1994 (Qld), s 185(1)(f); Land Title Act (NT), s 189(1)(e) also dealing with the situation where there are two titles.) The provisions are discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.255]. Further, a registered proprietor’s title is defeasible with respect to any portion of land which has been included in the folio of the Register by wrong description. (Real Property Act 1900 (NSW), s 42(1)(c); Land Act 1958 (Vic), s 42(1)(b); Land Title Act 1994 (Qld), s 185(1)(g); Real Property Act 1886 (SA), s 69(c); Transfer of Land Act 1893 (WA), s 68(1); Land Titles Act 1980 (Tas), s 40(3)(f); Land Titles Act 1925 (ACT), s 58(1)(c); Land Title Act (NT), s 189(1)(f).) This exception (and its interrelationship with the previous exception) is discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.260].

Easements, adverse possession and tenancies [5.315] The exceptions relating to easements, adverse possession and tenancies are discussed

in Chapters 17, 3 and 12 respectively). Rates and taxes [5.320] In Victoria, Western Australia and the Australian Capital Territory, the Torrens Acts

provide a specific exception to the indefeasibility of title with respect to the unpaid rates, taxes and charges of specified authorities. (Land Act 1958 (Vic), s 42(2)(f); Transfer of Land Act 1893 (WA), s 68(1); Land Titles Act 1925 (ACT), s 58(1)(f).) In Tasmania, there is a specific exception with respect to money charged on land under an Act (Land Titles Act 1980 (Tas), s 40(3)(g)) and in South Australia, an exception for unpaid succession duty exists (Real Property Act 1886 (SA), s 69(i). The Northern Territory legislation provides an example of provisions for the registra-tion of statutory charges: see Land Title Act (NT), ss 31, 35, 38. See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.305] and Victorian Law Reform Commission, The Register Book, Report No 12, 1987, p 4. Where there is no express exception, enforceability depends on whether the statute creating the charge overrides the Torrens statute.

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Real Property Act 1886 (SA), s 71 [5.325] Real Property Act 1886 (SA), s 71 71. Saving of certain rights and powers viz Nothing in the two preceding sections contained shall be construed so as to affect any of the following rights or powers, that is to saySales by Sheriff (a) the power of the Sheriff to sell the land of a judgment debtor under a writ of execution; Sales under order of the Court (b) the power of the Court to order the sale of land; Transmissions on bankruptcy or assignment (c) the right of the Official Receiver or of any trustee to land transmitted on the bankruptcy or statutory assignment of the registered proprietor; Contracts (d) the rights of a person with whom the registered proprietor shall have made a contract for the sale of land or for any other dealing therewith; Trusts (e) the rights of a cestui que trust where the registered proprietor is a trustee, whether the trust shall be express, implied, or constructive; Deed-poll by promoters of an undertaking (f) the right of promoters of an undertaking to vest land in themselves by deed-poll pursuant to the Compulsory Acquisition of Land Act, 1925, or any Act amending the same, provided that no unregistered estate, interest, power, right, contract, or trust shall prevail against the title of a registered proprietor taking bonafide for valuable consideration, or of any person bonafide claiming through or under him.

STATE GUARANTEE OF TITLE [5.330] The introduction of the Torrens system and its base concept of indefeasibility of title,

provided for a very different form of land title from the general law land system. Because the State act of registration had the potential to divest an innocent land owner of his or her title, it was considered vital that such a person should be able to seek compensation from a State guarantee or insurance fund. All jurisdictions provide for such compensation. (Real Property Act 1900 (NSW), ss 120, 128 – 135; Transfer of Land Act 1958 (Vic), ss 108 – 111; Land Title Act 1994 (Qld), ss 188 – 190; Real Property Act 1886 (SA), ss 201 – 219; Transfer of Land Act 1893 (WA), ss 201, 205 – 211; Land Titles Act 1980 (Tas), ss 127 – 128, 150 – 159; Land Titles Act 1925 (ACT), ss 143 – 155; Land Title Act (NT), ss 192 – 196.) Originally, the guarantee schemes were funded by particular users of the system but increasingly such contributions have been abolished as a result of the large amounts of money accumulated. Some jurisdictions no longer have separate assurance funds with claims being paid out of Consolidated Revenue (see generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.645]). The right to compensation as a result of loss arising through the operation of the Torrens statutes has been questioned. (See NSWLRC and VLRC, Torrens Title: Compensation for Loss [5.330]

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Discussion Paper (June 1989) and NSWLRC, Torrens Title: Compensation for Loss Issues Paper (Dec 1989) discussed in Butt “Reforming the Torrens Title Assurance Fund” (1990) 64 ALJ 78. See also Duncan, “State Indemnified Title in Queensland – Success or Failure” (1977) 10 UQLJ 15 and Toomey State Guarantee of Title under the Torrens System: Adequate, Inadequate or Forgotten? (paper delivered at the Real Property Teachers Conference, Bond University, July 1995).) The New South Wales Law Reform Commission finally accepted the need for an insurance scheme and made recommendations for reform of the existing system. Many of these recommendations were adopted in the Real Property Amendment (Compensation) Act 2000 (NSW) (discussed in Mitchell, “Torrens Title Compensation for Loss – the Real Property (Compensa-tion) Act 2000 (NSW)” (2001) 9 APLJ 40). In the most recently reformed Torrens legislation, the Land Title Act (NT), the traditional state guarantee of title was re-established. What arguments can be mounted for and against the retention of the compensation scheme? Private insurance, either as a substitute for or complement to, the state indemnity schemes has also been considered from time to time and there are now two companies licensed to market title insurance in Australia. The issues surrounding private title insurance have been discussed extensively; see Ziff, “Title Insurance: The Big Print Giveth But Does The Small Print Taketh Away?” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 371-395; Flaws, “Compensation for Loss under the Torrens System – Extending State Compensation with Private Insurance” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 397-418; O’Connor, “Double Indemnity – Title Insurance and the Torrens System” [2003] QUTLJJ 9; O’Connor, “Title Insurance – is There a Catch?” (2003) 10 APLJ 120; Griggs, “The Assurance Fund: Government Funded or Private?” (2002) 76 ALJ 250; Watkins, “The Case for Title Insurance as a Risk Management Tool” (2004) Law Soc J (Dec) 67; Ziemer, “Title Insurance: the good, the bad and the ugly, Does Victoria need it” (2011) 20 APLJ 1. There appears to be general agreement that even in a Torrens based system with indefeasibility of title and state indemnities, private insurance can assist in managing the risks involved in conveyancing. Private insurance can protect against some title risks which are not protected by the State guarantee and also risks which are not concerned with title defects or the Torrens system, and further may provide a simpler, less expensive avenue to pursue than seeking indemnity from the assurance funds. Private title insurance may also be important in the new environment of electronic conveyancing. Despite its many advantages, it is possible that electronic conveyancing may increase registration errors and private title insurance contains the potential to assist “in underpinning its safe use by extending compensation beyond the limits of that provided by the state”: Flaws, “Compensation for Loss under the Torrens System – Extending State Compensation with Private Insurance” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 397-418 at 418. Grounds for claiming compensation [5.335] The provisions concerning compensation vary from jurisdiction to jurisdiction. In

order to sustain a claim for compensation, the loss or damage must arise out of one of a number of listed circumstances. These circumstances vary from jurisdiction to jurisdiction.

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Diemasters Pty Ltd v Meadowcorp Pty Ltd [5.340] Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572 Supreme Court [Meadowcorp Pty Ltd executed a mortgage over its property to the plaintiffs, as security for a loan from the plaintiffs. By means of a fraudulent scheme, Meadowcorp secured a discharge of mortgage. It then sold the property to Chelliah and Jain and executed a transfer in favour of Chelliah and Jain. Neither the discharge nor the transfer had been lodged for registration. Chelliah, but not Jain, was implicated in the fraudulent transaction. Meadowcorp sought to uphold its interest against the purchasers. If such action were successful Jain, in another action, sought compensation from the Assurance Fund. Part of the judgment on this latter action is extracted below.] WINDEYER J: … Claim under Torrens Assurance Fund The claim of Jain is made under s 129(1) of the Act which is as follows: 129 Circumstances in which compensation payable (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from: (a) any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act in relation to the land, or (b) the registration (otherwise than under section 45E) of some other person as proprietor of the land, or of any estate or interest in the land, or (c) any error, misdescription or omission in the Register in relation to the land, or (d) the land having been brought under the provisions of this Act, or (e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, or (f) an error or omission in an official search in relation to the land, is entitled to payment of compensation from the Torrens Assurance Fund. Jain had earlier obtained leave under s 132(2) of the Act to bring the claim for compensation. The claim is under s 129(1)(e). Chelliah was joined as a defendant because he was not willing to join as a plaintiff for compensation, for fairly obvious reasons. Section 133(4) of the Act provides that the Registrar-General “may join any person as co-defendant in any court proceedings if of the opinion that the claimant has a cause of action against that person in respect of the compensable loss to which the proceedings relate”. This is not a particularly happily expressed provision. In proceedings for compensation the Registrar-General is the defendant (s 132(1)). The Registrar-General cannot, as a defendant, join another party as co-defendant in any orderly procedure. Proper procedure would be to join a party by way of cross-claim. No claim is made by Jain against Chelliah and no issue arises as between Jain and Chelliah in this claim for compensation. If the Registrar-General had wished to raise such an issue it could only be done by cross-claim with Chelliah as cross-defendant, not as co-defendant. I only point this out to make it clear the basis on which Chelliah is a defendant in the proceedings. The compensation provisions in the Torrens legislation caused difficulties for many years and the new provisions incorporated in Pt 14 by the Real Property Amendment (Compensation) Act 2000 are in some respects an attempt to overcome those difficulties, although it is not certain they do so. I approach this part of the judgment on the assumption that one joint tenant is not bound by or affected by the fraud of the other of which the first is unaware. As I have explained I do not consider that to be the correct position and I consider the claim against the fund fails. Never-theless I should consider the matter on the basis Jain is not affected by his co-owner’s fraud. [5.340]

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Diemasters Pty Ltd v Meadowcorp Pty Ltd cont. Counsel for Jain based his claim to entitlement through reasoning that the discharge was obtained by fraud of the mortgagor/vendor; that the handing over of the discharge of mortgage on settlement was fraudulent and that settlement would not have proceeded without such discharge; and that as a result of this Jain has suffered damage through being deprived of an interest in land, although Counsel did not put it this way because he argued Chelliah was innocent and seemed to accept Jain could not recover if Chelliah was party to the fraud. The interest of which he was deprived was an unencumbered estate in fee simple as joint tenant with Chelliah whose interest was encumbered, as opposed to an estate in fee simple subject to the registered mortgage to the plaintiff. This would or could follow from Myers v Smith. The pleaded defence of the Registrar-General and the argument of counsel for the Registrar-General was: (a) Jain has not suffered any loss or damage “as a result of operation of the Act”; and (b) Jain has not been deprived of the land or any estate or interest in it as a consequence of fraud. The words “as a result of the operation of the Act” which appear in s 129 did not appear in the earlier s 126 which was its predecessor. That section provided as follows: 126 Compensation for party deprived of land (1) Any person deprived of land or of any estate, or interest in land; (a) in consequence of fraud, or (b) through the bringing of such land under the provisions of this Act, or (c) by the registration of any other person as proprietor of such land, estate, or interest, or (d) in consequence of any error, omission, or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. It is, I think, clearly established that an interest in land referred to in the prior s 126 included an unregistered interest and it would do so under s 129: see Robinson v Registrar-General (1982) 2 BPR 9634; (1983) NSW ConvR 55-138 (57,022). It is also established that deprivation can extend, in the words of Professor Butt: to “being outranked in priority by other interests”: Land Law (3rd ed, LBC Information Services, 1996) at 2085. Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 at 637; and Robinson. This is a difficult matter. In general the compensation provisions of the Act were introduced because, in the absence of fraud on the part of a person obtaining title by registration, the act of registration conferred an indefeasible title on the transferee. This left the person subject to the fraud with only a claim for compensation or damages from the Fund or, under the old s 126, from the fraudster. It follows that in the ordinary case deprivation is the result of some interest lost as a result of the doctrine of indefeasibility, through registra-tion of a subsequent dealing obtained by reason of fraud of a party or of mistake on the part of the Registrar-General, although such lost interest can be an unregistered prior interest such as an unregistered mortgage or a mortgage by deposit of title deeds, defeated by fraudulent application for a new certificate of title and subsequent registered mortgage. In the instant case, however, the interest of the mortgagees, which prevents Jain from obtaining an unencumbered title, is not a subsequently acquired registered interest. It is a right or an interest to retain priority as registered mortgagee by having the discharge delivered up for cancellation. The interest of Jain on the other hand arises under contract to purchase an estate in fee simple free from encumbrance and transfer pursuant thereto it being the obligation of Meadowcorp to deliver a clear title. Had the land been under Old System title Jain, as bona fide purchaser for value without notice, would have taken a clear title had he received a re-conveyance from the mortgagees to Meadowcorp or a statutory discharge operating as a re-conveyance and a conveyance from Meadowcorp. It follows from this that it is because the land is under the Act that the mortgagees have maintained their priority. Thus the fact that Jain has not obtained unencumbered title is because the land is under the Act. The 394 [5.340]

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Diemasters Pty Ltd v Meadowcorp Pty Ltd cont. question is whether this failure, which has almost certainly caused damage to Jain, arises as a result of the operation of the Act through Jain having been deprived of an unencumbered title as a consequence of fraud. The words “as a result of the operation of the Act” are new. It is quite unlikely that they were intended to make access to the Assurance Fund more restrictive than under the old s 126, which it replaced. That is apparent from the report of the New South Wales Law Reform Commission, Torrens Title: Compensation for Loss, No 76 (1996) and the second reading speech of the Minister: (Parliamentary Debates, Legislative Assembly, 3 May 2000 at 5187). It was submitted by counsel for Jain on the authority of Robinson’s case that if the additional words were not present then the claim of Jain would certainly have been successful. I do not accept this follows. In Robinson’s case the interest of the Robinsons under their contract for purchase was defeated by fraudulent transfer and mortgage procured by a legal clerk, the mortgagee obtaining an indefeasible title to its mortgage on registration. That interest was lost by subsequent registration not because some prior interest remained. However, it may well be the case that 1’s(sic.) case would be decided differently under the new legislation, because the innocent mortgagee as bonafide purchaser without notice would have got a good title irrespective of the operation of the Act, so that the words “as a result of the operation of this Act” may result in a reduction of available claims against the Registrar-General. It is, I think, quite unlikely this would be an intended result. The argument of senior counsel for the Registrar-General is that the Act has not operated or been brought to bear on the transaction so as to cause damage as the loss has arisen through fraud, not by reason of the Act. The question however is whether or not the loss has arisen as a result of both. The argument of counsel for the Registrar-General seems to be based upon the assumption that loss as a result of the operation of the Act can only occur by reason of some dealing, later in time to the interest lost or reduced, having achieved priority by regis-tration, thus giving an indefeasible title to the holder of such registered interest. It also seems to assume that loss which would not have arisen had the land been under Old System title is not necessarily loss resulting from the operation of the Act. As I have said this is a matter of considerable difficulty. Nevertheless the purpose of compensation by access to the Fund is to balance disadvantage which can otherwise be brought about by indefeasibility of title. In principle I can see no reason to restrict access to the Fund to persons claiming that their interest has been lost through the registration of some subsequent dealing as a result of fraud. There is no particular logical reason why compensa-tion 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 me to arise out of the operation of the Act. The final question is whether or not Jain has been deprived of an interest in land through fraud. He has not got what Meadowcorp contracted to sell him and purported to transfer to him by way of transfer. The reason he has not got it is because the mortgagees are entitled to retain their interest because of fraud of Meadowcorp. The usual meaning of the verb “to deprive” is to take away something from a person or dispossess a person of something. However, the Macquarie Dictionary gives as one of the meanings of “deprive” as a verb: (2) to keep (a person, etc) from possessing or enjoying something; withheld; and the Shorter Oxford English Dictionary gives as one of its meanings: (3) to keep out of; to debar from. These definitions accord with the meaning given under the corresponding Queensland legislation relating to claims on an Assurance Fund in Finucane v Registrar of Titles [1902] St R Qd 75 at 94-97. As I have said there is every reason to give a reasonably wide meaning to the provision giving right to claim against the Fund. In all the circum-stances I have come to the conclusion that the claim of Jain, had he been a sole purchaser, would have fallen within s 129(1)(e). I should add that there is, at the present time, no way in which the amount of compensation could be ascertained. Nobody will know the true position until the subject property has been sold by the [5.340]

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Diemasters Pty Ltd v Meadowcorp Pty Ltd cont. mortgagee and whether there is any surplus after such sale and payment out of the mortgagees will then be known. Whether the second mortgagees, whose mortgage still remains on the title would have any claim to such surplus is a matter which cannot be determined in these proceedings. Whether there can be any possible damage, apart from recovery of the $90,000 paid by Jain, is a matter which has not been properly argued, although, as I understood it, the claim was limited to the $90,000 or perhaps $80,000 and the value of the motor vehicle. Thus had Jain been entitled to compensation out of the Fund, the calculation of the amount payable would have had to wait the outcome of any mortgagee sale, unless it were accepted that any amount otherwise payable to Jain as a result of such sale, should be paid to the Registrar-General …

[5.345]

Notes and Questions

1. With some variations, the statutory provisions reveal a variety of circumstances which give rise to a claim for compensation where loss is suffered. These fall under four main heads – fraud, bringing the land under the Act, error, omission or misdescription in the Register and registration of any other person as proprietor. In Victoria, there is no specific provision relating to fraud. Can a defrauded person make use of other provisions to make a claim? In Queensland and the Northern Territory the provisions are more specific than in the other jurisdictions and reflect a careful consideration of when compensation should be payable in light of the Land Title Act 1994 (Qld) and the Land Title Act (NT) and modern conditions. See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.420], [4.485]. 2. In some jurisdictions, the loss must comprise deprivation of an interest in the land (SA, WA, Tas, ACT): in the remaining jurisdictions, compensation is payable in some circumstances where the loss is by means other than a deprivation of an interest in land. Cf, however, loss through the misfeasance or mistake of the Registrar where the loss does not have to be by deprivation of interest in the land: Real Property Act 1900 (NSW), ss 120(1), 129(1); Transfer of Land Act 1958 (Vic), s 110(1); Land Title Act 1994 (Qld), s 188A; Real Property Act 1886 (SA), s 208; Transfer of Land Act 1893 (WA), s 205; Land Titles Act 1980 (Tas), s 153(1); Land Titles Act 1925 (ACT), s 155; Land Title Act (NT), s 193. 3. In some jurisdictions, the person who has suffered loss must first bring an action against the individual responsible for the loss (Real Property Act 1886 (SA), ss 203, 205; Transfer of Land Act 1893 (WA), s 201; Land Titles Act 1980 (Tas), ss 152(2)(b), (7), (8); Land Titles Act 1925 (ACT), ss 154(1)(a), 154(3), 155). In New South Wales, Queensland and the Northern Territory where the provisions have been introduced or amended recently with the aim of making claims simpler, and in Victoria, proceedings do not have to be taken against the wrongdoer first (Real Property Act 1900 (NSW), s 120(2); Transfer of Land Act 1958 (Vic), s 110(2); Land Title Act 1994 (Qld), s 188(2); Land Title Act (NT), s 192(2)). In New South Wales, Queensland and the Northern Territory, there are administrative procedures for the recovery of compensation. Why were these administrative procedures not used in Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572? 396 [5.345]

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4. There is a considerable body of case law interpreting various provisions concerning the assurance funds. See, for example, Cirino v Registrar-General (1993) 6 BPR 13 260 (“omission” of Registrar-General does not require a failure by the Registrar to perform an obligation under the Act, but cf Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98); Parker v Registrar-General [1977] 1 NSWLR 22 extracted below and Registrar-General v Behn [1980] 1 NSWLR 589 (“fraud” has a broad interpretation and includes legal and equitable fraud); Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 (deprivation of part only of an interest is sufficient); Parker v Registrar-General [1977] 1 NSWLR 22 extracted at [5.350] (compensation may be payable for temporary deprivation of an interest in land, for example, rent loss; Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 (deprivation of interest includes deprivation of equitable interest). See also Pedulla v Panetta [2011] NSWSC 1386, where a brother fraudulently transferred the sister’s property (the sister was in cloisters at the time), and then fled the country. The sister was ultimately awarded $3.8million, and legal costs were over $300,000.

Parker v Registrar-General [5.350] Parker v Registrar-General [1977] 1 NSWLR 22 Court of Appeal GLASS JA: In August 1965 the plaintiffs were the owners of a home in Granville which they valued at £10,000. They met, in that month, a man named Jake Gray, who was a plausible swindler. There followed a series of complex dealings which are subjected to a detailed examination in the judgment below: Parker v Registrar-General [1976] 1 NSWLR 342 at 345-351. They reveal a few new variations on a familiar theme, viz the effrontery of cheats and the gullibility of their victims. On 8th March 1966 the plaintiffs lodged a caveat forbidding any dealings with their property. In the meantime, however, they had signed a transfer in favour of a proprietary company controlled by Gray for a nett return of £642. On 22nd December 1965, the transfer had been registered and on 3rd March 1966, a mortgage was registered in favour of an insurance company to secure the sum of 6,300. In subsequent proceedings in equity the plaintiffs succeeded in having the property retransferred to them subject to the mortgage. In June 1969 they paid out the mortgage with borrowed money. In an action by them against the Registrar-General to recover damages under s 126 of the Real Property Act 1900, judgment was entered in their favour in the sum of $16,948,87. In this appeal, counsel for the Registrar-General accepts the trial judge’s primary findings and his assessment of damages. He submits, however, on three separate grounds that the judgment is liable to be set aside.The first ground argued was that s 126 upon its proper construction does not authorise any recovery by the plaintiffs. The relevant parts of the section [as it then was] read as follows: (1) Any person deprived of land or of any estate, or interest in land– (a) in consequence of fraud; or (b) through the bringing of such land under the provisions of this Act; or (c) by the registration of any other person as proprietor of such land,estate, or interest; or (d) in consequence of any error, omission or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages. (2) An action under subsection (1) shall, … subject to subsections (3), (4) and (5) be brought and prosecuted against the person– … [5.350]

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Parker v Registrar-General cont. (c) who acquired title to the land, or the estate or interest therein, through the fraud, error, omission or misdescription (5) in any of the following cases, that is to say– (a) where such person ceases to be liable for the payment of damages as aforesaid; or (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction, such damages with costs of action may be recovered out of the assurance fund by action against the Registrar-General as nominal defendant. It was submitted that, in two independent respects, the plaintiffs’ proofs failed to establish a statutory cause of action, viz (i) there was no fraud, and (ii) they were not deprived of land or any estate in land. The construction advanced was that fraud in the section was limited to dishonest conduct which produced a failure of the system to achieve a true registration, eg forged instruments, instruments signed in consequence of misrepresentations as to their nature and genuine instruments stolen and misapplied. This narrowing of the scope of the section was necessary, it was submitted, to avoid exposure of the assurance fund to claims based upon fraud unconnected with the registration system. The limited ambit of s 126(1)(b), s 126(1)(c) and s 126(1)(d) were said to support this construction. For the plaintiffs it was argued that the principle of the indefeasibility of the title of the registered proprietor: Frazer v Walker [1967] 1 AC 569 furnished a valid reason why all persons who suffer a loss of title caused by fraud of any kind should have a remedy. Mr Horton QC, in seeking to deny the plaintiffs a statutory remedy, further submitted that the section excluded every instance where the registered proprietor voluntarily executed a memorandum of transfer, notwithstanding that he was acting under the influence of fraud duress or undue influence. But upon this construction his own example of the transfer signed in blank and later stolen would be outside the section. This illustrates the difficulty which faces any attempt to draw a line which separates fraud within the section from fraud outside it. In my opinion, the section should be construed so as to embrace all frauds within the ordinary legal meaning of that term. I can see every reason why some might think it undesirable that, whenever the fraudulent party absconds, dies or becomes bankrupt, the assurance fund should bear the brunt of the many varieties of moral turpitude normally encompassed by the word fraud. But I can see no warrant for reading down the language of the section so as to restrict it to forgery or quasi-forgery. The second submission under this head was that the plaintiffs had not been deprived of their land because deprivation connotes an involuntary disposition. Although they had parted with it under the influence of fraud, they had not been deprived of it. The submission was based upon Fawkes v Attorney-General for Ontario (1903) 60 DLR 490 at 494, which does contrast disposition which is voluntary and deprivation which is deemed to be involuntary. It says: “According to the Oxford English Dictionary ‘To deprive a person of a thing, is to take it away from him’. Sub voce. It imports wrongful action, or action in invitum, and in the statute, I think, it intends some transaction ex parte, or behind the back of the true owner, or wherein his existence is concealed, whereby he being in ignorance of what is going on, is deprived of his property.” I must say, with respect, that I find this explication of the meaning of deprivation uncon-vincing, and its alleged lexicographic support nugatory. It seems to me that property is taken away from its owner, and he is just as surely deprived of if, whether it is done by a trick or by a theft. It follows that, on the findings made by the trial judge, the plaintiffs are able to establish the following ingredients of the statutory cause of action: (a) the registration of the transfer in favour of the company deprived them of the land; (b) this happened in consequence of the fraud of Gray; (c) the company was responsible for the fraud of its agent: Registrar of Titles (WA) v Franzon (1975) 132 CLR 611; (d) accordingly the company was liable in damages to the plaintiff under s 126(2)(c): ibid; (e) as the company was insolvent, the damages could be recovered by action against the Registrar-General: s 126(5). 398 [5.350]

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Parker v Registrar-General cont. [His Honour considered a further ground of appeal and continued.] The third ground upon which the appellant seeks to subvert the judgment enlists the exemption contained in s 133 which provides as follows: The assurance fund shall not, under any circumstances, be liable for compensation for any loss, damage, or deprivation occasioned (a) by the breach by a registered proprietor of any trust whether express, implied, or constructive; … It was argued that, upon the rescission of the contract, the company became a constructive trustee of the land in favour of the plaintiffs. Accordingly, the plaintiffs’ loss, damage or deprivation was occasioned by the breach of a constructive trust and is not recoverable from the fund. It is necessary to recall the sequence of events. The contract was not disaffirmed until the plaintiffs lodged their caveat on 8th March 1966. The deprivation of the land occurred on 22nd December 1965, when transfer to the company was registered. A loss which sounded (sic) in damages and flowed from the deprivation occurred on 3rd March 1966, when the mortgage was registered in favour of the National Mutual Life Association of Australasia Ltd. Since both of these events took place before the company became constructive trustee they could not have been occasioned by a breach of constructive trust then occurring. However, there is much uncertainty concerning the status of the equity of a defrauded party before he exercises his right to rescind, and whether the rescission takes effect retrospectively, Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, pp 96-99. I am prepared to assume favourably to the appellant that, upon rescission, a trust arose which related back to the original registration so that the company held as constructive trustee ab initio: Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 133 CLR 265 at 290, 291. Upon this view, the mortgage given before affirmation should be retrospectively treated as from the time of rescission as having been given in breach of trust. But the matter does not end there. It must be shown that the section, upon its true construction, has a bearing upon such a situation. I do not think it does. I consider that s 133(a) protects the fund from claims where the original default is that of the registered proprietor. It is not, in my view, concerned with loss or damage which is suffered because of a deprivation in consequence of a fraud practised upon the proprietor within the meaning of s 126. To give the two sections any concurrent operation would largely defeat s 126(5). They may be given a mutually exclusive operation by treating s 133 as if the words “occasioned by” meant “solely occasioned by”. Upon this construction the section has no application. In conclusion, I would commend the ingenuity and resourcefulness of the arguments put on behalf of the defendant. But none of them, in my view, can succeed in wresting judgment out of the hands of the plaintiffs. I would propose that the appeal be dismissed with costs. [Mahoney JA delivered a judgment to similar effect and Street CJ agreed with the judgments of Glass and Mahoney JJA.]

[5.355]

Notes

1. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.420], [4.485] for a more detailed analysis of the differences between the various provisions. See also MacDonald, McCrimmon, Wallace and Weir, Real Property Law in Queensland (3rd ed, Thomson Reuters, 2010), pp 426-448 for a detailed exposition of the way in which the Queensland provisions operate. 2. The case of Parker was considered a welcome change from the unduly restrictive interpretations of the compensation provisions by the courts. Cf Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98. [5.355]

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Specific limitations on claims for compensation [5.360] The Torrens legislation in each jurisdiction sets out a variety of restrictions on

payment of compensation from the funds. For example, loss occasioned by a breach of trust does not give rise to compensation (Real Property Act 1900 (NSW), s 129(2)(f)(i); Transfer of Land Act 1958 (Vic), s 109(2)(a); Land Title Act 1994 (Qld), s 189(1)(a); Real Property Act 1886 (SA), s 211; Transfer of Land Act 1893 (WA), s 196(1); Land Titles Act 1980 (Tas), s 151(1)(a); Land Titles Act 1925 (ACT), s 147(a); Land Title Act (NT), s 195(1)(a). See, however, Parker v Registrar-General [1977] 1 NSWLR 22 extracted at [5.350] which interpreted the New South Wales provision narrowly). Compensation is not payable where the same land has been included in two or more Crown grants (Real Property Act 1900 (NSW), s 129(2)(f)(ii); Transfer of Land Act 1958 (Vic), s 109(2)(b); Land Title Act 1994 (Qld), s 189(1)(b)(e); Transfer of Land Act 1893 (WA), s 196(1); Land Titles Act 1980 (Tas), s 151(1)(b); Land Title Act (NT), s 195(1)(b)(d); and cf Real Property Act 1886 (SA), s 214 (fund not liable but can proceed against nominal defendant); Land Titles Act 1925 (ACT), s 154(2) (action against the Territory) or, with certain saving provisions, cases where loss has been suffered by the land being included in the same certificate of title with other land through misdescription of boundaries or parcels of land (Transfer of Land Act 1958 (Vic), s 109(2)(c); Real Property Act 1886 (SA), s 212; Transfer of Land Act 1893 (WA), s 196(1); Land Titles Act 1980 (Tas), s 151(1)(d), 151(2); Land Titles Act 1925 (ACT), s 147(b). Cf Real Property Act 1900 (NSW), s 129(2)(e); Land Title Act 1994 (Qld), s 189(1)(e), (f), (g); Land Title Act (NT), s 195(1)(d))). There are further restrictions which vary from jurisdiction to jurisdiction. See See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.690]. For example, in New South Wales, Victoria, Queensland and the Northern Territory, no indemnity is payable if the claimant or his or her legal practi-tioner has substantially contributed to the loss by fraud or neglect: Real Property Act 1900 (NSW), s 129(2)(b)(i); Transfer of Land Act 1958 (Vic), s 110(3)(a); Land Title Act 1994 (Qld), s 189(1)(b);); Land Title Act (NT), s 195(1)(b). See Registrar-General v Fairless [1997] 1 VR 404. See Wallace and MacDonald, “A New Era in Torrens Title in Queensland – The Land Title Act 1994” (1994) 68 ALJ 675 at 679. What courses of action are open to a person who suffers a loss through the fraud or negligence of his or her solicitor? In some jurisdictions, there are provisions in the Torrens statutes which operate to bar access to the fund after a particular period of time. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.700]. What are the policy reasons against having a limitation period in this type of action? See Whalan, The Torrens System in Australia (The Law Book Co Ltd, Sydney, 1982), p 361 and Breskvar v White [1978] Qd R 187. In Land Title Act 1994 (Qld), ss 11A and 11B provide that mortgagees must take reasonable steps to confirm the identity of the mortgagor. By s 189(1)(ab) mortgagees who suffer deprivation, loss or damage because of a failure to take those reasonable steps, cannot claim compensation from the State. Amount of compensation [5.365] The case of Parker v Registrar-General [1977] 1 NSWLR 22 suggests that the aim of

the compensation payment is to place the applicant in the same position he or she would have been had the mistake or fraud not occurred. 400 [5.360]

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Difficulty in assessing the amount may arise where the loss is deprivation of an estate or interest in the land. If a mortgage debt is more than the value of the land, compensation would be limited to the value of the land: Keddell v Regarose Pty Ltd [1995] 1 Qd R 172. See MacDonald, McCrimmon, Wallace and Weir, Real Property Law in Queensland (3rd ed, Thomson Reuters, 2010), pp 447-448. Further, the value of the interest in the land may vary considerably over time. In Victoria, s 110(4) provides that the value of the interest in the land is to be assessed at the date of the loss. In the absence of specific statutory provision, damages which put the applicant in the same position as if the deprivation had not occurred would presumably reflect the value of the land when compensation is ordered: see Registrar-General v Behn [1980] 1 NSWLR 589; Glensaugh Pty Ltd v Registrar-General (2001) 10 BPR 19,311.

REGISTRAR’S POWER TO CORRECT THE REGISTER [5.370] The Registrar in all jurisdictions has particular powers to correct the Register. (Real

Property Act 1900 (NSW), s 12(1)(d); Transfer of Land Act 1958 (Vic), s 103(2)(a); Land Title Act 1994 (Qld), s 15(1)(a); Real Property Act 1886 (SA), s 220(f); Transfer of Land Act 1893 (WA), s 188(ii); Land Titles Act 1980 (Tas), s 139(1); Land Title Act (NT), s 17(1)(a); Land Titles Act 1925 (ACT), ss 14(1)(d) and 160.) Generally rights acquired before the time of the correction are not to be prejudiced. (Real Property Act 1900 (NSW), s 12(3)(b)(c); Transfer of Land Act 1958 (Vic), s 103(2)(b); Land Title Act 1994 (Qld), s 15(1)(b); Transfer of Land Act 1893 (WA), s 188(ii); Land Titles Act 1980 (Tas), s 139(2)(b); Land Titles Act 1925 (ACT), ss 14(1)(d), 160(6); Land Title Act (NT), s 17(1)(b).) See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.395], [4.415]; Butt, Land Law (6th ed, Thomson Reuters, Sydney, 2010), pp 793-796; and MacDonald, McCrimmon, Wallace and Weir, Real Property Law in Queensland (3rd ed, Thomson Reuters, 2010), pp 365-370 for a more detailed review of the statutory provisions. See State Bank of New South Wales v Berowra Waters Holding Pty Ltd (1986) 4 NSWLR 398 (extracted at [5.375]); James v Registrar-General (1967) 68 SR (NSW) 361; Equitiloan Securities Pty Ltd v Registrar of Titles [1997] 2 Qd R 597; Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606; Re Crompton [2000] QSC 386; Beames v Leader [2000] 1 Qd R 347. In some jurisdictions the Registrar has further and seemingly broader powers to cancel or correct a document where he or she is satisfied that some fraud was involved (Real Property Act 1900 (NSW), ss 136, 137; Real Property Act 1886 (SA), ss 60 – 63; Transfer of Land Act 1893 (WA), ss 76, 77; Tas, ss 163, 164; Land Titles Act 1925 (ACT), ss 160 – 162 (entry made in error). Arguably this power exists in Queensland and the Northern Territory: see Land Title Act 1994 (Qld), s 19; Land Title Act (NT), ss 20, 26(a). In Frazer v Walker [1967] 1 AC 569, the Privy Council considered the meaning of this second type of provision. After reconsidering the judgment in Frazer v Walker [1967] 1 AC 569, consider whether the provision has the potential to constitute an exception to indefeasibility of title.

[5.370]

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State Bank of New South Wales v Berowra Waters Holdings [5.375] State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398 [A registered mortgagee mistakenly discharged the mortgage. In his judgment, Needham J considered whether the notification of the discharge could be regarded as a recording made in error under s 136(1)(b) or as an error in the Register within s 12(1)(d).] NEEDHAM J: … The plaintiff submitted that the Registrar-General was empowered by the Real Property Act 1900, s 12(1)(d), to remove from the Register the notification of the discharge of mortgage. It also submitted that the Registrar-General was under a general duty to remove from the Register any recording of an unauthorised dealing, citing Pirie v Registrar-General (1962) 109 CLR 619 and Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415. The decision in Caldwell’s case was based upon the view, expressed by the minority in Boyd v The Mayor of Wellington [1924] NZLR 1174 and by Dixon J in Clements v Ellis, that the regis-tration of a void instrument created no indefeasible title in the immediate transferee. The conclusion that the entry of the notice of resumption was made in error was based upon that view. Roper CJ in Equity, whose reasons were apparently approved by Street CJ, expressed the opinion that the Registrar-General had the power, under what was then s 12(d), “to correct the error”. As the Registrar-General was not a party, his Honour considered that the plaintiff was entitled to a declaration of the invalidity of the resumption “in order to furnish evidence to the Registrar-General which he may consider sufficient to warrant the correction by striking out the entry”. The opinions expressed in Caldwell’s case have to be considered in the light of the rejection by the Privy Council (Frazer v Walker [1967] 1 AC 569) and by the High Court (Breskvar v Wall (1971) 126 CLR 376) of the basic principle of indefeasibility accepted in that cased (sic), so that the conclusion that the notification of the resumption was an error which the Registrar-General could correct becomes suspect. The “error” was in registering a document which, the Court found, had no effect in law, just as, in Pirie’s case, the High Court held that the Registrar-General had no right to maintain on the Register a notification of a restrictive covenant which did not satisfy the statutory requirements for notification. Neither of these cases, it seems to me, leads to the conclusion that the dealing in this case was a recording made in error (s 136(1)(b)) or constituted an error in the Register (s 12(1)(d)). I think that the ambit of these sections needs to be considered in the light of the principle accepted since the decision in Frazer v Walker, that a void instrument, upon registration, creates an interest indefeasible as against the whole world with the exception of persons who can bring themselves within the exceptions to indefeasibility. Thus, in Caldwell’s case, the notification in the Register of the invalid resumption would vest in the Minister an indefeasible title except in so far as the plaintiff there could establish that he came within the exceptions in s 42(1) or s 124. It seems to me that the same conclusion is necessary in the present case. In Frazer v Walker (at 586) their Lordships said that that action was one for the recovery of land within the meaning of the New Zealand equivalent of s 124 and was directly barred by that section. In the case of a mortgage (forged, as in that case) their Lordships said (at 583) that in so far as the action sought cancellation by the Court of the entry of the mortgage on the Register, it could only be based on the New Zealand equivalent of s 138 and that the power of the Court did not extend beyond those cases in which adverse claims against the registered proprietors are admitted by the Act. It seems to me to be necessary to draw the following conclusions in the present case: 1

The registration of the dealing (even assuming it was “invalid” or “ineffective”) destroyed the charge previously binding on the land. Such a conclusion was reached both by Connolly J, in Associated Securities Ltd v Perry [1978] Qd R 13 and by Kearney J in Grundy v Ley [1984] 2 NSWLR 467, and is, in my opinion, required by the reasons given in Frazer v Walker.

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State Bank of New South Wales v Berowra Waters Holdings cont. 2

The second defendant, therefore, held the land free of the mortgage unless the plaintiff could establish that it came within one of the exceptions to indefeasibility in s 42(1) or s 124.

3

The plaintiff does not come within any of those exceptions. So far as s 124(a) is concerned, registration of the dealing destroyed the charge and so that paragraph became inapplicable to the plaintiff.

4

These proceedings are proceedings for the recovery of land, and so the Court has no power to give directions to the Registrar-General to cancel the recording, because such proceedings are expressly barred (by s 124).

Those conclusions debar the Court from making the orders sought by the plaintiff unless the plaintiff can enforce against the second defendant a “personal equity”, or unless the Registrar-General has power to correct the “error”, and the Court, in view of his refusal to do so without an order of the Court, can make a declaration setting out the facts from which he could draw the conclusion that he should exercise his power of correction. The plaintiff submitted that a personal equity arose in its favour against the second defendant. The equity was said to be a personal right arising out of the mortgage against the mortgagor that the mortgage should not be discharged unless the debt had been paid. I have some doubt as to whether this submission is correct. The right to payment is a legal right; the act of submitting the discharge for registration was the act of the plaintiff-the second defendant had no power in it. If a personal equity arose in this case, then, it would seem, it would arise in every case where a mortgage is discharged without the whole of the sum due having been paid. But, assuming the existence of a personal equity against the second defendant arising out of the mortgage and its discharge, the reasons given in Frazer v Walker show that no action on a personal equity which falls within the prohibitions of s 42 and s 124 may be maintained (see at 585). It is necessary, therefore, to consider the powers of the Registrar-General. These are contained in s 12(1)(d) and s 136(1)(b). The New Zealand equivalent of s 12(1)(d) was said by the Privy Council (Frazer v Walker (at 581)) to be “little more than a ‘slip’ section and not of substantive importance”. In 1970, the section was amended by the addition to it of s 12(3), by paragraph (b) of which it is provided that when the Registrar-General exercises his power to correct errors and omissions in the Register, the correction shall not prejudice or affect a “right accrued from a recording made in the Register before the correction”. It was suggested that the addition of s 12(3) made it clear that the Registrar-General was to have the power to make substantive corrections to the Register. However, it seems to me that one cannot conclude from the amendment that s 12(1)(d) was being expanded to such a degree that the Registrar-General “upon such evidence as appears to him sufficient” was being empowered to breach the ramparts of indefeasibility in a manner prohibited to the Court by the Act. Section 12(3)(b) is, in my opinion, equivocal on the matter. My inclination is to treat s 12(1)(d) as being restricted to departmental errors and omissions, but I do not have to reach a final conclusion on the matter of its correct ambit, because it seems to me plain that the Act, as construed by the Privy Council and the High Court, would not permit the Registrar-General, in the exercise of powers of “correction”, to create a situation forbidden by the Act itself. By cancelling the notifications and restoring the mortgage he would be doing what is prohibited to the parties and the Court by s 124. I am, in any event, not satisfied that the notification of the dealing created an error in the Register. The document lodged for registration was in proper form. It was incorrect in stating that the plaintiff had received “all moneys in full satisfaction and discharge of the … mortgage”, but if the notification in the Register of a document in proper form (which in this case had the specific statutory effect given to it by s 65), registration of which is permitted by the Act, creates an error in the Register merely because it makes an incorrect statement, the Registrar-General would be empowered to correct such [5.375]

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State Bank of New South Wales v Berowra Waters Holdings cont. things as caveats making incorrect claims as to interest, mortgages containing incorrect recitals, and even, one would assume, forged transfers. I do not think that s 12(1)(d) goes so far. I do not think that the plaintiff can rely on s 136(1) as giving the Registrar-General the power to do the things the plaintiff seeks. In the first place, I do not think that a “recording has been made in error in the Register”. The plaintiff was undoubtedly in error in executing and lodging the document for registration, but I do not think it can be said that the recording was made in error. The document was a proper one to record; it was authorised by s 65 of the Act, and the plaintiff intended that it be lodged. Certainly, the Registrar-General made no error in recording the document. Secondly, s 136, despite the terms of s 136(1)(b), seems restricted to cases where documents are sought by the Registrar-General from persons who should not be in possession of them. Assuming one of the events set out in paras (a) to (d), the remedy is the giving of notice by the Registrar-General to the persons concerned to deliver up a certificate of title or duplicate registered dealing for the purpose of it being cancelled or corrected. As the Privy Council said, in Frazer v Walker (at 585), the New Zealand equivalent of s 136 gives “significant and extensive” powers to the Registrar, but it does not seem to me that the power of correction or cancellation of a recording made in error could be more extensive than the power given by s 12(1)(d). I should notice some of the authorities on the question of the Registrar-General’s power to correct errors, although none, unfortunately, gives particular guidance. Re N Jobson and the Real Property Act (1900) 51 SR (NSW) 76 seems a clear case in which the power of correction is called for. The error had occurred in the office of the Registrar-General, and he was held entitled to correct the entries. It was a “slip”. In James v Registrar-General (1967) 69 SR (NSW) 361, the mistake was again that of the department, who issued a certificate of title omitting to record on it details of an easement binding the land. The Registrar-General was held to be entitled, when the certificate came into his possession, to place upon it a notification of the easement. The exception to indefeasibility in s 42(b) played a large part in the reasons of the majority. There are two South Australian cases which appear to be relevant, but each seems to rely upon a section of the South Australian Act (s 64) which has no counterpart in the Real Property Act. They are Re Mallen (1892) 25 SALR 34 and Elder’s Trustee and Executor Co Ltd v Bagot’s Executor and Trustee Co Ltd [1964] SASR 306. The facts in the latter case were, for relevant purposes, identical with those in the present. Section 64 was in very wide terms, and the Court gave no consideration to the question of indefeasibility. No doubt it would have done so if the case had arisen after the decision in Frazer v Walker. For these reasons, I am of the opinion that neither the Court nor the Registrar-General has the power to give the plaintiff the relief it seeks in respect of dealing No V818827. No questions arose of any other action open to the plaintiff, and, accordingly, I make no comment on the matter….

[5.380]

Notes and Questions

1. In most instances, the “slip” provisions have been narrowly interpreted (see, for example, State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398 extracted at [5.375]) and generally the statutes provide that corrections cannot prejudice rights acquired before the correction of the Register (see, for example, Real Property Act 1900 (NSW), s 12(3)(b); Land Title Act 1994 (Qld), s 15(1)(b)). See, for example, Equitiloan Securities Pty Ltd v Registrar of Titles [1997] 2 Qd R 597. Cf Re N Jobson and the Real Property Act 1990 (1951) 68 WN (NSW) 23. 404 [5.380]

The Torrens System: The Principle of Indefeasibility

CHAPTER 5

2. In James v Registrar-General (1967) 69 SR (NSW) 361 the Registrar amended the Register by replacing the entry of an easement on the title of the servient tenement after the Registrar had, in error, left the entry off the Register. This correction was upheld on the basis the easement was an express exception to indefeasibility and the holding of the servient tenement was thus subject to it, whether or not it was registered on title. It has been suggested that, in view of the comments and decision in the Equitiloan case the James case may not apply in Queensland: see Weir, “Registrar’s Power of Correction – Queensland Reforms” (1998) 6 APLJ 101. 3. The second set of provisions appears to give the Registrar a broader power to correct the Register where registration has been fraudulently obtained. They have not been used often, however, and it appears unlikely that Registrars will use them to resolve disputes involving complicated issues of fact and law: see Weir, “Registrar’s Power of Correction – Queensland Reforms” (1998) 6 APLJ 101. 4. The introduction of electronic conveyancing will make the importance and breadth of the Registrar’s powers to correct even more important: see Grinlinton, “The Registrar’s Powers of Correction” in Grinlinton, Torrens in the Twenty-First Century (2003), pp 217-246. In the paper-based system traditionally the Registrar identifies errors in instruments presented for registration and returns them for correction before registration. Although the electronic conveyancing scheme mooted for Australian jurisdictions retains the Registrar’s overseeing role, it is unclear whether the perusal of all instruments lodged in electronic form will be undertaken in the same manner. In England and New Zealand, the “registration” will take place simultaneously with lodgment by the registered conveyancer and it would be thought that the need for the Registrar’s power to correct (even after registration) would be vital to the smooth operation of the system where errors are subsequently discovered: Grinlinton, p 218. See s 81(2) and (3) of the Land Transfer (Computer Register and Electronic Lodgment) Amendment Act 2002 (NZ) which appears to allow a wide discretion to the Registrar to correct the computer register. Grinlinton argues that the apparent width of the discretion is probably restricted by the general provision in s 80(1). See also s 44H(1) of the Transfer of Land Act 1958 (Vic) (inserted by Transfer of Land (Electronic Transactions) Act 2004 (Vic), s 6) which provides that the Registrar may correct errors and supply omissions in the Register if the error or omission resulted from a malfunction of the electronic lodgement network. The provision appears to confer broad powers but it seems unlikely that the Registrar would seek to use them to overturn indefeasibility of title.

[5.380]

405

CHAPTER 6 Unregistered Interests in Torrens Land: Nature and Priorities [6.05]

INTRODUCTION .................................................................................................... 408

[6.10]

DISPUTE BETWEEN TWO REGISTERED INTERESTS ............................................. 409

[6.20]

DISPUTE BETWEEN A REGISTERED INTEREST AND SUBSEQUENT UNREGISTERED INTEREST ................................................................................................................ 409 [6.25]

Barry v Heider ....................................................................... 410

[6.35]

DISPUTE BETWEEN AN UNREGISTERED INTEREST AND SUBSEQUENT REGISTERED INTEREST .......................................................................................... 414

[6.40]

DISPUTE BETWEEN TWO UNREGISTERED INTERESTS ....................................... 414 [6.40] [6.45]

Caveats ................................................................................................. 414 Nature of caveatable interests ........................................................... 415 [6.45]

[6.55]

Describing the claimed interest ......................................................... 424 [6.60] [6.70]

[6.80] [6.85]

Kerabee Park Pty Ltd v Daley ................................................. 424 Four Oaks Enterprises Pty Ltd v Clark ...................................... 427

The general mechanics and effect of a caveat ................................. 430

PRIORITY BETWEEN EQUITABLE OR UNREGISTERED INTERESTS UNDER THE TORRENS SYSTEM ................................................................................................. 432 [6.85]

The test and its theoretical basis ....................................................... 432 [6.85]

[6.95]

[6.160]

[6.170]

Heid v Reliance Finance Corporation Pty Ltd ............................ 432

Application of the test ........................................................................ 441 [6.105] [6.120] [6.125] [6.135] [6.145] [6.150]

Abigail v Lapin ...................................................................... Person-to-Person Financial Services Pty Ltd v Sharari ............... Jacobs v Platt Nominees Pty Ltd ............................................. Handberg v MIG Property Services Pty Ltd .............................. Black v Garnock .................................................................... J & H Just (Holdings) Pty Ltd v Bank of New South Wales ................................................................................... IAC (Finance) Pty Ltd v Courtenay ..........................................

443 449 451 457 459 467 472

The relevance of notice ...................................................................... 476 [6.170] [6.175]

[6.185]

Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd ....................................................................................... 415

Moffett v Dillon ..................................................................... 476 Perpetual Trustee Company Ltd v Smith .................................. 485

PRIOR EQUITY AND SUBSEQUENT UNREGISTERED INTEREST ......................... 493 [6.185]

[6.195]

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) ............... 493

Statutory provisions which may affect priority ................................ 501 [6.200] [6.205] [6.210]

Real Property Act 1900 (NSW), s 43A ..................................... 501 IAC (Finance) v Courtenay ..................................................... 501 Barlin Investments Pty Ltd v Westpac Banking Corporation .......................................................................... 502 407

Australian Property Law: Cases and Materials

INTRODUCTION [6.05] A priority dispute arises where two or more persons claim wholly or partially inconsistent proprietary interests in the land. The interests may be legal or equitable and may involve different types of proprietary interests (for example, a fee simple, a mortgage, a lease, an easement). In relation to general law land, rules evolved to settle the various kinds of priority disputes. Although only a very small number of general law land titles remain, an understanding of these rules will help in the resolution of priority disputes surrounding Torrens land. This understanding can be obtained from Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), Chapter 2. However, there is also no doubt that the particular nature of the Torrens land register has led to the evolution of priority disputes in a way that is specific to Torrens land. For this reason, this chapter focuses on the nature and resolution of priority disputes that occur in respect of land registered under the Torrens system. The starting point of the Torrens system is to provide a record relating to individual pieces of land. At its simplest, the Register containing such information is intended to provide a record of the state of the title so that an intending purchaser needs only to search the folio relating to the land to be purchased to determine the nature of the interests existing over the land and the identity of the holders of such interests. The simplistic concept is that a person who takes a registered title should only be subject to interests that he or she could have discovered from a search of the Register. In theory, priority disputes should not arise. The reality is far more complicated. There are a number of situations in which interests in Torrens land may exist despite their absence from the Register. In some circumstances, these interests may prevail over the title of a registered interest holder.

• First, the Torrens statutes all provide for particular interests not on the Register to prevail over the title of the registered proprietor (the “paramount” exceptions) (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.180]–[4.310]). • Secondly, if a statute creates an interest in land and that statute, according to ordinary principles of statutory interpretation, overrides the relevant Torrens statute, an interest in land not disclosed on the Register may be enforceable against the registered proprietor (Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.325]–[4.345]) • Thirdly, and apart from the paramount exceptions set out in the Torrens statutes, in several provisions the legislation recognises that unregistered or equitable interests can exist. • Fourthly, the parties themselves may deliberately or simply by the context of the transaction, create an interest that is not registered. For example, the holder of an registrable interest may decide not to register because of cost, or because the context in which the transaction occurs has led them to think that registration is not necessary. For the above reasons, priority disputes can arise.

408 [6.05]

Unregistered Interests in Torrens Land: Nature and Priorities

CHAPTER 6

DISPUTE BETWEEN TWO REGISTERED INTERESTS [6.10] Section 34 of the Transfer of Land Act 1958 (Vic) provides: (1) Save as otherwise expressly provided every instrument lodged for registration shall be registered in the order in which and as from the time at which it is lodged for that purpose, and instruments purporting to affect the same estate or interest shall be entitled to priority as between themselves according to order of lodgment for registration and not according to the date of the instrument or any other factor. (2) Subject to this section, if two or more instruments signed by the same proprietor and purporting to affect the same estate or interest are at or about the same time lodged for regis-tration, the Registrar shall register that instrument which is lodged by the person submitting the duplicate Crown grant certificate of title mortgage charge or lease (as the case may be). (3) If two or more instruments which affect the same land are lodged and are awaiting registration, the Registrar may register those instruments in the order which will give effect to the intentions of all the parties, as expressed in or apparent to the Registrar from those instruments.

[6.15]

Notes and Questions

Variations of this provision exist in the other jurisdictions. Generally, priority is granted according to the time of lodgment, (see Real Property Act 1900 (NSW), s 36(5); Transfer of Land Act 1958 (Vic), s 34(1); Land Title Act 1994 (Qld), s 177; Real Property Act 1886 (SA), s 56(1); Transfer of Land Act 1893 (WA), s 53(1); Land Titles Act 1980 (Tas), s 48; Land Titles Act 1925 (ACT), s 48(4); Land Title Act (NT), s 180) but in most jurisdictions, if the intentions of the parties make clear that dealings are to be lodged in a particular order, the Registrar registers the dealings to give effect to those intentions (see Real Property Act 1900 (NSW), s 36(4); Transfer of Land Act 1958 (Vic), s 34(3); Land Title Act 1994 (Qld), s 159; Land Titles Act 1980 (Tas), s 48(2), (3); Land Titles Act 1925 (ACT), s 48(5); Land Title Act (NT), s 157.) In some cases, priority is accorded to the party who lodges the duplicate certificate of title with the registrable instrument (see Transfer of Land Act 1958 (Vic), s 34(2); Real Property Act 1886 (SA), s 58).

DISPUTE BETWEEN A REGISTERED INTEREST AND SUBSEQUENT UNREGISTERED INTEREST [6.20] As discussed in Chapter 5 of Moore, Grattan and Griggs, Australian Real Property

Law (6th ed, Thomson Reuters, Sydney, 2016), a registered title will gain the benefits of indefeasibility or paramountcy. In theory, it will only be subject to such estates or interests as are noted on the register. In practice, the reality can be very different. As discussed in Chapters 4 and 5 of that book, overriding legislation, personal exceptions to indefeasibility, the doctrine of notice and express statutory provisions within the Torrens legislation can lead to a registered interest losing priority to an unregistered interest. For the acceptance of the vulnerability of the registered interest. see Barry v Heider (1914) 19 CLR 197 High Court (extracted at [6.25])

[6.20]

409

Australian Property Law: Cases and Materials

Barry v Heider [6.25] Barry v Heider (1914) 19 CLR 197 High Court [Barry, the registered proprietor of land, executed a memorandum of transfer to Schmidt. This transfer, which remained unregistered, was voidable because of Schmidt’s fraud. Schmidt executed a mortgage to Heider, which also remained unregistered. Barry sought an injunction to prevent Schmidt from registering the transfer, and a declaration that he held the land free of Heider’s mortgage. The New South Wales Supreme Court held that the transfer to Schmidt should be cancelled subject to the fact that Barry held the land subject to Heider’s mortgage. Barry’s appeal to the High Court was unsuccessful.] GRIFFITH CJ (with whom Barton J agreed): … The substantial ground of appeal is that upon a proper construction of the provisions of the Real Property Act the transfer was inoperative for any purpose until registration, so that no claim could be founded upon it of any kind, except, perhaps, a personal right of action by Schmidt himself. … The main contention for the appellant is that an unregistered instrument is inoperative to create any right with respect to the land itself. This argument is founded upon the provision in sec. 2, subs 4 of the Act that “All laws, Statutes, Acts, ordinances, rules, regulations and practice whatsoever relating to freehold and other interests in land and operative on the first day of January one thousand eight hundred and sixty-three are, so far as inconsistent with the provisions of this Act, hereby repealed so far as regards their application to land under the provisions of this Act, or the bringing of land under the operation of this Act,” and upon sec. 41, which enacts that “(1) No instrument, until registered in manner hereinbefore prescribed, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any instrument in manner hereinbefore prescribed, the estate or interest specified in such instrument shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions and contingencies set forth and specified in such instrument, or by this Act declared to be implied in instruments of a like nature. (2) Should two or more instruments executed by the same proprietor and purporting to transfer or encumber the same estate or interest in any land be at the same time presented to the Registrar-General for registration and endorsement, he shall register and endorse that instrument under which the person claims property who shall present to him the grant or certificate of title of such land for that purpose.” I note in passing that the second paragraph of this section treats the person presenting an instrument for registration as a person “claiming property” under it. In my opinion the only relevant words of sec. 2, “All laws … rules … practice,” are not of themselves sufficient to embrace the body of law recognised and administered by Courts of Equity in respect of equitable claims to land arising out of contract or personal confidence. But it is said that the words of sec. 41 “No instrument until registered … shall be effectual to pass any estate or interest in any land under the provisions of this Act” have that effect. It is now more than half a century since the Australian Colonies and New Zealand adopted, in substantially the same form but with some important variations, the system, sometimes called the “Torrens” system, which is now in New South Wales embodied in the Real Property Act 1900. With the exception of one decision in South Australia, soon afterwards overruled, the contention of the appellant has never been accepted in any of them. I proceed to consider other provisions of the Act bearing on the question for the purpose of discovering whether equitable rights or claims with respect to land are recognised by it. Part IX of the Act deals with trusts. By sec. 82 the Registrar-General is forbidden to make any entry of any notice of trusts, whether expressed, implied or constructive, in the register book. The second 410 [6.25]

Unregistered Interests in Torrens Land: Nature and Priorities

CHAPTER 6

Barry v Heider cont. goes on to provide that trusts may be declared by any instrument, and that a duplicate or attested copy of the instrument may be deposited with him for safe custody and reference. The instrument itself is not to be registered, but the Registrar-General is required to enter on the register a caveat forbidding the registration of any instrument not in accordance with the trusts and provisions contained in the instrument so deposited. This is, in my opinion, an express recognition of the equitable rights or interests declared by that instrument. Section 86 provides that whenever any person “interested in land” under the Act appears to be a trustee within the meaning of any Trustee Act then in force, and a vesting order is made by the Court, the Registrar-General shall enter the vesting order in the register book and on the instrument evidencing the registered title to the land, and that upon such entry being made the person in whom the order purports to vest the land shall be deemed to be the registered proprietor. No restriction is made as to the cases in which the Court may declare a trust. The jurisdiction recognised by this section clearly includes any case in which the Court can make a vesting order under the Trustee Acts. That jurisdiction has always included cases in which specific performance of a contract to sell land has been decreed by the Court. This, again, is an express recognition of an equitable claim or title to land as existing before and irrespective of registration. The provisions of the Act relating to caveats embody a scheme expressly devised for the protection of equitable rights. The caveat required by sec. 82 to be entered by the Registrar-General is one instance of the application of that scheme. Section 72 provides that any person “claiming any estate or interest” in land under the Act “under any unregistered instrument” may by caveat forbid the registration of any interest affecting such land, estate or interest. This provision expressly recognises that an unregistered instrument may create a “claim” cognisable by a Court of Justice, and the caveat is the means devised for the protection of the right of the claimant pending proceedings in a competent Court to enforce it. … In my opinion equitable claims and interests in land are recognised by the Real Property Acts. It follows that the transfer of 19th October, if valid as between the appellant and Schmidt, would have conferred upon the latter an equitable claim or right to the land in question recognised by the law. I think that it also follows that this claim or right was in its nature assignable by any means appropriate to the assignment of such an interest. It further follows that the transfer operated as a representation, addressed to any person into whose hands it might lawfully come without notice of Barry’s right to have it set aside, that Schmidt had such an assignable interest. The respondent Heider’s case is mainly based upon this representation, but does not entirely rest upon it. Barry’s letter of 23rd October authorising the delivery of the certificate of title to Messrs Gale & Gale, and delivered to them upon their request to Schmidt for its production, was, in my opinion, an even more emphatic representation that Schmidt had such an interest as entitled him to possession of the certificate of title. Mrs Heider thereupon became in a position to register the transfer from Barry to Schmidt, and consequent upon it to register Schmidt’s mortgage to herself. Her right to do so was complete, although actual registration was formally impeded by the delay in the preparation of the new certificate. So far, therefore, as she is concerned, I think that Barry is not entitled to any relief against her except upon the terms of making good his representations … ISAACS J: … The plaintiff’s primary case is that he was cheated into signing the document; that though he intended to sign a document giving Schmidt some rights in respect of the land, it was not a transfer at all, and was only a contract for £4,000, that being the sum really agreed upon; and that as Schmidt had never paid anything in fact to Barry, the transaction was fraudulent, and even utterly null and void. [6.25]

411

Australian Property Law: Cases and Materials

Barry v Heider cont. As regards Schmidt no difficulty arises: the learned Chief Judge in Equity was satisfied that Barry was defrauded, and has declared the transfer to be “void and of no effect”. Heider … however [says she acted to her prejudice] upon the statement in the document of transfer by lending money to Schmidt upon the security of his apparent interest, and that to the extent of [her claim] the transfer should be declared to be binding on Barry. Barry’s substantial replies to this are: (1) The document of transfer was ab initio void as he never intended to sign a document of that nature, and therefore nothing can validly rest upon it; (2) if voidable only, the effect of the Real Property Act is to forbid both legal and equitable estates or interests in land arising except upon registration, and therefore Heider [has] no right but a personal right against Schmidt … There was a contention as to the incompleteness of the transfer by reason of the absence of proof of attestation, but that cannot be regarded as serious. (1) As to the document being void, the argument was twofold. First, it was said that the decree expressly declaring that “the said transfer was void and of no effect” meant it was absolutely void ab initio. It is quite certain the learned Judge in so declaring did not mean that, otherwise he could not have made the subsequent declarations in the decree. It is manifest he meant exactly what Erle CJ said in Ex parte Swan 7 CB (NS) 400, 431. The learned Lord Chief Justice observed: “Now, although the deeds of transfer, as between Swan and Oliver, were null and void, yet, as between Swan and a purchaser for value on the faith that they were valid, they may be valid to pass the property, if not directly, yet indirectly, by estopping Swan from setting up his right against such purchaser.” As to whether the document ought to be held to be for all purposes a nullity, that is impossible on the evidence before us. The evidence of Barry himself does not even go so far as to show he thought he was not signing a transfer. He does, I agree, say he did not think he was signing a transfer with a statement that £1,200 was the consideration and was paid, but that is not sufficient. The transfer is not the contract creating the obligation. Even if he proved that he believed he was signing a contract only, and not a transfer, the question would arise whether that necessarily would cut away the position of Heider … Whether it would or not raises an interesting question of law, involving the consideration of several important cases, such as Stewart v Kennedy [No 2] 15 App Cas, 108, Hunter v Walters LR 7 Ch, 75, Henderson & Co v Williams [1895] 1 QB 521, Farquharson Bros & Co v King & Co [1902] AC, 325, 332, and Carlisle and Cumberland Banking Co v Bragg [1911] 1 KB, 482. But the point does not now present itself for decision. (2) The transfer being voidable only, and now avoided, as against Schmidt, for the gross fraud undoubtedly perpetrated by him in connection with the transaction, the next question is what is the effect of such avoidance? Mr Loxton argued very strenuously that sec. 41 of the Real Property Act was decisive in his favour. It says “No instrument, until registered in manner hereinbefore prescribed, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money.” His point was that that provision applied to both legal and equitable estates, interests, and liability. I agree with him so far as to the meaning of that provision. “Estate” and “interest”, as used in the Act, include both legal and equitable estates and interests. The interpretation section, sec. 3, defines “Proprietor” as “any person seised or possessed of any freehold or other estate or interest in land at law or in equity in possession in futurity or expectancy”, and “Transfer” as “the passing of any estate or interest in land under this Act whether for valuable consideration or otherwise”. But what follows? Mr Loxton contended that the consequence was that until registration no person can acquire any interest in land legal or equitable. He said that whatever personal liability existed might be enforced as “a chose in action” against the person liable, but not against the land, for the Act recognises no interests legal or equitable except in the registered proprietor. 412 [6.25]

Unregistered Interests in Torrens Land: Nature and Priorities

CHAPTER 6

Barry v Heider cont. Such a contention is absolutely opposed to all hitherto accepted notions in Australia with regard to the Land Transfer Acts. They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines, by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them. The notion that an equitable right is a mere chose in action, once accepted by the Court (Finch’s Case (1590) 4 Inst, 85) but definitely and finally parted from by Lord Hardwicke in Hopkins v Hopkins, West 606, and Lord St Leonards in Stump v Gaby (1852) 2 De G M & G 623, has not, so far as I know, except in one notable instance been considered by Australasian Courts as applicable to the Land Transfer Acts. In Victoria, in the case of Maddison v McCarthy (1865) 2 WW & àB (Eq) 151, it was held in 1865 by a very distinguished Judge, Sir Robert Molesworth, that registered proprietors were compellable in equity to specifically perform their contracts. So in Paoro Torotoro v Sutton 1 NZJR (NS) SC 57, in 1875; so in Cuthbertson v Swan 11 SALR 102, in 1877 reversing an earlier case of Lange v Ruwoldt 6 SALR 75; 7 SALR 1, the single instance referred to; and so in Tierney v Loxton [No 1] 12 NSWLR (L) 308, in 1894, a case as to caveats. Not only so, the Privy Council in the case of Williams v Papworth [1900] AC 563, 568 – strangely enough not cited in argument – said, by Lord Macnaghten: “It could not, of course, be disputed that the expression ‘interest in land’, unless there was something to restrict the meaning, must include equitable as well as legal interests. But it was argued that the scope of the Act rightly understood requires such a restriction.” Their Lordships, however, declined to adopt that view, and pointed to expressions in the Act contrary to such a conclusion. They held, affirming the Supreme Court of New South Wales, that beneficiaries under a settlement, if deprived of their equitable interests, could validly claim under s 117 (now s 126) for damages for loss of an interest in land. … The Land Transfer Act does not touch the form of contracts. A proprietor may contract as he pleases, and his obligation to fulfil the contract will depend on ordinary principles and rules of law and equity, except as expressly or by necessary implication modified by the Act. Section 43, for instance, makes provision with respect to the case of a bona fide purchaser without notice, and the section says “any rule of law or equity to the contrary notwithstand-ing”. Consequently, s 41, in denying effect to an instrument until registration, does not touch whatever rights are behind it. Parties may have a right to have such an instrument executed and registered; and that right, according to accepted rules of equity, is an estate or interest in the land. Until that instrument is executed, s 41 cannot affect the matter, and if the instrument is executed it is plain its inefficacy until registered – that is, until statutory completion as an instrument of title -cannot cut down or merge the pre-existing right which led to its execution. The basis of the contention therefore fails, and we have to consider the position as to equitable remedies as if the land were not under the Statute. (3) This raises the question of the effect of Barry’s conduct. Distinctions have been drawn as to whether such a case is to be solved by the doctrine of estoppel, or by the doctrine that, where one of two innocent persons has to suffer by the fraud of a third, he who, by what Lord Halsbury, in adopting the language of an American Judge, calls “an indiscretion”, has enabled the third person to commit the fraud, shall bear the loss. I see no real distinction in principle. I call them both estoppel, because the second principle simply compels the person who enabled the fraud to be committed to stand by the consequences of his own conduct and precludes him from asserting his really superior title. … Why does not Barry fall within that principle so far as the transfer is concerned? Whatever be the legal effect of the transfer under the Act, it is a statement by Barry, importing that Schmidt was entitled [6.25]

413

Australian Property Law: Cases and Materials

Barry v Heider cont. to all his (Barry’s) estate and interest in the land, and that not as a volunteer but as a purchaser for £1,200, and that Barry had no further claim or lien on the land, because the whole consideration had been paid. That is equivalent to a declaration that Schmidt was the full equitable owner of the land. And everyone must be taken to know that, armed with such a document, Schmidt if the statements were true could sell or mortgage the property it represented, the registration being a mere formality, apart from the possible fraud of Barry himself, which no one was bound to anticipate, and which, as regards Barry himself, is nothing. In Vickers v Hertz LR 2 HL (Sc) 113, 115, Lord Hatherley LC says: “When … one person arms another with a symbol of property, he should be the sufferer, and not the person who gives credit to the operation and is misled by it.” I apprehend, therefore, the facts so far bring the case absolutely both within the principle of estoppel and the innocent person doctrine if there is really any difference between them. Mrs Heider lent her money believing and trusting to the accuracy of Barry’s own statements in the transfer, and Barry must be held to the truth of those statements as to her, or, as Lord Selborne said in the Citizens’ Bank of Louisiana v First National Bank of New Orleans LR 6 HL 352, 360, he “shall be compelled to make them good”. I attach no importance to the letter signed by Barry dated 23rd October and addressed to the Registrar of Titles. It is doubtful how that came into existence, and for what purpose, and I think Mrs Heider’s rights are quite well established without it, and not increased by it. Mrs Heider, in my opinion, has a good equitable claim against Barry to have her loan secured in some way on his land. [A second mortgage in favour of Gale was postponed to Barry’s lien for the unpaid purchase moneys on the basis that Gale had not been misled in the same manner as Heider.]

[6.30]

Notes and Questions

Barry v Heider (1914) 19 CLR 197 was decided before the doctrine of immediate indefeasibility became the ideology of choice. It could be argued that the relevance and importance of immediate indefeasibility was not understood at the time of Barry v Heider. If the same facts came before a court today, it may be possible for that court to distinguish, or if the presiding Court was the High Court, overrule Barry v Heider.

DISPUTE BETWEEN AN UNREGISTERED INTEREST AND SUBSEQUENT REGISTERED INTEREST [6.35] Unless one of the exceptions to indefeasibility applies, the registered interest will prevail over the unregistered interest.

DISPUTE BETWEEN TWO UNREGISTERED INTERESTS Caveats [6.40] The Torrens statutes provide some protection for the holders of unregistered interests. The most usual form of protection is the caveat lodged by a person who claims an estate or interest in land and who wishes to restrain the registration of dealings inconsistent with his or her interest. Real Property Act 1900 (NSW), s 74F; Transfer of Land Act 1958 (Vic), s 89(1); 414 [6.30]

Unregistered Interests in Torrens Land: Nature and Priorities

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Land Title Act 1994 (Qld), ss 122, 124; Real Property Act 1886 (SA), s 191; Transfer of Land Act 1893 (WA), s 137; Land Titles Act 1980 (Tas), s 133; Land Titles Act 1925 (ACT), s 104(1); Land Title Act (NT), ss 138, 140. A caveat can only be lodged to protect a proprietary interest in land. The following material deals with this type of caveat. Caveats generate more litigation than any other area of the Torrens system of land registration: Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict” (1997) 21 MULR 460; O’Connor, “Information, Automation and the Conclusive Land Register” in Grinlinton, Torrens in the Twenty-first Century (2003), pp 249-275; Aitken, “Many Shabby Manoeuvres – the use and abuse of caveats in theory and practice” (2005) 26 ABR 205; Aitken, “Current Issues with Caveats: a pan-Australian conspectus” (2010) 84 ALJ 22; Cahill, “Caveats: Current Issues” (2008) 16 APLJ 87; Aristei, “Recent Developments in the Law of Caveats” (2008) 16 APLJ 62. Apart from the lodgment of caveats to protect equitable interests, the Torrens statutes contain a mechanism pursuant to which declarations of trust may be deposited with the Registrar. (Real Property Act 1900 (NSW), s 82(2); Real Property Act 1886 (SA), s 162; Transfer of Land Act 1893 (WA), s 55; Land Titles Act 1925 (ACT), s 124.) In most jurisdictions, the Registrar is not permitted to record the trust in the register but in New South Wales and the Australian Capital Territory, the Registrar must lodge a caveat prohibiting registration of dealings not in compliance with the trust (Real Property Act 1900 (NSW), s 82(3); Land Titles Act 1925 (ACT), s 124(3). In Western Australia, the Registrar may protect the rights of the beneficiary by caveat (Transfer of Land Act 1958 (Vic), s 37; Transfer of Land Act 1893 (WA), s 55(3)). In Victoria, from the commencement of s 22 of the Land Legislation Amendment Act 2009 (Vic), a trust may not be deposited with the Registrar (Transfer of Land Act 1958 (Vic), s 37(2)). The procedure for the depositing of a trust is not used often: generally the caveat provisions provide a simpler and surer means of protection of equitable interests. In Queensland, Tasmania and the Northern Territory the Registrar may register an instrument of transfer which describes the registered holder as a trustee (Land Title Act 1994 (Qld), s 110(1) and (2); Land Titles Act 1980 (Tas), s 132(3); Land Title Act (NT), s 126(1), (2)). The trust document must be deposited with the Registrar but does not form part of the Register (Land Title Act 1994 (Qld), s 110(3) and (4); Land Titles Act 1980 (Tas), s 132(1)). Nature of caveatable interests

Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [6.45] Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 Vic SC Appeal Division [The mortgagee entered into possession of the land after the mortgagor fell into arrears. The mortgagee subsequently sold the land, yet the mortgagee’s transfer remained unregistered. The mortgagor claimed that the sale seriously undervalued the price that could have been obtained, and sought to lodge a caveat prohibiting the registration of any transfer by the mortgagee pursuant to the sale. The registrar declined to record the caveat. The mortgagee initially brought an action to remove the caveat, claiming that the mortgagor did not have a caveatable interest. This was amended (because the caveat was not recorded) to become a claim for a direction to the registrar not to record the caveat and to return it to the caveator. This claim was made because the purchaser from the mortgagee was refusing to complete the purchase until the caveat was disposed of in some way. [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. Eames J held that the caveat asserted a caveatable interest, and dismissed the mortgagee’s application. The mortgagee appealed.] BROOKING J: … The right to lodge a caveat is conferred by s 89(1) of the Transfer of Land Act on “any person claiming any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise”. By the subsection the caveat is to be “in an appropriate approved form” – a reference to a form approved by the registrar under s 121 – and the caveat is to forbid “the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or conditionally” … The present caveat alleges a sale of the mortgaged land by the registered mortgagee in breach of its duty to the mortgagor, it being said in the caveat that the sale was made without regard to the interests of the mortgagor. In Victoria s 77(1) of the Transfer of Land Act expressly requires the mortgagee, in exercising the power of sale, to act in good faith and to have regard to the interests of the mortgagor. Equity imposed duties on a mortgagee exercising a power of sale the extent of which is to this day not clear and in the Australian States other than Victoria there has been no statutory statement of the duties of a mortgagee of land under Torrens title exercising his power of sale, although in Queensland the mortgagee is under a statutory duty to take reasonable care. The principles applied by courts of equity were developed in relation to the mortgage still employed in Victoria in the case of general law land, whereby the land is conveyed to the mortgagee and the mortgagor has an equity of redemption in the sense that the equitable estate always remains in him. Under the Torrens system the land is not transferred to the mortgagee. This is in Victoria the result of s 74(2), whereby the mortgage “shall when registered have effect as a security and be an interest in land, but shall not operate as a transfer of the land thereby mortgaged”. The mortgage does not transfer the legal estate to the mortgagee: it creates a statutory charge but leaves the whole of the legal and beneficial ownership in the mortgagor, the mortgagee having an interest but no estate in the land. The mortgagor can be divested of his legal title only in consequence of the exercise of the mortgagee’s power of sale; by s 77(4), upon registration of a transfer by the mortgagee expressed to be in exercise of the power of sale, all the estate and interest of the mortgagor as registered proprietor of the land mortgaged vests in the purchaser as proprietor by transfer. See Trust and Agency Co v Markwell (No 2) (1874) 4 QSCR 50 at 52 per Cockle CJ; Matton v Lipscomb (1895) 16 NSWLR (Eq) 142 at 147 per Owen CJ in Eq; Robert Reid and Co v Minister for Public Works (1902) 2 SR (NSW) L 405 at 415 per Owen J; English, Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 321 per Dixon, Evatt and McTiernan JJ; Lyons v Lyons [1967] VR 169, at 174-176 per McInerney AJ; Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265, at 274-275 per Kitto J, and 281-282 per Taylor J; Forsyth v Blundell (1973) 129 CLR 477, at 498 per Walsh J; Blundell v Associated Securities Ltd (1971) 19 FLR 17, at 40 per Fox J. In the case of land under the general law, a sale in breach of duty by a mortgagee to a purchaser acting in collusion with the mortgagee will be set aside as against the mortgagee and his purchaser, and consequential relief will be granted on the footing that the sale and conveyance to the purchaser were ineffectual to extinguish the equity of redemption, so that the mortgagor is entitled to redeem as against the purchaser. (I need not, either here or elsewhere in this judgment, consider in what circumstances falling short of collusion a sale by a mortgagee will be set aside as against the purchaser.) In the case of land under Torrens title, the mortgagor, having not an equity of redemption but the legal estate, has a right to a discharge of the mortgage on payment of the amount owing under it. If the land is sold by the mortgagee in circumstances entitling the mortgagor to have the sale set aside as against the mortgagee and the purchaser has taken a transfer and had it registered, the purchaser will be treated as having taken a transfer not of the land but of the mortgage and the mortgagor will be entitled to have the legal estate restored to him freed from the mortgage upon payment of the amount owing under it: the Latec Investments case, at 274-275, per Kitto J. 416 [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. The Latec Investments case concerned a competition between the defrauded mortgagor, whose Torrens title land had been sold by the mortgagee acting in collusion with the purchaser, and a person who had acquired from the purchaser an equitable interest in the land by way of charge. The mortgagee’s sale had long since been completed and the transfer to the purchaser registered, and so the mortgagor had been deprived of his legal title in favour of the purchaser. The High Court held that the equitable interest by way of charge acquired from the purchaser prevailed over the rights of the mortgagor, and in reaching this conclusion discussed the distinction between an “equity” or “mere equity” and a mortgagor’s equitable interest. Snell’s Equity, 29th ed, ch 2, distinguishes between four senses in which the term “an equity” may be used. In the first sense it means an equitable interest in property, that is, some right of ownership enforced by equity but not by the common law. An equity in the second sense – often called a “mere equity” – is not a right of property and is accordingly contrasted with the equitable interest. It is difficult to define; Snell defines it as a right, usually of a procedural character, which is ancillary to some right of property, and which limits it or qualifies it in some way. Examples are a right to have a transaction set aside for fraud or undue influence, or to have a document rectified for mistake. The third sense of the term equity is the floating equity, and an example is the right which the next-of-kin have in respect of the unadministered estate of an intestate. With this use of the term we are in no way concerned. In its fourth and widest sense “an equity” means no more than the right to seek an equitable remedy, whether or not that remedy is sought in aid of a property right. The distinction between equitable interests and “mere equities” has often been considered in the context of competing estates and interests; learned articles by RE Megarry in (1955) 71 LQR 480; Delany in (1957) 21 Conveyancer 195; Everton in (1976) 40 Conveyancer 209; and Neave and Weinberg in 6 U Tas LR 24 and 115. In some of those places will be found discussion of the Latec Investments case. There all three members of the court agreed that the equitable interest by way of charge created by the purchaser from the mortgagee prevailed over the rights of the mortgagor, who succeeded as against the mortgagee and the purchaser, the sale having been made by the mortgagee acting in collusion with the purchaser. But the approach of the members of the court was somewhat different. Kitto J distinguished between the mortgagor’s equity to have the sale set aside – a “mere equity” – and the equitable interest (the equity of redemption) which would be held to exist if, but only if, the equity to have the sale set aside was made good. The mortgagor’s claim to the equitable interest was dependent for its success upon the setting aside by the court of the mortgagee’s sale. At the time when the equitable chargee acquired its interest there was no prior equitable interest to which its interest could be held to be subject. The competition was therefore between the chargee’s equitable interest and the mere equity of the mortgagor. With this approach compare Allied Irish Banks Ltd v Glynn [1973] IR 188 at 192-193, where Kenny J, in a case concerning priority, described the right to have a conveyance set aside for undue influence or fraud as an equity and as a chose in action which could become an estate if proceedings to set the conveyance aside were successfully taken. Taylor J differed from Kitto J to the extent of holding that the mortgagor, being entitled to have the sale set aside, already had an equitable interest in the land: it was not correct to say that there was a mere equity unless and until the sale was set aside. But the prior equitable interest of the mortgagor was postponed to the equitable interest of the chargee because the mortgagor required the assistance of a court of equity to remove an impediment to its title, which assistance would be withheld if an equitable interest had already passed to a purchaser for value without notice. The third member of the court, Menzies J, agreed with Kitto J that the competition was not between two equitable interests but between the mortgagor’s equity to have the sale set aside and the equitable interest of the chargee. This was so notwithstanding that, once the right to sue for the setting aside of the sale had been successfully exercised, the equitable interest established by the suit would relate back. There was no inconsistency between the notion that a person in the position of the mortgagor had a mere equity in [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. competition with the chargee’s equitable interest and the notion that such a person had a devisable interest by virtue of his equity. The approach of Menzies J has been welcomed by certain learned authors as recognising that equitable rights may be classified in one way for one purpose and in another way for another purpose, the right in question having been classified by his Honour as a mere equity for the purpose of priority but as an equitable interest for the purpose of devisability. The approach did enable two lines of authority to be reconciled but it does seem to me to lead to uncertainty. By reference to what considerations will the court determine whether to treat the equitable right as constituting an equitable interest for a given purpose? It has been suggested that policy considerations may provide the answer: Hanbury and Maudsley, Modern Equity, 13th ed, at 876. On the approach of Kitto J, the mortgagor in the Latec Investments case could not on any view be said to have had a caveatable interest. The approach of Menzies J is more flexible and it is certainly arguable that one could, consistently with his Honour’s judgment, conclude that the mortgagor did in that case have a caveatable interest. Judicial attempts to distinguish between equities and equitable interests have led to criticisms of suggested circularity and the statement of conclusions as opposed to reasons for conclusions. Mindful of these criticisms, I nevertheless venture to express the opinion that on the approach of Menzies J the right of the mortgagor in that case should be regarded as a mere equity for the purposes of the right to caveat. The decision in Re Pile’s Caveats [1981] Qd R 81, to which I refer later, supports this conclusion. The question whether a caveatable interest exists seems to me to resemble more closely the question of priority than the question of devisability. What is the position if the holder of a registered mortgage sells in breach of duty in that he fails altogether to have regard to the interests of the mortgagor but no transfer to effectuate the sale has been registered? Does the mortgagor, for the purpose of the caveat provisions, have any equitable interest in the land by virtue of a right to have the sale set aside? If he is entitled to have the sale set aside by reason of the breach of duty, he has an equity, not an interest in land. The conclusion that the mortgagor has only an equity, not an interest in land, for the purposes of a caveat in cases where no transfer has been registered seems to me to follow if I am correct in my conclusion that on the reasoning of Kitto J and Menzies J in the Latec Investments case the mortgagor in that case had no caveatable interest. There is a further possible difficulty, independent of the distinction between a mere equity and an equitable interest, about the view that a mortgagor has a caveatable interest where no transfer to the purchaser has been registered. In the Latec Investments case it was beyond question that if the mortgagor did not, at the time the chargee acquired its equitable interest, already have an equitable interest in the land, it would have one if it was successful in having the sale set aside. That interest was described by Kitto J, at 275, as a true equity of redemption, the purchaser having acquired the legal estate in the land in consequence of the registration of the transfer. But where no transfer has been registered, what is the equitable interest which will be established in favour of the mortgagor by the establishment of its equity to have the sale set aside? The mortgagor remained, despite the giving of the mortgage, the legal and beneficial owner of the land. Presumably, upon the making of a specifically enforceable contract of sale between the mortgagee and the purchaser the purchaser would acquire an equitable estate in the land notwithstanding that the mortgagee had none. This would be upon the footing that the statutory power of the mortgagee to sell and to pass to the purchaser, by means of a registered transfer, all the estate and interest of the mortgagor as registered proprietor of the land enabled him to pass an equitable estate by the making of the contract of sale. It is said ... that the mortgagee does have a legal interest (the statutory charge, which is or gives an interest in the land) and it is then said that “the mortgagee can assign an interest and thus a contract by the mortgagee will confer equitable rights upon the purchaser”. I doubt very much whether it is intended to suggest that the ability of the mortgagee to transfer his mortgage and so transfer the interest in land which he has means that a contract made by him, not for the sale of his mortgage, but 418 [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. in the exercise of his power as mortgagee to sell the land, creates an equitable estate or interest in the land. The intended meaning is, I believe, that the power of sale conferred on the mortgagee, which includes power to pass by means of a registered transfer all the estate and interest of the mortgagor as registered proprietor of the land, enables the mortgagee to pass to the purchaser, by the making of the contract of sale, the equitable estate which would pass if the registered proprietor had himself entered into a specifically enforceable contract to sell the land. … I turn now to the decision in reliance upon which the present caveat was framed, that of Needham J in Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870. There the registered proprietor had given a registered mortgage and the mortgagee had sold the land in the supposed exercise of his power of sale. No transfer to the purchaser had been registered. The mortgagor alleged that the mortgagee had sacrificed the mortgagor’s interests in entering into the contract of sale and that the sale was voidable and ought not to be completed and the question for Needham J was whether the mortgagor was entitled to lodge a caveat forbidding the registration of any transfer pursuant to the contract of sale. It is desirable to quote at length from the judgment, at 874-875: The entitlement of a former registered proprietor to be restored as such as against a mortgagee or a transferee from the mortgage [sic] involved in the fraud against him was considered by the High Court in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265. The case is well-known and I do not think it necessary for me to recount the facts or to analyze the three judgments. But Kitto J and Taylor J seem to agree that, once the fraudulent transfer has been registered the defrauded mortgagor has more than a “mere equity”. Kitto J described his right as an equity of redemption, Taylor J as an equitable interest in land. Taylor J said (at 284): I regard these authorities as establishing that where the owner of property has been induced by fraud to convey it the grantor continues to have an equitable interest therein and that that interest may be devised or assigned inter vivos and that the grantor’s interest in the property does not come into existence only if and when the conveyance is set aside. Menzies J (at 289) pointed to the two lines of authority emanating from Phillips v Phillips (1861) 4 De G F & J 208; 45 ER 1164 and Stump v Gaby (1852) 2 De G M & G 623; 42 ER 1015, respectively. The latter line would require the court to recognise that a person defrauded as a mortgagor of his registered estate had a devisable interest in the land by virtue of his equity to have the conveyance to the fraudulent purchaser set aside, while the former line would require a conclusion, in a contest of priorities as between the mortgagor and a bona fide purchaser for value without notice, that the equity of the mortgagor was not entitled to priority merely because it came into existence before the equitable interest of the purchaser. It seems to me to be difficult to say, in the light of these judgments, that a defrauded mortgagor of land under the Real Property Act who has lost his registered title is not within s 72(1) of that Act a person claiming an estate or interest in land and thus able to lodge a caveat. What, then, is the position of a mortgagor whose mortgagee has entered into a contract for the sale of the land which has not been completed-the very case to be decided here? In Forsyth v Blundell (1973) 129 CLR 477 the majority (Walsh and Mason JJ) held that the mortgagor was entitled to an injunction against the completion of the contract. Walsh J (at 498) said that the right of the mortgagor was not merely an equity of redemption; until the title was transferred pursuant to the sale, he retained a legal interest in the land. His Honour (at 497) spoke of the mortgagor’s “proprietary right”. On this aspect of the case Mason J agreed. Menzies J dissented on the preliminary question of whether the sale should be enjoined as being in breach of the mortgagee’s duty. [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. The question is whether the mortgagor, maintaining his registered title, has, nevertheless, in his proprietary right to enjoin the completion of his mortgagee’s contract for the sale of his land, a caveatable interest in the land. I do not think that the fact that the mortgagor remains the registered legal owner makes it impossible for him to hold, at the same time, an equitable interest in the land. The right, which is an equitable right, to prevent the completion of a voidable sale, is not one which arises solely from his position as registered proprietor. It arises from (1) the charge created by him by entering into the mortgage; (2) the action of the mortgagee in entering into the voidable contract. It is no less “an equitable claim enforceable by reason on [sic] the principles of the Court of Chancery” than if the right existed shorn of the registered estate. Accordingly, in my opinion, the question whether the registered proprietor may lodge a caveat before the completion of the contract is not different from the question whether, after the contract has been completed and the transfer registered, the mortgagor may lodge a caveat to protect his right to have the sale set aside. This discussion of the Latec Investments case attributes to Kitto J the view that the defrauded mortgagor had an equity of redemption without referring to his Honour’s opinion that the equity to have the sale set aside had to be made good before the equitable interest could be held to exist and his Honour’s consequent conclusion that what was competing with the equitable interest of the chargee was the mere equity of the mortgagor. Nor does Needham J, in discussing the view of Menzies J, advert to the question whether the equitable right of the mortgagor should, when the question is that of its characterisation from the point of view of caveatable interest, be treated as a mere equity or as an equitable interest. In the last paragraph of the passage I have cited, Needham J poses as the question “whether the mortgagor, maintaining his registered title, has, nevertheless, in his proprietary right to enjoin the completion of his mortgagee’s contract for the sale of his land, a caveatable interest in the land”. But this statement of the question seems to me, with respect, to beg the question, by describing the right as proprietary. His Honour goes on to describe the equitable right to prevent the completion of a voidable sale as “an equitable claim enforceable by reason on [sic] the principles of the Court of Chancery”. But this is not the definition of an equitable interest. It is not even a definition of a “mere equity”. It is a definition of an “equity” in the widest sense of that term, the right to seek an equitable remedy, whether or not in aid of a property right. In addition Needham J does not discuss the nature of the equitable interest which in his opinion the mortgagor has. The decision of Needham J was applied by Ryan J in Re McKean’s Caveat [1988] 1 Qd R 524, his Honour observing, at 525, that the right to set aside a contract of sale was an equitable interest sufficient to found a caveat. In the present case the learned primary judge was of the view that Sinclair’s Case and Re McKean’s Caveat correctly stated the law. In Re Cross and National Australia Bank Ltd (1992) Q ConvR 54-433, another decision of the Supreme Court of Queensland, Cooper J followed Sinclair’s Case and Re McKean’s Caveat in a case in which the caveat had been lodged at least one day before the mortgagee entered into a contract of sale. The facts in that case, as they may be gathered from the report mentioned and the note in (1993) Aust and NZ Conveyancing Report Issue 129, at 29, were that the caveat alleged that the mortgage was “void” and that any sale by the mortgagee would be unlawful and that the caveator’s allegation before Cooper J was in part that the mortgage had been rescinded for misrepresentation before the lodging of the caveat. This is, if I may respectfully say so, a long way removed from the facts in two of the decisions relied on by his Honour, the Latec Investments case and Forsyth v Blundell. There is no discussion of the distinction between the ability to invoke the assistance of a court of equity in proceedings concerning land and the existence of a proprietary interest in that land. Nor is there any discussion of the nature of the equitable proprietary interest. With these decisions is to be contrasted that in Re An Application by Haupiri Courts Ltd [No 2] [1969] NZLR 353, a decision of Richmond J, which was not followed in Sinclair’s case. There the registered 420 [6.45]

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Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd cont. proprietor lodged a caveat against the registration of a transfer to the purchaser from the holder of a registered mortgage who had purported to exercise the power of sale. The caveat alleged that the statutory prerequisites to the exercise of the power of sale had not been met. Richmond J was of opinion that the caveator had no caveatable interest. His Honour first arrived at the conclusion that a registered proprietor could not lodge a caveat merely because he was the registered proprietor: it was necessary for him to go further and to establish circumstances over and above his status as registered proprietor which gave rise to a distinct interest in the land, like that of the registered proprietor in Great West Permanent Loan Co v Friesen [1925] AC 208, who had contracted to sell the land (thereby losing his beneficial interest in it) but was entitled to caveat by reason of his unpaid vendor’s lien. Richmond J then went on to consider whether there were in the case before him circumstances over and above the caveator’s status as registered proprietor which gave rise to a distinct interest in the land. His Honour held that there were not, observing, at 357: In the present case … the company does no more than allege a series of invalid acts by the mortgagee which may result in the company being deprived of its existing interest in the land. It is true that it is claiming the land adversely to the mortgagee but it is doing so by virtue of its existing ownership and not by virtue of some new and distinct interest in the land brought into existence by the acts of the mortgagee. For these reasons I cannot accept the alternative contention put forward by Mr Evans. The conclusion that there was in the present case no right to caveat is supported by Re Pile’s Caveats [1981] Qd R 81, where a married woman lodged caveats on the basis that she had been induced to execute transfers (since registered) of the lands in question to two companies by the fraudulent misrepresentation of her husband that the transfers would not affect her beneficial interests in the lands. At the time of the transfers she and her husband were the registered proprietors of the lands. Dunn J described the wife’s claim as a claim to have the lands retransferred to her on the ground that the original transfers had been procured by fraud. It was the assertion of “a personal equity”. In ordering removal of the caveats, Dunn J observed that a personal equity was to be distinguished from an interest in land, an observation adopted by Kelly J in Ex parte Goodlet and Smith Investments Pty Ltd [1983] 2 Qd R 792 at 793. Re Pile’s Caveats is an example of the characterisation of the equitable right to assail a transfer of land for fraud as a mere equity, not an equitable interest, for the purposes of the right to caveat. In my opinion the present caveat claims an interest in the land which the facts alleged in the “grounds of claim” in the caveat are incapable of establishing. In other words, the interest set up as a caveatable interest is not an interest in land known to the law. [The appeal was allowed, Southwell and Teague JJ agreeing with Brooking J.]

[6.50]

Notes and Questions

1. It has been argued that the Court of Appeal’s conclusion that “a defrauded registered proprietor has less than a proprietary equitable interest” is not supported by authority: see Wright, “Does the Registered Proprietor Have a Caveatable Interest?” (1995) 69 ALJ 935; Rodrick “The Response of Torrens Mortgagors to Improper Mortgagee Sales” (1996) 22 Mon LR 289 at 336ff.). Cf Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 Vic SC with Sinclair v Hope Investments Pty Ltd [1982] NSWLR 870; Patmore v Upton (2004) 13 Tas R 95. See also Reinhardt, “Caveats by Mortgagors” (1994) 68 LIJ 69. [6.50]

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2. Did the Court of Appeal in the Swanston case take the view that a registered proprietor has the right to lodge a caveat against his or her own title? Generally speaking, a caveat will be lodged by a person seeking protection of his or her unregistered interest. In some circumstances, however, the holder of a registered interest may seek to lodge a caveat. In New South Wales, Queensland and the Northern Territory the legislation specifically provides that a registered proprietor can protect his or her interest by lodging a caveat. (Real Property Act 1900 (NSW), s 74F(2); Land Title Act 1994 (Qld), s 122(1)(c); Land Title Act (NT), s 138(1)(c).) In the other jurisdictions reliance on case law is necessary: see McEacharn v Colton [1902] AC 104; Barry v Heider (1914) 19 CLR 197; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546; Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870; Daniell v Paradiso (1991) 55 SASR 395; Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444. Discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [5.40]. 3. There have been many cases in which the courts have discussed what is meant by an “estate or interest” in the land. More specifically, the courts have considered whether, in order to be caveatable, the interest claimed (if established) must be capable of being placed on the Register. The more likely view supported by considerable Australian authority, is that the interest does not have to be capable of being placed on the Register, in order to be caveatable. See Chiodo v Murphy (1995) V ConvR 54-531 (where most of the authorities are mentioned and summarised); Avco Financial Services Ltd v White [1977] VR 561; King v AGC (Advances) Ltd [1983] 1 VR 682; Murphy v Wright (1992) NSW ConvR 55-652; Troncone v Aliperti (1994) 6 BPR 13,291; Bunning Building Supplies Pty Ltd v Sgro (1995) V ConvR 54-535; Composite Buyers Ltd v Soong [1995] 38 NSWLR 286; Crampton v French (1995) V ConvR 54-529; Renwarl Pty Ltd v Birky (1998) V ConvR 54-578; Valerica v Global Minerals Australia Pty Ltd (2001) NSW ConvR 55-963; Schmidt v 28 Myola St Pty Ltd [2006] VSC 343. There is, however, substantial authority of the other way. See, for example, Miller v Minister of Mines [1963] AC 484; Bacon v O’Dea (1989) 25 FCR 495; Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54-506; George v Biztole Corporation Pty Ltd (1995) V ConvR 54-519; National Bank of Australia v Dyer (1996) V ConvR 54-533; Elmant Pty Ltd v Dickson (2001) V ConvR 54-647. See also Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589. The issue has in turn generated considerable academic discussion. See, for example, Robinson, “Caveatable Interests: Their Nature and Priority” (1970) 44 ALJ 351; Wikrama, “Do Caveats Need Supporting by Registrable Instruments?” (1995) 69 LIJ 101; Butt, “Caveats: No More Black Holes?” (1996) 70 ALJ 683; Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict” (1997) 21 MULR 460. The uncertainty surrounding this issue needs to be removed, either by the High Court or by the individual state legislatures. But how should this issue be resolved? In many cases, the holder of such an unregistrable interest could avoid injustice by relying on one of the exceptions to indefeasibility (such as the in personam exception). Nevertheless, problems may arise in some cases where third parties are involved, problems that may have been avoided by allowing the lodgment of a caveat in these circumstances. It is for this reason that the wider interpretation of “estate or interest in the land” is to be preferred. 422 [6.50]

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4. There are many interests which constitute caveatable interests. For an extensive yet non-exhaustive list, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [5.35]. Two of the more common interests traditionally accepted as capable of supporting a caveat are the interest of a mortgagee under an unregistered mortgage and the interest of a purchaser of a registered interest under a specifically enforceable contract for sale (but consider now the effect of the High Court decision in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315). Cf the view of Batt J in Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54-506. 5. Can the following rights constitute caveatable interests? (a) a spouse’s claim under s 79 of the Family Law Act 1975 (Cth). If such a claim cannot support a caveat, could a spouse base his or her claim on an interest arising under a constructive trust? See Re Weeks’ Caveat [1971] QWN 4; Re Pile’s Caveats [1981] Qd R 81; Re Sabri; Ex parte Brien (1997) FLC 92-732; Bell v Graham [2000] VSC 142; Elmant Pty Ltd v Dickson (2001) V ConvR 54-647; Hayes v O’Sullivan (2001) 24 WAR 40; Goldstraw v Goldstraw [2002] VSC 491; Westpac Banking Corporation v Dimopoulos [2006] VSC 10. Does this depend upon when the constructive trust is considered to have arisen? Cf Ioppolo v Ioppolo (1978) 4 Fam LR 124; Gadsdon v Gadsdon [2003] WASC 48. See Butt, “Moot Point Caveat Caveator” (1980) 54 ALJ 166. Note that once an order is made under s 79 and one spouse is ordered to transfer an interest to the other spouse, the spouse who is to receive the interest has a caveatable interest before formal transfer occurs: Official Trustee in Bankruptcy v Mateo (2003) 202 ALR 571 at 586-587 per Wilcox J; at 599 per Branson J; at 606 per Merkel J. (b) a pre-emptive right, such as a right of first refusal to purchase. If the right per se cannot support a caveat, does the “triggering” of the right of pre-emption alter the situation? See Jonns v Tan (1999) NSW ConvR 55-906; Bob Jane T-Marts v The Baptist Union of Victoria [1999] VSC 346; Sahade v BP Australia Pty Ltd (2005) NSW ConvR 56–113. (c) the right of a purchaser under a conditional contract of sale (see Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419; Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140; Re Henderson’s Caveat [1998] 1 Qd R 632; cf Re Bosca Land Pty Ltd’s Caveat [1976] Qd R 119); and the right of a holder of an option to purchase a lot in an unregistered strata plan (see Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486; Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd (2001) 10 BPR 19,253.) See Weir, “Caveats: The Conditional Contracts Conundrum” (1994) 2 APLJ 205; Liew, “Conditional Contracts and Caveatable Interests: A Mutual Exclusion” (1995) 14 U Tas LR 63; Butt, “Caveatable Interests 1: Options and Unregistered Strata Plans” (2001) 75 ALJ 592. (d) a charge over the land given to secure the performance of contractual obligations: Murphy v Wright (1992) NSW ConvR 55-652; Coleman v Bone (1996) 9 BPR 16,235; Wilson v Graham (1997) 10 BPR 19,051; Capital Finance Australia Ltd v Karabassis (2003) 11 BPR 21,123; McMillan v Dunoon [2006] ANZ ConvR 87; [2005] VSC 440; Spunter Pty Ltd v Hall [2006] WASC 6. [6.50]

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(e) the simple grant of a right to lodge a caveat or an agreement between the parties that a caveat may be lodged: Tooth & Co Ltd v Barker (1960) 77 WN (NSW) 231; Wilson v Graham (1997) 10 BPR 19,051; Nguyen v Huy On (2004) NSW ConvR 56-065; Redglove Projects v Ngunnawal Local Aboriginal Council (2004) 12 BPR 22–319; Dominion Lifestyle Tower Apartment Ltd v Global Capital Corporation Pty Ltd (2005) V ConvR 54-696; cf Troncone v Aliperti (1994) NSW ConvR 55-703 per Mahoney JA at 60,019. (f) the right of a purchaser under a contract of sale where he or she has paid a deposit and/or instalments but there is a defence to specific performance of the contract: see Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315. (g) the right to have a transaction set aside for fraud, duress or undue influence. If this right is considered an equity, can it support a caveat? See Re Pile’s Caveat [1981] Qd R 81; Global Minerals Australia Pty Ltd v Valerica Pty Ltd (2000) 10 BPR 18,463 (also reported as Valerica Pty Ltd v Global Minerals Australia Pty Ltd (2001) NSW ConvR 55-963); Westpoint Corp Pty Ltd v Registrar of Titles [2004] WASC 189 at [91]; cf Re McKean’s Caveat [1988] 1 Qd R 524 and Re Andel Pty Ltd & Century Car Care Pty Ltd (1989) Q ConvR 54-315. (h) the right of a unit holder in a unit trust: see Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90; Schmidt v 28 Myola St Pty Ltd [2006] VSC 343 suggesting the right is caveatable but cf the High Court decision in CPT Custodian Pty Ltd v Commissioner for State Revenue (2005) 221 ALR 196. The cases are discussed in Furnell, “Do Beneficiaries have an Interest in Trust Properties?” (2006) 80 LIJ 48. (i) a native title interest: see Butt, “The Native Title Act: A Property Law Perspective” (1994) 68 ALJ 285; Babie, “Case Note: James Smith Indian Band v Saskatchewan (Master of Titles) – Is Native Title Capable of Supporting a Torrens Caveat?” (1995) 20 MULR 588; Secher, “Native Title – An Exception to Indefeasibility and a Ground for Invoking the Deferred Indefeasibility Theory” (2000) 7 JCULR 17 at 19. (j) an interest in the proceeds of the sale of land. See Terry v O’Connell [2010] NSWSC 255. Compare Peters v Lithgow Forge Pty Ltd [2010] NSWSC 283. Describing the claimed interest [6.55] The Torrens statutes provide that caveats must be lodged in a particular form and manner (Torrens statutes: Real Property Act 1900 (NSW), s 74F(5); Transfer of Land Act 1958 (Vic), s 89(1); Land Title Act 1994 (Qld), s 121; Real Property Act 1886 (SA), s 191(a); Transfer of Land Act 1893 (WA), s 137(1); Land Titles Act 1980 (Tas), s 133(1), (2); Land Titles Act 1925 (ACT), s 104; Land Title Act (NT), s 137).

Kerabee Park Pty Ltd v Daley [6.60] Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 Supreme Court [The plaintiff was the registered first mortgagee. The defendants lodged caveats over the land in relation to an unregistered equitable mortgage. It was clearly the case, and accepted by the parties, that the plaintiff’s interest had priority over those of the defendants. The mortgagor defaulted and the plaintiff wished to exercise its power of sale. Despite being requested to do so, the defendants refused to remove their caveats. The plaintiff sought their removal by the court. (At the hearing and two days before the auction, the defendants agreed to remove the caveats. The action proceeded on the issue 424 [6.55]

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Kerabee Park Pty Ltd v Daley cont. of compensation for the plaintiff but this substantively depended on the question of whether the defendants had a right to lodge and maintain their caveats.) The court held in favour of the plaintiff on the basis that a caveator does not have a right to prevent registration of a dealing to which his or her interest would not entitle him or her to object. In obiter, Holland J commented on the requirements for a valid caveat.] HOLLAND J: … In case the matter goes further, I should express my views on the other grounds of objection that were argued. Grounds 2 and 3 raise issues as to the degree of particularity required in the statement of the estate or interest claimed by the caveator. Decisions in New South Wales on the provisions of the Act (s 24 and Third Schedule; s 72 and Sixteenth Schedule) had established before amendments were made in 1970 a rule that, in order to be valid, or to be permitted to remain on the title, the caveat had to state the nature and quantum of the estate or interest claimed and the instrument, or facts, on which the claim was founded: Re Spencer (1904) 4 SR (NSW) 471; 21 WN 192; Palmer v Wiley (1906) 23 WN (NSW) 90; Re Jones (1935) 35 SR (NSW) 560; 52 WN 222; Re Fairlie (1959) 76 WN (NSW) 475. The rule, so far as it required the quantum of the estate or interest to be specified, was strongly criticised by Joske J in Gasiunas v Meinhold (1964) 6 FLR 182 at 185, 186 as being unjustified by the language of the statute. Counsel for the defendants subjected the New South Wales decisions, and the legislation on which they were based, to a close examination; and submitted that they were clearly wrong in requiring the quantum of the interest claimed by the caveator to be specified. Moreover, changes made by the Real Property (Amendment) Act 1970 in the language of s 72, the repeal of the Sixteenth Schedule, and its replacement by a requirement that a caveat be in a form approved by the Registrar-General under s 104 of the Act were relied on by counsel for the defendants as having made the previous decisions on requirements for a valid caveat of no further application, whether rightly or wrongly decided. Notwithstanding the amendments of s 72 made in 1970, there have been later decisions, which I should respect, to the effect that the requirements for a proper statement of the estate or interest of the caveator laid down by the earlier New South Wales cases should still be followed in New South Wales, at least by a judge at first instance: see Easton v Ardizzone [1978] 2 NSWLR 233(n); Vandyke v Vandyke (1976) 12 ALR 621 at 638, 639, per Hutley JA, Mahoney JA (1976) 12 ALR 621 at 644; Bethian Pty Ltd v Green (1977) 3 Fam LR 11,579 at 11,582. Easton v Ardizzone [1978] 2 NSWLR 233(n) was a case where the caveator claimed to be holding a dated and executed unregistered memorandum of mortgage given to him by the registered proprietor to secure the repayment of a loan of $3,000. The caveat described the caveator’s claim as “estate or interest for moneys outstanding to the caveator pursuant to memorandum of mortgage between the registered proprietor and the caveator in the land described in the following schedule”. The caveat forbad the recording in the register of any dealing affecting the land, and was holding up a sale by a registered mortgagee exercising his power of sale. Bowen CJ in Eq said [1978] 2 NSWLR 233(n) at 234: By s 72 of the Real Property Act 1900, a caveator is required to state the estate or interest which he claims. I think the principles previously laid down in relation to this matter under the previous form of s 72 and the old Sixteenth Schedule still apply to s 72 in its present form: that is to say, a caveator is required to disclose a caveatable interest, and the quantity of the estate or interest claimed, and how he claims it. In the present case, the caveator referred to a memorandum of mortgage. This is better than a reference simply to an agreement, without more. At least, it discloses that it is an interest by way of mortgage that he claims. However, the absence of any date or other information means not only that it might be difficult to identify the mortgage with any degree of certainty, but also that the extent and the priority of any interest or claim he is asserting is quite uncertain. In my opinion caveat N620287 is defective in its statement of the caveatable interest claimed. [6.60]

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Kerabee Park Pty Ltd v Daley cont. His Honour also held that, in prohibiting all dealings, the caveat went beyond any restriction that the caveator might be entitled to prescribe.

[6.65]

Notes and Questions

1. There are a number of other decisions which reiterate that the quantum of the claim and the facts on which the claim is based should be set out: see, for example, Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459; George v Biztole Corporation Pty Ltd (1995) V ConvR 54-519 and Cruz v Osborne [1999] WASC 8. 2. In New South Wales the caveator must use a particular form and must specify his or her interest and verify it by statutory declaration: see Real Property Act 1900 (NSW), s 74F(5). Although s 74L provides that a failure to comply strictly with formalities is to be disregarded by the courts the requirements remain very detailed and are similar to the requirements developed by courts. See, however, Windella (NSW) Pty Ltd v Hughes (1999) NSW ConvR 55-926 where a technical defect was excused and FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 where a failure to state the amount of the charge was “cured” by s 74L. The views of Holland J in Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 are probably applicable in the other jurisdictions, but see Hooper v ANZ Banking Group Ltd (1996) 5 Tas R 398; Sullivan v McMahon [1999] WASC 84; Four Oaks Enterprises Pty Ltd v Clark [2002] ANZ ConvR 440; [2002] TASSC 39 (note at [6.70]) and Midland Brick Co Pty Ltd v Welsh [2006] WASC 122 where the courts stated that a bona fide claim by a caveator should not be destroyed by a court because of technical difficulties with the form and content of the caveat. 3. A caveat will be removed if it is cast in terms that are wider than necessary to protect the interest of the caveator. See Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485; His Grace Metropolitan Petar v Macedonian United Society of Western Australia Inc [2003] WASC 15 but cf Re Henderson’s Caveat [1998] 1 Qd R 632. 4. See Lewenberg and Pryles v Direct Acceptance Corp Ltd [1981] VR 344 and Commercial Bank of Australasia Ltd v Schierholter [1981] VR 292 where on facts similar to those in the Kerabee Park case, it was held a caveat protecting an equitable mortgage and prohibiting all dealings was too widely expressed. See now s 90(2A) of the Transfer of Land Act 1958 (Vic). See MacCallum, “Dilemmas for Torrens System Mortgagees” (1981) 13 MULR 248. 5. The relevant statutory provisions require only that the caveator “claims” an estate or interest in the land. The interest need not be “established”. It might be thought that the admixture of the above factors may lead to the lodgment of frivolous and vexatious caveats. Compensation provisions, however, give some protection against such caveats: these provisions are discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [5.45].

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Four Oaks Enterprises Pty Ltd v Clark [6.70] Four Oaks Enterprises Pty Ltd v Clark [2002] ANZ ConvR 440; [2002] TASSC 39 Supreme Court of Tasmania [The Respondent had lodged a caveat over land that he had previously owned, and had sold to the appellant. The contract allowed the respondent the right to remove six saw mill logs from the property.] BLOW J:…The Land Titles Act 1980, s 133(2)(c), requires a caveat to state “the estate or interest claimed by the caveator”. The estate or interest claimed by the respondent is described in the caveat as follows: Claiming estate or interest in equity by virtue of an agreement in writing between FOUROAKS ENTERPRISES PTY LTD ACN 081 676 093 as the registered proprietor of the land herin [sic] described and the caveator and dated 15th November 2001 whereby it was agreed, inter alia, that the caveator could remove certain trees from the land …. The caveat is silent as to whether the respondent claims to have a profit à prendre, an exclusive licence amounting to an estate or interest in the land, or some other sort of estate or interest. The caveat is therefore defective: Cwalinski v Cwalinski [1958] Tas SR 56; Smith v Longden (Crawford J, 127/1997). Further, the caveat purports to make a claim to an estate or interest in all the land comprised in the two certificates of title specified therein, an area totalling some 81 acres, whereas the evidence was that the November 2001 agreement related to a particular stand of timber comprising only part of that total area. Even allowing for the possibility that the agreement permitted the respondent to traverse other parts of the applicant’s land when exercising his right to carry away the timber, I do not think it can be said that the respondent’s claim relates to the whole of the land comprised in both certificates of title. The Land Titles Act, s 133(2)(e) requires a caveat to state, “where the caveat relates to part only of the land in a folio of the Register …, such further description as may be necessary to identify the subject land”. However, this is not a situation where the caveat is defective in that it does not sufficiently describe part of the land comprised in a folio of the Register, or two folios of the Register. It is a case where the caveat is too wide, in that it asserts that the respondent claims an estate or interest in the whole of the land comprised in both folios, when he claims an estate or interest only in a smaller area. In such circumstances, a caveat forbidding any dealing with the land can be removed on the basis that it is too wide to be sustained: In re Paul (1902) 19 WN (NSW) 114; Re Powell’s Caveat [1966] QWN 9; Queensland Estates Pty Ltd v Co-ownership Land Development Pty Ltd [1969] Qd R 150; Elliott v Blanshard (1970) 17 FLR 7; Roclin Investments Pty Ltd v Makris (1974) 7 SASR 485; Nichols Constructions Pty Ltd v Henry (Cox J, A91/1994). Although the caveat is both defective in failing to specify the sort of interest claimed and too wide in relation to the area of land that it affects, I would prefer not to order its removal on those grounds. When an application for the removal of a caveat is made under the Land Titles Act, s 135(1), this Court “may make such order, either ex parte or otherwise, as it considers necessary”: s135(2). In Hooper v Australia and New Zealand Banking Group Ltd (1996) 5 Tas R 398 at 404, Wright J said that, in his opinion, “the nature and purpose of a caveat is such that technical deficiencies in its form and content should not be allowed to deprive a bona fide claimant from obtaining the advantage and breathing space that prompt notification of his claim to the Registrar [sic] should, in principle, permit him to achieve”. I agree. I hasten to add that this is a case in which the bona fides of the respondent are challenged. If the respondent’s evidence is truthful and accurate, it is at least arguable that he has a profit à prendre by virtue of the November 2001 agreement. However, there are both factual and legal issues in dispute between the parties. It would not be appropriate to determine those issues on the summary [6.70]

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Four Oaks Enterprises Pty Ltd v Clark cont. application that is before me. See Lindsay Caveats Against Dealings in Australia and New Zealand, 174; Colbran and Jackson Caveats, 332 - 333. The appropriate course is for me to determine whether, in the exercise of the discretion conferred by the Land Titles Act, s 135(2), I should make an order for the removal of the caveat. There is a strong body of authority supporting the proposition that a statutory discretion to order the removal of a caveat should be exercised in accordance with the “balance of convenience” test that is applied in relation to interlocutory injunctions: Eng Mee Yong v Letchumanan [1980] AC 331; Re Burman’s Caveat [1994] 1 Qd R 123; Lindsay (supra) at 203 - 207; Colbran and Jackson (supra) at 346 - 354. In Western Australia, the view has been taken that the “balance of convenience” test is relevant but not necessarily decisive: Porter v McDonald [1984] WAR 271; Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42. On 30 April 2002, the applicant contracted to sell the property, ie, the land comprised in its three certificates of title, for $240,000. That is $40,000 more than it paid the respondent for the property in 1999. According to the respondent’s affidavit, the felling of six trees from the area in question might yield timber worth $16,000 or $20,000 after harvesting and milling; the milling would be likely to cost $5,000; and the harvesting would be likely to cost about $3,000. He says that racking and drying the sawn timber over an 18 month period could double its value, but I assume that milled green undried timber is available commercially, and I will therefore disregard the profits that could be made from racking and drying such timber. The respondent’s evidence is that an outlay of about $8,000 on harvesting and milling would yield timber worth $8,000 to $12,000 more than that. There is no suggestion that the respondent’s right to a dead tree pursuant to cl3 of the November 2001 agreement is of any significant value, and I will therefore ignore it. The applicant contends that its $240,000 sale warrants the removal of the caveat lodged by the respondent to protect his claim to an interest in the land when the evidence suggests that that interest is potentially worth about $8,000 to $12,000 to him. The respondent gave evidence that, although the November 2001 agreement expressly referred to him “removing 6 saw mill logs” from the property, that document was a note or memorandum of a pre-existing oral agreement for the removal by him of “six or so” logs to be obtained by felling trees that were still growing. That evidence was contradicted by one of the applicant’s directors, Mr Waddilove, who said that the respondent had pointed out six logs that had been lying on the ground for some time, and that it was orally agreed prior to the signing of the document that the respondent would be allowed to remove those six logs. There is a risk that the respondent will be disbelieved on this point, especially since the critical clause in the November 2001 agreement refers to “Keith Clark removing 6 saw mill logs” without any reference to the felling of trees, though it may be significant that the author of the document was one of the applicant’s directors. Sometimes a right to take from land some natural product of it, such as timber, will amount to a profit à prendre, but at other times it will not. In certain circumstances, a person with a right to take timber from certain land will not be the holder of a profit à prendre, but will have the status of a buyer pursuant to a contract for the sale of goods. The criteria for distinguishing between a sale of goods and a grant of a profit à prendre were referred to by Young J in Perpetual Trustee Australia Ltd v Shand (1992) 27 NSWLR 426 at 431 - 432, where his Honour said: The main problem in such cases is whether there is a sale of the timber or slate as a sale of goods, or whether there is an interest in the land. Everyone recognises that the cases are not completely consistent but, generally speaking, if the trees or slate are to be taken away immediately, there is a sale of goods; if the material is to be warehoused on the land for a particular period and then taken away, there is usually a sale of goods, but if it is to be left in situ for an indefinite period, in which case there may be further growth before reaping it, it is usual for the Court to hold that there is a profit à prendre: see, eg, Duppa v Mayo (1669) 1 Wms Saunders 275 at 276; 85 ER 336 at 343; Marshall v Green (1875) LR 1 CPD 35 especially at 39. 428 [6.70]

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Four Oaks Enterprises Pty Ltd v Clark cont. The applicant had put the property on the market through a real estate agent in September 2001. The November 2001 agreement was entered into against that background. Although the agreement did not specify a date by which the “logs” and dead trees were to be removed, there are strong grounds for inferring that the parties did not intend that they were to be left in situ for an indefinite period, but intended that they were to be removed prior to the applicant completing its anticipated sale of the property, and that they did not intend that any purchaser would take title subject to the rights of the respondent. On this basis there is a significant risk that, even if the respondent’s evidence as to the meaning of “saw mill logs” is accepted, it will be held that the agreement did not give rise to a profit à prendre. The respondent’s solicitors lodged a priority notice under the Land Titles Act on 13 May 2002, by which they reserved priority for his caveat, and subsequently lodged the caveat on 13 June 2002. If the caveat, or even the priority notice, had been lodged prior to 30 April 2002, the applicant might not have entered into a contract for the sale of the property. If the caveat is not removed, it may take a very long time for the nature of the respondent’s rights to be determined in an action, and there is every likelihood that the purchaser will rescind the contract of 30 April 2002, and possibly even sue the applicant for damages. Two of the applicant’s directors, Mr and Mrs Waddilove, apparently expecting some of the proceeds of the sale of the property to be made available to them, entered into a contract on 5 May 2002 for the purchase of a property for $168,000, subject to their bank making available a loan of $60,000. Mr Waddilove says in his affidavit that they are relying on the proceeds of the Ellendale sale to finance that purchase. The respondent contends that the timing of the lodgement of his caveat was not unreasonable, on the basis that he had been making reasonable efforts to arrange for a contractor to harvest the timber, and for the owner of an adjoining property to permit the removal of the timber through that property; had encountered delays beyond his control; had learned of the applicant’s sale of the property; and had needed to lodge a caveat to protect his rights. The applicant contends that the respondent had had a reasonable time to remove the timber that he was entitled to, and had failed to do so. I am not in a position to make a finding as to the reasonableness or unreasonableness of the respondent’s timing. However, in deciding where the balance of convenience lies and in making a discretionary decision whether to order the removal of the caveat, it is highly significant that the priority notice and caveat were not lodged until after the applicant contracted the sell the property. When a registered proprietor of a piece of land, well aware of the nature of an unregistered interest in that land, contracts to sell it, in disregard of the rights of the holder of that interest, a complaint that a caveat was lodged only after the signing of a contract would ordinarily carry no weight at all. But this is not such a situation. It is by no means self-evident that the November 2001 agreement created, or might have created, a profit à prendre. There is no evidence that the status of the respondent’s rights under that agreement was discussed with the directors of the applicant company or contemplated by them. The evidence suggests that the respondent gave no indication of any claim to an interest in the land until after the applicant contracted to sell it. An order for the removal of the caveat will not leave the respondent without a remedy. If the facts are as he asserts them to be, he will be entitled to sue the applicant for damages for breach of contract. It seems his claim would be sufficiently small for the proceedings to be brought in the Civil Division of the Magistrates Court. The proceedings would be simpler and less costly than those he would have to institute if the caveat were to remain in force, since it would not be necessary for him to contend that the November 2001 agreement created a profit à prendre, nor for him to seek equitable relief. It seems most unlikely that he would have difficulty enforcing a judgment. The property is unencumbered. The applicant is selling it for $40,000 more than the price it paid the respondent for it in 1999. The company search obtained by the respondent shows that there are no registered charges in respect of the applicant’s assets. [6.70]

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Four Oaks Enterprises Pty Ltd v Clark cont. Although the respondent has a prima facie claim to an equitable interest in the nature of a profit à prendre in respect of part of the land affected by his caveat, I do not think it is appropriate to allow his caveat to remain in force because of (a) the weaknesses of his claim; (b) the fact that the applicant entered into a contract for the sale of its real estate at a time when there was apparently no suggestion that any claim by the respondent to an interest in the land had been communicated to it; (c) the likely adverse consequences for the applicant and its directors if that contract cannot proceed to completion; and (d) the likelihood that the respondent has an adequate remedy in damages.

[6.75]

Notes and Questions

1. Similar discretionary provisions to what Blow J used in this case are available in all jurisdictions: Real Property Act 1900 (NSW), s 74MA; Transfer of Land Act 1958 (Vic), s 26R; Land Title Act 1994 (Qld), s 127(2); Real Property Act 1886 (SA), s 191(d); Transfer of Land Act 1893 (WA), s 31(2); Land Titles Act 1925 (ACT), s 33(2); Land Title Act (NT), s 143(2). Does the framework adopted in Four Oaks Enterprises Pty Ltd v Clark [2002] ANZ ConvR 440; [2002] TASSC 39 provide an avenue by which disputes about the validity of caveats could be resolved? The general mechanics and effect of a caveat [6.80] A person claiming an estate or interest in the land may lodge a caveat prohibiting the

registration of all, or specifically named, dealings in the land that would affect the interest protected by the caveat: the caveat effectively operates as an injunction to the Registrar by restraining the Registrar from registering any dealing except with the caveator’s consent (Real Property Act 1900 (NSW), s 74H(1)(a), (b); Transfer of Land Act 1958 (Vic), s 90(1)(b) and s 91(1); Land Title Act 1994 (Qld), s 124(1) and s 124(2)(b); Land Titles Act 1980 (Tas), s 137(1); Land Titles Act 1925 (ACT), s 107A(1)(b); Land Title Act (NT), s 140(1) and s 140(3)(b)). A memorandum of the caveat is noted in the Register (Real Property Act 1900 (NSW), s 74G; Transfer of Land Act 1958 (Vic), s 89(2); Land Title Act 1994 (Qld), s 29(2); Real Property Act 1886 (SA), s 191(b); Transfer of Land Act 1893 (WA), s 141(l); Land Titles Act 1980 (Tas), s 133(1)(a); Land Titles Act 1925 (ACT), s 104A(1); Land Title Act (NT), s 31(2)). The Registrar must give notice to the registered proprietor that a caveat has been lodged. (Real Property Act 1900 (NSW), s 74F(6); Transfer of Land Act 1958 (Vic), s 89(3); Land Title Act 1994 (Qld), s 123; Real Property Act 1886 (SA), s 191(b); Transfer of Land Act 1893 (WA), s 138(1); Land Titles Act 1980 (Tas), s 133(3)(b); Land Titles Act 1925 (ACT), s 105(1); Land Title Act (NT), s 139. See NRMA Insurance Ltd v Martin (1988) 84 ACTR 1.) In all jurisdictions except Queensland, South Australia and the Northern Territory, a memorandum of the caveat remains on the Register until proceedings are commenced for the removal of the caveat, or until a dealing inconsistent with the caveator’s claim is lodged for registration (Real Property Act 1900 (NSW), s 74H; Transfer of Land Act 1958 (Vic), s 90(1); Transfer of Land Act 1893 (WA), s 138(2); Land Titles Act 1980 (Tas), s 137; Land Titles Act 1925 (ACT), ss 106 and 107). The Registrar is prevented from registering such an inconsistent dealing until the caveator has been given notice of the dealing and has had an opportunity to establish his or her claim. After being given notice, the caveator has a set period in which to consent to registration, or to take action to show cause why the dealing should not be registered. The caveat will lapse if 430 [6.75]

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no action is taken, and a lapsed caveat cannot be renewed. If the caveator takes action to demonstrate the validity of his or her claim, then the court must resolve the priority dispute between the caveator’s unregistered interest and the unregistered interest of the person who lodged the dealing. Such a dispute is resolved according to the various priority rules (discussed below), and the presence of a caveat may be a factor in the resolution of the dispute. In Queensland and the Northern Territory, a caveat claiming an interest in land and prohibiting dealings does not simply remain on the title until an instrument is lodged for registration (except where the caveat is lodged with the consent of the registered proprietor: Land Title Act 1994 (Qld), s 126(1); Land Title Act (NT), s 142(1)). Rather, the caveator must take proceedings to establish his or her claim within three months of lodging the caveat (Land Title Act 1994 (Qld), s 126; Land Title Act (NT), s 142). If the caveatee serves an appropriate notice on the caveator (Land Title Act 1994 (Qld), s 126(2); Land Title Act (NT), s 142(3)), the caveator must commence proceedings to establish the interest within 14 days of the notice. The caveat will lapse if such proceedings are not taken. See Circuit Finance Australia Ltd v Registrar of Titles [2006] 1 Qd R 204 where it was held that a caveat lodged by an equitable mortgagee, whether or not with the owner’s consent, is a lapsing caveat despite s 126(1)(b). In South Australia, the position is more open-ended. The registered proprietor may seek to have the caveat removed. The Registrar then gives the caveator 21 days in which to obtain a court order for extension of the caveat. The caveat will lapse if such an order is not obtained (, s 191(e), (f)). A caveat can be removed from the register in four different ways: 1

The caveator may withdraw the caveat at any time;

2

The caveat may lapse;

3

An application may be made to the court seeking removal of the caveat; or

4 An application may be made to the Registrar seeking removal of the caveat. The details associated with these options vary from jurisdiction to jurisdiction. Generally, however, the court exercises its jurisdiction as to whether to remove a caveat or to extend an existing caveat by considering “… in which party’s favour the balance of convenience lies; whether there is a serious question to be tried; and whether the caveator claims an interest wider than what the caveator may be entitled. These questions inform the ultimate consideration, that is, whether the caveator has discharged his or her onus of satisfying the maintenance of the caveat. The process is comparable to the exercise undertaken in granting or denying an interlocutory injunction.”: Schmidt v 28 Myola Street Pty Ltd [2006] VSC 343 at [32] per Warren CJ. See also Burman v AGC (Advances) Ltd [1994] 1 Qd R 123. Where a caveat has lapsed or been removed, no further caveat can be lodged by the caveator in relation to the same interest arising from the same facts, without an order of the court (in most cases). (Real Property Act 1900 (NSW), s 74O; Transfer of Land Act 1958 (Vic), s 91(4); Real Property Act 1886 (SA), s 129; Real Property Act 1886 (SA), s 191(k); Transfer of Land Act 1893 (WA), s 138; Land Titles Act 1980 (Tas), s 107C; Land Title Act (NT), s 145.)

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PRIORITY BETWEEN EQUITABLE OR UNREGISTERED INTERESTS UNDER THE TORRENS SYSTEM The test and its theoretical basis

Heid v Reliance Finance Corporation Pty Ltd [6.85] Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 High Court [Heid (the appellant) agreed to sell his land to Connell Investments Pty Ltd (Connell), and signed a memorandum of transfer that contained an untrue acknowledgment that he had received full payment of the purchase price. The appellant, who therefore held a vendor’s lien over the property, then gave the memorandum of transfer and authority to collect the certificate of title to Gibby, whom McKay (Connell’s principal) had falsely described as the “company solicitor”. In fact, Gibby was an unqualified employee of Connell’s controlling company: Newman, McKay and Co. Once Gibby had obtained the certificate of title, Connell created an equitable mortgage in favour of Reliance Finance Corporation Pty Ltd (Reliance) who had advanced the money relying on the acknowledgment set out in the transfer, and on the fact that the transfer was regular on its face and was accompanied by the certificate of title. Kearney J resolved the priority dispute between the two unregistered interests by holding that the appellant’s lien should not be postponed to Reliance’s equitable mortgage. The Court of Appeal reversed this decision, and the appellant appealed to the High Court.] GIBBS CJ (with whom Wilson J agreed): … [I]t is convenient first to discuss the question which arises between the appellant and Reliance Finance. Each of those parties had an equitable interest in the land – the appellant because of his vendor’s lien, and Reliance Finance as an equitable mortgagee. In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v Rice (1853) 2 Drew 73 at 78 (61 ER 646 at 648). But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest: Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265 at 276. In the present case the interest of the appellant was first in time. The question therefore is whether his conduct in handing to Gibby a completed memorandum of transfer, containing an acknowledgment of payment and accompanied by the certificate of title, thus enabling Connell Investments to represent itself to Reliance Finance as having a title free from outstanding equitable interests, has the consequence that Reliance Finance has the better equity, and that the appellant’s interest should be postponed to that of Reliance Finance. In Rimmer v Webster [1902] 2 Ch 163 at 173, Farwell J stated the following proposition which appears to govern cases such as the present: If the owner of property clothes a third person with the apparent ownership and right of disposition thereof, not merely by transferring it to him, but also by acknowledging that the transferee has paid him the consideration for it, he is estopped from asserting his title as against a person to whom such third party has disposed of the property, and who took it in good faith and for value. There is no doubt as to the general correctness of that proposition: see also Capell v Winter [1907] 2 Ch 376 at 381, and Tsang Chuen v Li Po Kwai [1932] AC 715 at 728-729. It is illustrated by the decision 432 [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. in Rice v Rice. In that case the vendors, who had not in fact received the purchase money, delivered to the purchaser the title deeds indorsed with a receipt acknowledging payment. The purchaser made a mortgage by deposit of the deeds. It was held that possession of the deeds and the fact of the indorsement of the receipt gave the mortgagee a better equity, so that his equitable interest prevailed over that of the unpaid vendor. Kindersley V-C said (1853) 2 Drew 73 at 83-84 (61 ER 646 at 650): they (the vendors) voluntarily armed the purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of incumbrance or adverse equity. In truth it cannot be said that the purchaser, in mortgaging the estate by the deposit of the deeds, has done the vendors any wrong, for he has only done that which the vendors authorised and enabled him to do. This passage was cited with approval in the judgment of the Judicial Committee in Abigail v Lapin (1934) 51 CLR 58 at 68. In that case the respondents (Mr and Mrs Lapin), one of whom was indebted to one Heavener, transferred certain land to Mrs Heavener as her husband’s nominee. The transfers were absolute in form but were in fact given as security for the debt. After the transfer was registered, Mrs Heavener executed a registrable mortgage in favour of the appellant (Abigail) as security for advances made by him. It was held that the equitable mortgage of Abigail took priority over the Lapins’ equitable right to redeem. Lord Wright, who delivered the judgment of the Judicial Committee, approved (1934) 51 CLR 58 at 64 the reasons of Gavan Duffy and Starke JJ in this court which concluded as follows (see Lapin v Abigail (1930) 44 CLR 166 at 198): In our opinion, the Lapins are bound by the natural consequences of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the lands and thus execute transfers or mortgages of the lands to other persons, and they ought to be postponed to the equitable rights of Abigail to the extent allowed by the Supreme Court. Lord Wright went on to say (1934) 51 CLR 58 at 68-69: 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; in the present case the respondents on the one hand enabled the Heaveners to represent themselves as legal owners in fee simple, while on the other hand it cannot be said that Abigail did or omitted to do anything which he should have done in lending the money on the security, though he might, by registering the mortgage, have secured the legal title. Lord Wright pointed out (1934) 51 CLR 58 at 70 that it was only in an artificial sense that it could be said that the Lapins had made any representations to Abigail and continued (1934) 51 CLR 58 at 71: It is true that in cases of conflicting equities the decision is often expressed to turn on representations made by the party postponed, as, for instance, in King v King [1931] 2 Ch 294. But it is seldom that the conduct of the person whose equity is postponed takes or can take the form of a direct representation to the person whose equity is preferred: the actual representation is, in general, as in the present case, by the third party, who has been placed by the conduct of the party postponed in a position to make the representation, most often as here because that party has vested in him a legal estate or has given him the indicia of a legal estate in excess of the interest which he was entitled in fact to have, so that he has in consequence been enabled to enter into the transaction with the third party on the faith of his possessing the larger estate. The decisions in such cases as Rimmer v Webster and Abigail v Lapin may be based, alter-natively, on the principle that a person who hands over title deeds to an agent with authority to deal with the property in a restricted manner cannot rely on the restrictions as against the third party who had no notice of them, and on the doctrine of estoppel. The former principle is said to have its origins in equity, and has been distinguished from estoppel (see Capell v Winter [1907] 2 Ch 376 at 382), but it seems to me that it may be regarded as a particular form of estoppel. However, either principle will [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. determine the present case, and it is sufficient to deal with the question whether the ordinary rules of estoppel prevent the appellant from asserting his equitable interest against the respondents. The essential elements of an estoppel by representation, summarily stated, are that there must have been a representation (by words or conduct or, if there was a duty to speak or act, by silence or inaction) upon the faith of which the representee has acted to his detriment. No direct representation in the present case was made by the appellant to Reliance Finance but, as Lord Wright explained in Abigail v Lapin, that is immaterial. The act of the appellant in allowing Gibby to have the certificate of title and the memorandum of transfer which acknowledged receipt of the purchase price armed Gibby’s employer with the means of dealing with the land as absolute legal and equitable owner; in other words it armed Connell Investments “with the power of going into the world under false colours”: Dixon v Muckleston (1872) LR 8 Ch App 155 at 160. When in these circumstances Reliance Finance acted to its detriment on the assumption, to which the appellant’s conduct had contributed, that no adverse equitable interest existed, the appellant is estopped from setting up his equitable interest. The result may be explained in point of principle by saying (as was said in Lapin v Abigail (1930) 44 CLR 166 at 198) that the appellant is bound by the natural consequences of his acts, although I would prefer to say, in the words of Griffith CJ in Barry v Heider (1914) 19 CLR 197 at 208, that “the transfer operated as a repre-sentation, addressed to any person into whose hands it might lawfully come without notice”, that Connell Investments had an absolute interest. It was submitted that in the present case no estoppel was raised against the appellant, because the fraudulent conduct of Gibby was not a natural consequence of the appellant’s acts, and that the appellant was not guilty of any negligence in entrusting Gibby with the memorandum of transfer and the certificate of title. The foundation of this argument was that the appellant was entitled to believe that Gibby was a solicitor, and that it was not unreason-able of the appellant to allow Gibby to have the memorandum of transfer and certificate of title for the purpose of completing the transfer when payment was received, and that the misapplication of such documents by a fraudulent solicitor was not a natural consequence of entrusting them to him. It was accepted by the learned judges of the Court of Appeal that if an owner of land engages a solicitor to act upon the sale of it, and gives to the solicitor the certificate of title and an executed memorandum of transfer, the owner’s interest will not necessarily be postponed to someone who is led by the possession of those documents by the transferee to believe that the latter is the sole legal and equitable owner, since the conduct of the owner in those circumstances “is entirely in accordance with established practice, and is necessary to enable conveyancing transactions to be completed”, and that the position is no different when the one solicitor acts for both the vendor and the purchaser. The argument for the appellant, proceeding from this assumption, was that the position is the same in the present case, where the appellant believed Gibby to be a solicitor, even though it was known that Gibby was an employee of Connell Investments. If, in truth, it is in accordance with common usage for a vendor of land to entrust to his solicitor a completed and receipted memorandum of transfer before payment of the purchase price has been made, for the purpose of allowing the solicitor to complete the transaction when the payment is made, it might well be held that a vendor who gave the documents to his solicitor in those circumstances would not be guilty of any neglect of duty to those who might subsequently act on the faith of the documents, and that he would therefore not be estopped, by his failure to guard against the possible fraud of the solicitor, from asserting his equitable interest as unpaid vendor: cf Rimmer v Webster [1902] 2 Ch 163 at 172. Although the broad principle stated in Lickbarrow v Mason (1787) 2 TR 63 at 70 (100 ER 35 at 39) that “wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it”, is often repeated and relied on, “warnings have often been given of the danger of applying it literally as a rule of law, and more than once attention has been recalled to the need of a duty and some neglect of it before the 434 [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. occasioning of the loss can be correctly attributed to the party sought to be made responsible”: Thompson v Palmer (1933) 49 CLR 507 at 546. However, it is unnecessary for the purposes of the present case to consider these questions further, or to discuss the cases in which it has been held that a person has not been deprived of an equitable interest by reason of the fraudulent acts of his solicitor. The fact is that Gibby was not a solicitor. But he was, as the appellant knew, an employee of Newman, McKay & Company, and therefore, in effect, of Connell Investments. The appellant gave the receipted memorandum of transfer and the certificate of title to an employee of the purchaser believing that he was a solicitor and trusting him to deal honestly and fairly with the documents entrusted to him. The appellant trusted Gibby because he trusted McKay. The case is indistinguishable from any other in which an unpaid vendor trustingly puts a purchaser in a position to represent himself as absolutely entitled to the land in law and in equity. It was imprudent of the appellant to have accepted, without further inquiry, the statements by McKay and Gibby that the latter was a solicitor. However, even if Gibby was a solicitor, there is no proof of any custom whereby a vendor delivers to a solicitor employed by the purchaser, but acting for the vendor as well, a receipted memorandum of transfer before payment of the purchase price has been received, and judicial notice cannot be taken of the existence of any such custom. If, contrary to my opinion, the appellant acted reasonably in accepting without inquiry that Gibby was a solicitor, his knowledge that Gibby was an employee of Newman, McKay & Company meant that in giving the documents of title to Gibby he failed in his duty to those persons into whose hands the documents might subsequently come to take care that they would not be misled by them. If it is necessary to find a breach of a duty of that kind before an estoppel comes into existence, the breach occurred when the vendor delivered the indicia of title to the purchaser or his servant or agent notwithstanding that he had not received the purchase price. The present case falls squarely within the principle of such decisions as Rice v Rice (1853) 2 Drew 73 (61 ER 646), Rimmer v Webster [1902] 2 Ch 163 and Abigail v Lapin (1934) 51 CLR 58. It is unnecessary finally to decide whether that principle applies when the indicia of title are delivered to a solicitor in conformity with the ordinary course of conveyancing practice, for this is not such a case. For these reasons the Court of Appeal was right in holding that the equitable interest of Reliance Finance as mortgagee prevailed over that of the appellant. … The appellant’s failure to lodge any caveat in respect of his vendor’s lien (the belated caveat lodged on 23 September referred only to his interest as mortgagee) was not in itself fatal to his case, but if he had promptly lodged an appropriate caveat that would have been a means of giving notice to Reliance Finance …of his equitable interest: cf J & H Just (Holdings) Pty Ltd v Bank of NSW (1971) 125 CLR 546 at 554-555, 557-559. MASON AND DEANE JJ: … Where the merits are equal, the general principle applicable to competing equitable interests is summed up in the maxim qui prior est tempore potior est jure – priority in time of creation gives the better equity. But where the merits are unequal and favour the later interest, as for instance where the owner of the later equitable interest is led by conduct on the part of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest: Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liq) (1965) 113 CLR 265 at 276; Abigail v Lapin (1934) 51 CLR 58 at 63; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 575-576. A common illustration of conduct on the part of the owner of an equity which postpones his interest is the arming of a third person with the indicia of title, such as the delivery of title deeds and an instrument of transfer of the property containing or accompanied by an acknowledgment that the third party has paid the consideration for it in full. Generally speaking in this situation a person who acquires an interest from the third party for value without notice of the prior interest takes in priority: Abigail v Lapin (1934) 51 CLR 58 at 68 et seq, reversing Lapin v Abigail (1930) 44 CLR 166; the dissenting judgment of Gavan Duffy and Starke JJ in Lapin v Abigail (1930) 44 CLR 166 at 197-198; [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. Tsang Chuen v Li Po Kwai [1932] AC 715 at 728-729; Rice v Rice (1853) 2 Drew 73 (61 ER 646); and Rimmer v Webster [1902] 2 Ch 163 at 173; cf Courtenay (1963) 110 CLR 550 at 578. To use the words of Lord Selborne LC in Dixon v Muckleston (1872) LR 8 Ch App 155 at 160, words which have often been repeated in the cases to which we have referred, the owner of the first equity is said to have “armed” the third party “with the power of going into the world under false colours”. The theoretical basis for granting priority, in such circumstances, to the later interest has been the subject of debate. Some have found the basis in the doctrine of estoppel; others have identified a more general principle that a preference should be given to what is the better equity on an examination of the circumstances, especially the conduct of the owner of the first equity. In favour of a person to whom the third person disposed of the interest without authority and who took it without notice of the outstanding interest and for value, Farwell J in Rimmer v Webster (1902) 2 Ch 163 at 173-174, thought that this conduct created an estoppel, a view that seems to have been endorsed by the Judicial Committee in Tsang Chuen [1932] AC 715 at 728-729. But in Capell v Winter [1907] 2 Ch 376 at 382, Parker J vigorously denied that the principle was based on estoppel. Although he did not refer to Rimmer v Webster, he examined two of the earlier decisions and correctly asserted that they were not based on estoppel. He pointed out that in Rice v Rice, a decision on similar facts, Kindersley V-C embarked on a consideration of which was the better equity and held “that the incumbrancer had the better equity, because he was in possession of a title deed containing the proper indorsed receipt, and which did not therefore put him upon inquiry, whereas the conduct of the vendor in parting with such deed made it inequitable for him to rely on the priority of his lien in point of time”. And in Abigail v Lapin (1934) 51 CLR 58 at 68, the Judicial Committee, after quoting the judgment of Kindersley V-C in Rice v Rice with approval, said: “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 …” It is difficult, if not impossible, to accommodate all the cases of postponement of an equity under the umbrella of estoppel. In Dixon v Muckleston (1872) LR 8 Ch App 155 at 160, Lord Selborne LC pointed out that the holder of the first equity might arm the third party with the indicia of title by means of express representation, positive act or omission, or negligence, though he unnecessarily confined it to “wilful and unjustifiable neglect”. As the Judicial Committee noted in Abigail v Lapin (1934) 51 CLR 58 at 71, it is seldom that the conduct of a person whose equity is postponed takes the form of a direct representation to the person whose equity is preferred or is otherwise such as to found a conventional estoppel in pais. The actual representation is usually made by the third party who has been enabled to make it by the holder of the first equity, who has, for example, armed the third party with the indicia of title. In this situation, it is the adoption of the fiction that what the third party does is within the actual authority given by the holder of the first equity that fits the case to the doctrine of estoppel: see Rice v Rice (1853) 2 Drew 73 at 83-84 (61 ER 646 at 650); approved in Abigail v Lapin (1934) 51 CLR 58 at 68; Rimmer v Webster [1902] 2 Ch 163 at 172-173; Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 at 391. But the true position is that in the situation contemplated, where there is fraud on the part of the third party, the first holder gives no authority, express or implied, to him to make the representation to the second holder: see the discussion by Starke J in Thompson v Palmer (1933) 49 CLR 507 at 526-527. While the conduct of the holder of the first equity may, in such a case, be blameworthy, the operative representation was neither made nor authorised by him. For our part we consider it preferable to avoid the contortions and convolutions associated with basing the postponement of the first to the second equity exclusively on the doctrine of estoppel and to accept a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances. It will always be necessary to characterise the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, 436 [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest. Thus in Latec Investments (1965) 113 CLR 265 at 276 Kitto J said that the case where the conduct of the prior owner leads the later owner to acquire his interest on the supposition that the earlier interest does not exist – the test stated by Dixon J in Lapin v Abigail (1930) 44 CLR 166 at 204 – was just one “instance” of a case when the merits are unequal: see also Lapin v Abigail (1930) 44 CLR 166 at 185-186, per Isaacs J; General Finance Agency, etc, Co (In liq) v Perpetual Executors and Trustees Association, etc (1902) 27 VLR 739 at 742-744. To say that the question involves general considerations of fairness and justice acknowledges that, in whatever form the relevant test be stated, the overriding question is “… whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made …”: Sykes, Law of Securities, 3rd ed (1978), p 336; see also Dixon v Muckleston (1872) LR 8 Ch App 155 at 160; Latec Investments (1965) 113 CLR 265 at 276. Thus elements of both negligence and estoppel will often be found in the statements of general principle: see, for example, Lapin v Abigail (1930) 44 CLR 166 at 204, per Dixon J. It may be that an equitable interest will not be postponed to an equitable interest created later in time merely because there is a causal nexus between an act or omission on the part of the prior equitable owner and an assumption on the part of the later equitable owner as to the non-existence of the prior equity. Fairness and justice demand that we be primarily concerned with acts of a certain kind – those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest. Thus, the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest would otherwise give (J & H Just (Holdings) Pty Ltd v Bank of NSW (1971) 125 CLR 546), notwithstanding that the person acquiring the later interest had, before acquiring that interest, searched the register book and ascertained that no caveat had been lodged. It is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority. In deciding whose is the better equity in this case it is necessary to ask whether there has been an act, neglect or default of the kind mentioned on the part of the appellant. We need to consider what are the reasonably forseeable consequences of his act in entrusting Gibby with the instrument of transfer and the authority to collect the certificate of title. Lord Selborne LC in Dixon v Muckleston (1872) LR 8 Ch App 155 at 160 had pointed out that the holder of the first equity is bound by the natural consequences of his positive acts. More recently in Courtenay (1963) 110 CLR 550 Kitto J made use of this concept in considering whether there was negligence on the part of the first holders which resulted in a postpone-ment of their interest. There the vendor received a portion of the purchase money in cash, and agreed to accept a mortgage back from the purchasers (the Courtenays) to secure payment of the balance. The transfer and mortgage were left with the vendor’s solicitor to lodge for registration. The solicitor lodged the documents but later fraudulently withdrew them from registration. The solicitor for a sub-divider (Denton) later relied upon the ostensibly clear title. Kitto J (1963) 110 CLR, 578, speaking of the Courtenays’ conduct, said, adopting the Dixon v Muckleston (1872) LR 8 Ch App 155 at 160 formula, that the question was “whether their conduct was such that the deception was a natural consequence”, so that they might fairly be said to have armed the third party with the power of going into the world under false colours. He went on to say (1963) 110 CLR 578 at 578-579: the answer to the question, in my opinion, is that in the circumstances it was not reasonably to be foreseen by the Courtenays or their solicitor that a third party might, without inquiring of them, part with money on an assumption that, contrary to all ordinary experience, their [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. transferor’s solicitor had their authority to withdraw from registration the transfer which to all appearances they were absolutely entitled to have registered. … But the Courtenays did lodge their transfer for registration, and in my judgment it is not to be laid at their door that Denton’s solicitor was deceived by the assurances of a rogue. See also per Taylor J (1963) 110 CLR 578 at 590. The question then is whether the risk of some such deception as that practised by McKay was reasonably foreseeable when the appellant delivered to Gibby the signed instrument of transfer and the authority to collect the certificate of title. In Union Bank of London v Kent (1888) 39 Ch D 238 at 248, Fry LJ said: I know of no decided case in which the mortgagee has been postponed on the ground that he did not take precautions against a future fraud by the mortgagor; and I do not know of any general rule which obliges you to assume that every person with whom you are dealing is likely to be a knave. But this comment does not deny that in some situations a person may be under a duty to take care to avoid or minimise the risk of fraudulent or deceptive conduct by others or that a person may be negligent in placing another in a position in which he can readily misrepre-sent to a third party that he is the owner of property. There are two elements of special significance in the appellant’s conduct. The first is that the instrument of transfer signed by the appellant contained an acknowledgment of the receipt by him of the purchase money which was in fact unpaid and which lay at the heart of his equitable lien. The second is that the appellant left the signed instrument of transfer together with the authority to collect the certificate of title with Gibby, who, as far as the appellant was led to believe, was a solicitor acting for the purchaser as well as for the appellant and, moreover, was a servant of a group of companies or firms of which the purchaser corporation was a member. The two circumstances are interrelated. In the Court of Appeal Hope JA (with whom Glass and Mahoney JJA agreed) thought that if Gibby had been an independent solicitor the appellant would have been entitled to retain his priority. His Honour said (1982) 1 NSWLR 466 at 482: If an owner of land engages a solicitor to act upon the sale of it, and gives to the solicitor the certificate of title and an executed memorandum of transfer of the land, whether in favour of the purchaser or without a named transferee, the owner has enabled the solicitor to arm the purchaser, or has armed the solicitor, with documents allowing the purchaser, or the solicitor (or some other person) to appear to the world as the absolute owner of the land. But this conduct may not postpone the owner’s interest, for it is entirely in accordance with established practice, and is necessary to enable conveyancing transactions to be completed. The fact that in such a case the owner’s action is based upon a trust that his solicitor will deal with the documents in accordance with his authority is not something which in itself will lead equity to postpone his interest. We agree with his Honour’s remarks, though we would prefer to say that, having regard to the established practice in conveyancing transactions and the trust which the client reposes in his solicitor to deal with the documents in accordance with his authority, the risk of deceptive use of the documents by the solicitor is not, in the ordinary case, a reasonably foreseeable consequence of entrusting the solicitor with the documents. A contrary view would entail delay and complexity in the completion of conveyancing transactions. Seemingly the vendor would always need to be present. The situation revealed by the facts in the present case is, of course, far removed from the usual conveyancing transaction in which vendor and purchaser are represented by separate solicitors. The primary judge and the Court of Appeal expressed different views as to the outcome of the present situation in which the vendor instructed an employee of the purchaser to act for him. The case for the appellant here is that it was reasonable for him to accept and act upon McKay’s representation and on that basis to hand to Gibby the instrument of transfer and the authority to 438 [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. collect the certificate of title in order to complete the transaction. In short, the appellant submits that the case is to be determined on the footing that he reasonably believed that Gibby was a solicitor acting for both parties, not on the footing that he was merely an employee of the purchaser. There are two flaws in this argument. The first is that, in all the circumstances of the present case, including the circumstances that Gibby was introduced to the appellant as an employee who was concerned with the transaction on the purchaser’s behalf, it was reckless for the appellant, without further inquiry, to accept McKay’s representation that Gibby was a solicitor who could act for him. The second is that the appellant, knowing that Gibby was an employee, should reasonably have apprehended that Gibby might be required by the purchaser to act in accordance with its instructions and in its interests and that there was a risk that Gibby might give effect to that requirement. There was therefore a greater risk that the documents might be put to use for the purposes of the purchaser, in a manner inconsistent with the appellant’s interests, than would have been presented by the delivery of the documents to an independent solicitor retained by the appellant. The principal foundation of a client’s justifiable trust that his solicitor will not use the documents of title in a conveyancing transaction for unauthorised purposes – the duty which the solicitor owes to his client – is necessarily compromised if the solicitor owes a duty as an employee in relation to the very transaction in which he is instructed. Accordingly, we must look at the case as one in which the appellant handed the documents to an employee of the purchaser. The delivery of the documents to the employee armed the purchaser with the capacity to represent itself to be the true owner of the property and to engage in fraudulent and deceptive conduct of the kind which took place. The risk of the purchaser engaging in that conduct was reasonably foreseeable. Indeed, that conduct, though not intended by the appellant, was the natural consequence of his positive act in handing over the documents to Gibby – in effect to the purchaser – without taking any steps, as for instance, by lodging a caveat, to protect himself and others who might otherwise be deceived by misuse of the documents. [Their Honours concluded that the appellant’s negligence amounted to postponing conduct, and dismissed the appeal.] MURPHY J: … As a general principle, a party who makes such an untrue statement must, as between himself and an innocent third party, bear any loss resulting from his bringing it into existence. This is consistent with statements in the English cases such as Rice v Rice (1853) 2 Drew 73 at 83-84 (61 ER 646 at 650); Rimmer v Webster [1902] 2 Ch 163 at 173; Tsang Chuen v Li Po Kwai [1932] AC 715 at 728-729; and the Privy Council decision in Abigail v Lapin (1934) 51 CLR 58. It accords with the broad principle stated in Lickbarrow v Mason (1787) 2 TR 63 at 70 (100 ER 35 at 39) “wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it”. Australian authority is to the same effect: see Barry v Heider (1914) 19 CLR 197 at 208; Thompson v Palmer (1933) 49 CLR 507 at 547-548; and IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 578. In Lapin v Abigail (1930) 44 CLR 166 at 198 Gavan Duffy and Starke JJ stated: It (sic.) our opinion, the Lapins are bound by the natural consequences of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the lands and thus execute transfers or mortgages of the lands to other persons, and they ought to be postponed to the equitable rights of Abigail to the extent allowed by the Supreme Court. On appeal this was approved by the Privy Council (1934) 51 CLR 58 at 64. Although that passage refers to “natural consequences”, in my opinion the rule should not be confined to natural consequences. Also, the rule should not be confined to circumstances where the party making the untrue statement has acted negligently. I prefer the statement in the same case made by Dixon J (1930) 44 CLR 166 at 204: [6.85]

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Heid v Reliance Finance Corporation Pty Ltd cont. The act or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority. This, in effect, generally means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring in equity. No doubt, when the appellants executed transfers which expressed the consideration as the receipt of a money payment, they did something which might well have operated to lead a person who dealt with the transferee on the faith of the transfers and read the statement of the consideration, to suppose that she had bought the land and paid the purchase money, and thus become the beneficial owner. Where a person creates a danger which will cause harm to others if it gets out of control the general theme of the law is that strict liability should apply, that is, he is liable for harm to others even without his negligence. To sign an untrue acknowledgment on a memorandum of transfer that the purchase price has been received is to create a dangerous instrument which, if it falls into the wrong hands, may be used to injure prospective purchasers or those who advance money on the security of the land. Here, as between himself and the innocent third parties, who acted without negligence, the appellant should bear the loss. The appeal should be dismissed.

[6.90]

Notes and Questions

1. Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 highlights the confusion surrounding the precise formulation of the test to be used to resolve the priority dispute between competing unregistered interests. Under the formulation preferred by Mason and Deane JJ, priority in time should be considered only where the competing equities are equal in all other respects (at 339. See also Rice v Rice (1853) 2 Drew 73; 61 ER 646; Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in Liq) (1965) 113 CLR 265 at 276 per Kitto J (semble.); Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790 at 795 per Thomas J; Jacobs v Platt Nominees Pty Ltd [1990] VR 146; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 966; Moffett v Dillon [1999] 2 VR 480 at 500-502 per Ormiston JA.) Gibbs CJ, by contrast, seemed to endorse this approach early in his judgment, then went on to hold that the order of creation determines priority unless there is a reason for postponing the holder of the first interest. ((1983) 154 CLR 326 at 333. See also Lapin v Abigail (1930) 44 CLR 166 at 204 per Dixon J; Abigail v Lapin [1934] AC 491 at 504 per Lord Wright; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 583 per Taylor J; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 556 per Barwick CJ; Avco Financial Services Ltd v Fishman [1993] 1 VR 90 at 93 per Tadgell J; Avco Financial Services Limited v White [1977] VR 56; Breskvar v Wall (1971) 126 CLR 376 at 388 per Barwick CJ.) It is unlikely that these formulations would yield different results on the same set of facts. Neave stated that “[i]n most (but not all) cases these formulations will not produce different results”. (Neave, “Towards a Uniform Torrens System: Principles and Pragmatism” (1993) 1 APLJ 114 at 126.) In what circumstances might different results be produced?

440 [6.90]

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2. As Mason and Deane JJ commented, the “theoretical basis for granting priority … has been the subject of debate” (at 339). Interestingly, the three judgments extracted above each proceed along different theoretical paths. Gibbs CJ (with whom Wilson J agreed) preferred an estoppel analysis: Heid was estopped from asserting the priority of his interest because his conduct induced Reliance to act to its detriment. Mason and Deane JJ preferred to avoid the “contortions and convolutions” associated with the estoppel approach by endorsing a general and flexible principle that the better equity in the circumstances should prevail. This approach is based on negligence and, to a lesser extent, on estoppel. Murphy J, in a judgment that has largely been ignored by commentators and subsequent cases, held that principles of strict liability formed the basis of granting priority to Reliance’s subsequent interest. This is clearly the most far-reaching of the three approaches. 3. Recently it has been held by the Victorian Court of Appeal that there is a further separate and independent test, applicable to some fact situations, for determining this type of priority dispute: see Moffett v Dillon [1999] 2 VR 480 extracted at [6.175] and Perpetual Trustee Company v Smith [2010] V ConvR 54-779 extracted at [6.180]. 4. Whilst many of the Torrens cases on priority disputes involve the issue of the relevance of caveating, one case where this was not so is AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2010] QCA 83. AG(CQ) was the registered proprietor of land that was to be subdivided. Ikin, who was involved in obtaining the land for AG(CQ) was entitled to have one of the subdivided lots transferred to him. Ikin, prior to the transfer to him, granted a mortgage over his lot to A & T Promotions. Ikin then granted a mortgage over the land to AG(CQ). This was done to secure repayment of advances made by AG(CQ). As part of this transacton, AG(CQ) retained the transfer instrument for the proposed lot for Ikin (with the details left blank). The court concluded that AG(CQ)’s interest, despite later in time, prevailed over A & T Promotions. In the view of the court, A & T Promotions had failed to act as a prudent lender. Do you agree? What should they have done? 5. Sir Robert Torrens probably envisaged a system where only registered interests would be enforceable; consequently, scant attention was paid to unregistered interests and possible disputes between them. As can be gleaned from above, the courts opted to use the principles governing disputes between equitable interest holders of unregistered land and apply them to Torrens land. Recently, attention has been focused on developing alternative, simpler and more certain means of resolution of such disputes. It has been argued that the introduction of electronic conveyancing will provide a feasible opportunity to introduce a better scheme. See O’Connor, “Information, Automation and the Conclusive Land Register” in Grinlinton, Torrens in the Twenty-First Century (2003), pp 249-275. Application of the test [6.95] Irrespective of the precise formulation of the test, the cases reveal that the courts tend to focus their attention on the conduct of the first equitable interest holder. Indeed, in the absence of any act or omission by the first holder, he or she will win the priority dispute on the basis of priority of time. Where such an act or omission is demonstrated, however, the conduct of the second interest holder will be examined. Such conduct may act as a counterbalance in “weighing” the relative merits of the equities. [6.95]

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Broadly speaking, priority disputes between competing unregistered interests can be divided into the following two categories: 1.

Where the registered proprietor arms a third party with the means to become registered proprietor, and another person purchases an interest in the land from the new registered proprietor (see, for example, Abigail v Lapin [1934] AC 491; Breskvar v Wall (1971) 126 CLR 376; Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326); and

2.

Where the registered proprietor creates two inconsistent unregistered interests (see, for example, J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; Jacobs v Platt Nominees Pty Ltd [1990] VR 146; Avco Financial Services Ltd v Fishman [1993] 1 VR 90; Double Bay Newspapers v AW Holdings Pty Ltd (1996) 42 NSWLR 409; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266). The relevance of the failure to lodge a caveat by the holder of the first equitable interest has been considered in many cases in both these categories: as you read the following cases, keep in mind the category of dispute which is involved and the way in which the court considers the lodgment or non-lodgment of a caveat. The cases extracted reveal that there remain a number of uncertainties in the application of the rule relating to competing equitable interests. Various alternatives and reforms for the resolution of disputes between equitable interest holders have been suggested: see Neave, “Towards a Uniform Torrens System: Principles and Pragmatism” (1993) 1 APLJ 114 at 128-129; VLRC, Priorities, Report No 22, 1989, p 2, recommendation 10; McCrimmon, “Protection of Equitable Interests under the Torrens System: Polishing the Mirror of Title” (1994) 20 Mon ULR 301; Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict” (1997) 21 MULR 460; Rodrick, “Resolving Priority Disputes between Competing Equitable Interests in Torrens System Land – which Test?” (2001) 9 APLJ 172; O’Connor, “Information, Automation and the Conclusive Land Register” in Grinlinton, Torrens in the Twenty-First Century (2003), pp 249-275; McEniery, “A dedicated means of giving notice of the existence of unregistered interests under Torrens” (2006) 12 APLJ 244.

The arming conduct scenario [6.100] Where, as in Heid’s case, the original registered proprietor arms a third party “with the power of going into the world under false colours” the original registered proprietor’s failure to lodge a caveat may be an important factor in resolving the priority dispute. As the High Court noted, lodging a caveat effectively disarms the third party from representing himself or herself as the holder of an unencumbered estate. (Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 338 per Gibbs CJ, 345 per Mason and Deane JJ.) Thus the failure to lodge a caveat in these circumstances may be considered as a factor that would lead to postponement. Such a failure to caveat will still be considered relevant even where the second interest holder did not search the title before acquiring his or her interest. The second holder may still be misled by the first holder’s conduct other than the failure to lodge a caveat, and a search would not have prevented him or her from acquiring the interest. (Lapin v Abigail (1930) 44 CLR 166 at 197-198 per Gavan Duffy and Starke JJ; Abigail v Lapin [1934] AC 491 at 503 per Lord Wright. Compare the views of the majority in Lapin v Abigail (1930) 44 CLR 166: Knox CJ (at 184), Isaacs J (at 186-187) and Dixon J (at 205).) 442 [6.100]

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Abigail v Lapin [6.105] Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58 Privy Council LORD WRIGHT: … On December 5, 1923, Mr and Mrs Lapin executed two memoranda of transfer, duly witnessed by a solicitor in the statutory form required by the Real Property Act 1900, of New South Wales, of two properties, in respect of which they were then respectively registered as proprietors of an estate in fee simple, to Mrs Heavener; in the one case the consideration money was expressed to be £1,800, and in the other case £1,200; the receipt of these sums respectively was acknowledged on the transfers. The titles of the Lapins were at the time subject to a registered mortgage of £1,320 to the Union Bank, which was discharged on December 7, 1923. On December 18, 1923, Mrs Heavener, or Heavener on her behalf, lodged these transfers and the certificates of title, which she had received from the respondents, at the land registry, where the transfers were entered in the land registry books, and particulars were indorsed on the certificates of title which the Heaveners held and which accordingly showed Mrs Heavener as the proprietor in fee simple of the estates. On March 14, 1924, Mrs Heavener mortgaged the properties in statutory form to the English, Scottish and Australian Bank; this mortgage was duly registered, as appears on indorsements on the certificates of title, which the mortgagee bank held. On September 2, 1925, as appears from further indorsement on the certificates of title, these mortgages were discharged, as is sufficiently clear, out of moneys lent by Abigail to the Heaveners on or about September 2, 1925; these moneys, which amounted in all to £5,500, were secured by a statutory mortgage dated September 2, 1925, granted by Mrs Heavener in terms as “being the registered proprietor of an estate in fee simple” in the specified properties, including the two properties in question; the mortgage was also signed by Abigail as being correct. Abigail thereafter held the certificates of title. On September 4, 1925, Abigail as mortgagee lodged a caveat under the Act in respect of these two properties. On February 24, 1926, Abigail lodged the mortgage for registration, but it was referred back by the registrar for the correction of some minor formal defects; before it was finally relodged the respondents lodged caveats and in due course brought the present action. The respondents claimed as against the Heaveners that the register should be rectified by registering them as full proprietors of the lands and that the certificates of title should be delivered up to them; they alleged that they had handed over the certificates of title solely as collateral security for a loan in respect of another transaction, but the loan had since been discharged; they further alleged as regards the transfers that they did not sign them at all, or if they did, were induced to do so by Heavener’s fraud in the belief that they were by way of further security for the other transaction. Heavener by way of answer alleged that the lands were transferred absolutely in order to discharge the Union Bank mortgage and in payment of costs due to him. Abigail was joined as defendant by the respondents, as having no better title than the Heaveners because she did not take bona fide as a purchaser for value and without notice. It was also alleged that the security was void because Abigail was acting as a moneylender in the transaction without being registered as such. The trial before Long Innes J took a somewhat unusual course: after evidence had been given and closed on these issues, the respondents were allowed to amend as against the Heaveners, though not in terms as against Abigail, by alleging that, if they knowingly signed the transfers, they did so on the terms that Heavener would hold the transfers as security for his professional costs and not otherwise, and that he registered the transfers in fraud of that understanding and without their knowing what he had done until October, 1925. This was a new case, contrary to the evidence given by both parties. By his judgment delivered on March 22, 1929, Long Innes J did not accept the evidence of the respondents, but found that they did sign the transfers, and signed them, moreover, knowing that they were signing transfers of the properties, that they were signing as transferors, and that the transferee was Mrs Heavener; he did however, further find that they understood the transfers were to be by way of security only for Heavener’s costs and for repayment of the mortgage debt to the Union [6.105]

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Abigail v Lapin cont. Bank. In so finding the judge took a midway course, disbelieving the sworn evidence of both parties. As to Abigail, who gave, so the judge said, his evidence with great frankness and whose evidence the judge accepted, he found that it was not established that he was a moneylender within the meaning of the Moneylenders and Infants Loan Act 1905: the judge also found that Abigail, as regards the mortgage in question, discharged the onus of establishing that he was a bona fide purchaser for value without notice: he further found that Abigail made the advance in question on the faith of the transfers of December 5, 1923, and of the certificates of title in Mrs Heavener’s name and of the mortgage executed by Mrs Heavener as registered proprietor. He accordingly held in regard to the mortgage of September 2, 1925, that the respondents were estopped by their representations from asserting as against Abigail that their equity was prior in point of time to that of Abigail. A later mortgage given by the respondents to Abigail on the lands, which stood on a different footing, is not here material. This judgment was on appeal affirmed by the Full Court of the Supreme Court of New South Wales. The Court agreed with the findings of fact of the trial judge: in effect, the Court held that the case was covered by the decision of the High Court of Australia in Butler v Fairclough (1917) 23 CLR 78: that Abigail’s equity, though subsequent in time, was the better equity: that the respondents’ conduct “in executing a memorandum of transfer on the face of it clear and unfettered, and the failure to place on the register any embargo which would prevent the Heaveners from using those transfers at their face value, is such unreasonable and negligent conduct as to make their equity inferior” to Abigail’s. They also agreed with the judge’s finding that Abigail was not carrying on business as moneylender. They accordingly dismissed the appeal. The respondents then appealed to the High Court of Australia, the judges of which by a majority (Knox CJ, Isaacs and Dixon JJ) allowed the appeal, Gavan Duffy and Starke JJ dissenting. It is difficult fairly to summarise these carefully reasoned judgments; but taking the crucial issue to be whether the equitable interest of the respondents was to be postponed to that of Abigail, the conclusion on that point of the late learned Chief Justice, Sir Adrian Knox, long a distinguished member of the Judicial Committee, may be found in substance in the following passage from his judgment 44 CLR 183. The registration of Mrs Heavener as proprietor in fee simple was consistent with the existence of an equitable interest outstanding in some other person, and not inconsistent with the whole beneficial title to the lands being in the appellants. Mrs Heavener was in a fiduciary relation to the appellants, and was entitled under the arrangement between them and Heavener to become registered as proprietor and to hold the documents of title until the debt intended to be secured was paid off. The decisions in Shropshire Union Rys and Canal Co v The Queen LR 7 HL 496; Carritt v Real and Personal Advance Co (1889) 42 Ch D 263; and Taylor v London and County Banking Co [1901] 2 Ch 231; and the observations of Farwell J in Rimmer v Webster [1902] 2 Ch 163 at 172; and Burgis v Constantine [1908] 2 KB 484 at 501 seem to me to indicate that the possessor of the prior equity is not to be postponed to the possessor of a subsequent equity unless the act or omission proved against him has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it, that the prior equity was not in existence. On the evidence as it stands no such act or omission on the part of the appellants has, in my opinion, been proved. The transfers did not amount to such an act, for there is no evidence that Abigail ever saw them. The certificates of title showing Mrs Heavener as registered proprietor were consistent with the beneficial ownership of the lands being in the appellants or any other persons, and did not indicate that she held the beneficial as well as the legal interest. The omission to lodge a caveat can have had no effect in inducing Abigail to advance the money, for it is not proved that any search was made before the money was advanced. Isaacs J, dealing with the same issue, said 44 CLR 188: 444 [6.105]

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Abigail v Lapin cont. The Full Court’s concurrence on that point is open, as I think, to the observation that too great significance is attached to the single fact of Heavener’s registration, and too little both to the lack of evidence as to Abigail’s conduct being in part influenced by the absence of a caveat, and to the silence of Harris. (Harris was Abigail’s clerk; his connection with the case appears at 503 int.) Dixon J lays emphasis on the fact that (205): Although the appellants did not caveat, it does not appear that any search for caveats was made on Abigail’s behalf, or that he acted in the belief that there was no caveat. The default of the appellants – if default it be – therefore did not contribute directly to any assumption upon which Abigail may have dealt with the Heaveners. On the other hand, the final conclusion of Gavan Duffy and Starke JJ is summed up in the following words (198): In our opinion, the Lapins are bound by the natural consequences of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the lands and thus execute transfers or mortgages of the lands to other persons, and they ought to be postponed to the equitable rights of Abigail to the extent allowed by the Supreme Court. In this conflict of eminent judicial opinion their Lordships find themselves in agreement with Gavan Duffy and Starke JJ in regard both to their reasoning and their conclusion. The Real Property Act 1900, of New South Wales, embodies what has been called, after the name of its originator, the Torrens system of the registration of title to land. It is a system which is in force throughout Australasia and in other parts as well. It is a system for the registration of title, not of deeds; the statutory form of transfer gives a title in equity until registration, but when registered it has the effect of a deed and is effective to pass the legal title; upon the registration of a transfer, the estate or interest of the transferor as set forth in such instrument with all rights, powers and privileges thereto belonging or appertaining is to pass to the transferee. No notice of trusts may be entered in the register book, but it has long been held that equitable claims and interests in land are recognised under the Real Property Acts. This was held in Barry v Heider (1914) 19 CLR 197 and in Great West Permanent Loan Co v Friesen [1925] AC 208; for the protection of such equitable interests or estates, the Act provides that a caveat may be lodged with the registrar by any person claiming as cestui que trust, or under any unregistered instrument or any other estate or interest; the effect of the caveat is that no instrument will be registered while the caveat is in force affecting the land, estate or interest until after a certain notice to the person lodging the caveat. Thus, though the legal interest is in general determined by the registered transfer, and is in law subject only to registered mortgages or other charges, the register may bear on its face a notice of equitable claims, so as to warn persons dealing in respect of the land and to enable the equitable claimant to protect his claim by enabling him to bring an action if his claim be disputed. In the registry all statutory transfers are filed and duplicate certificates of title are kept and noted up from time to time with all registered dealings; the other duplicate certificate of title is held by the registered proprietor. The register is open to inspection and search. Provision is made by the Act for mortgages in statutory form, and for their registration; in such a case the legal estate remains in the registered proprietor of the fee simple, and the mortgage constitutes a charge of debt on the land; hence it may not be technically correct, though it is common, to speak of the mortgagor as having the equity of redemption, though the legal title remains in him. But a practice has sprung up of affecting what amounts to a mortgage by registering an instrument of transfer of the legal title from the mortgagor, and at the same time executing a document certifying that it was by way of security only. This is no doubt done for the purpose of facilitating dealings with the land by the transferee. Such a practice has been recognised in various decisions of the Courts, and [6.105]

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Abigail v Lapin cont. in particular in Currey v Federal Building Society 42 CLR 421. In the present case the same result was effected as the judge found as between the parties by an oral agreement; but all that appeared in the registry was the absolute grant of transfer as for full consideration paid and received; no document of qualification was executed and no caveat was lodged. In the result the public register showed to all the world, that is, to any one who cared to inspect, that the fee simple was in the two estates vested in Mrs Heavener; the equity of redemption (if it is so to be called for convenience) was in no way indicated to any searcher of the register. The Full Court of New South Wales regarded the present case as governed in principle by Butler v Fairclough (1917) 23 CLR 78 at 91, already mentioned, where there was a conflict of equities between a prior equitable incumbrancer who had lodged no caveat and a subsequent transferee who had, after a search of the register and without notice of the unregistered equitable charge, paid the purchase consideration. It was held that the former was to be postponed: Griffith CJ thus summed up the position 23 CLR 78 at 91: It must now be taken to be well settled that under the Australian system of registration of titles to land the Courts will recognise equitable estates and rights except so far as they are precluded from doing so by the statutes. This recognition is, indeed, the foundation of the scheme of caveats which enable such rights to be temporarily protected in anticipation of legal proceedings. In dealing with such equitable rights the Courts in general act upon the principles which are applicable to interests in land which is not subject to the Acts. In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had the effect or might have had the effect of inducing a claimant later in time to act to his prejudice. Thus, if an equitable mortgagee of lands allows the mortgagor to retain possession of the title deeds, a person dealing with the mortgagor on the faith of that possession is entitled to priority in the absence of special circumstances to account for it. Under the Australian system a clear title on the register is, for some purposes at any rate, equivalent to possession of the title deeds. A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat. In the present case the plaintiff might, if he had been sufficiently diligent, have registered his charge of June 30 on that day. The defendant, having before parting with the purchase money to Good found on searching the register that Good had a clear title, and relying on the absence of any notice of defect in Good’s title, paid the agreed price. Their Lordships think that case was rightly decided, though it may be that the statement as to retention of the title deeds needs some qualification. But the only distinction between Butler v Fairclough (1917) 23 CLR 78 at 91, and the present case appears to be that in the present case it was not proved that (though he had no notice of the prior charge) Abigail made any search before lending the money: he said he instructed his conveyancing clerk Harris to examine the title and left it to him. Though there is no reason why Harris should have neglected his duty, Harris was not called, it seems, because of the unfortunate course taken at the trial of raising fresh issues after the evidence was closed. That the question whether or not a search of the register had been made might be regarded as of decisive importance, does not emerge on the record or in any of the judgments until those in the High Court. The question is whether in such a case as this, where the title on the register was clear, the failure to prove a search by the second incumbrancer can make any difference. There is no reason to think that Heavener would have ventured to claim that Mrs Heavener was proprietor in fee simple unless she was so registered, and in that sense the grant of the transfer by the respondents to her did cause or contribute to Abigail’s lending the money. A search by or on behalf of Abigail would merely have shown that the transfer purported to be for full consideration, thus excluding any idea of it being by way of security. The case is closely parallel to that of Honeybone v National Bank of New Zealand 9 446 [6.105]

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Abigail v Lapin cont. NZLR 102, where the second incumbrancer’s equity was preferred, on the ground that the act of the plaintiff in falsely representing the transaction with the first incumbrancer to have been a sale and not a mortgage, and in placing him in a position to obtain a title as registered proprietor and so obtain an advance from the bank the second incumbrancer, disentitled him to put his equity in competition with the later equity. No question is raised in that case, whether the second incumbrancer made any search or inquiries: the emphasis is placed on the conduct of the mortgagor. This is in accordance with the judgment of Kindersley V-C in Rice v Rice (1853) 2 Drew 73, where the question was whether the equity of the plaintiff in respect of his lien as unpaid vendor should be preferred to that of a subsequent equitable mortgagee, who had lent his money to the purchaser against a deposit of the title deeds and of an assignment showing payment of the purchase money in full. The opinion of the Vice-Chancellor no doubt has not been approved in so far as he says that priority in time is only taken as the test where the equities are otherwise equal: it is now clearly established that prima facie priority in time will decide the matter unless, as laid down by Lord Cairns LC in Shropshire Union Rys and Canal Co v The Queen LR 7 HL 496, that which is relied on to take away the pre-existing equitable title can be shown to be something tangible and distinct having grave and strong effect to accomplish the purpose. The Vice-Chancellor did not treat the possession of the title deeds as necessarily decisive: he said that the conduct of the parties having the equitable interests and all the circumstances must be taken into consideration in order to determine which has the better equity. He held that the second incumbrancer was not bound to go and inquire of the vendors whether they had received all the purchase money: he then describes the conduct of the vendors in this language: They voluntarily armed the purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of incumbrance or adverse equity. In truth it cannot be said that the purchaser in mortgaging the estate by the deposit of the deeds has done the vendors any wrong, for he has only done that which the vendors authorised and enabled him to do. These words can aptly be applied to the present case if “for deposit of the deeds” there is substituted that the respondents had authorised and enabled Mrs Heavener to register herself as owner in fee simple. 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; in the present case the respondents on the one hand enabled the Heaveners to represent themselves as legal owners in fee simple, while on the other hand it cannot be said that Abigail did or omitted to do anything which he should have done in lending the money on the security, though he might, by registering the mortgage, have secured the legal title; it may be that he accepted Heavener’s word that he or his wife were registered as having the legal title, but that was a true statement, and no search or inquiry that could have been made would have displaced it. … But it may be that the majority judgment in the High Court laid emphasis on the absence of search of the register by Abigail because they were of opinion that there must be something in the nature of a direct representation by the respondents to Abigail. In fact, in this case the only documents under the hand of the respondents or either of them which a search would have revealed are the transfers, the terms of which embody a transfer out and out as for full consideration: and if these had been seen by or on behalf of Abigail they might in one sense be construed as a direct representation from them to him; but it seems that the transfers were put on the register by the Heaveners, not by the respondents: the transfers could thus only in an artificial sense be described as representations made by the respondents to Abigail. In truth, the essence of the matter was the conduct of the respondents in giving the transfers to Heavener: so far as there was any representation in any strict sense to Abigail, it was made by Heavener. In Dixon v Muckleston LR 8 Ch 155 at 160, Lord Selborne in terms distinguishes the case of an express representation from the case of acts of negligence: a man, he says, “is not [6.105]

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Abigail v Lapin cont. entitled to deny being bound by the natural consequence of his own acts, if it be a case of positive acts”. He adds, in much the same language as that of Kindersley V-C quoted above: “By one or other of those means he may have armed another person with the power of going into the world under false colours; and if it be really and truly the case that by his act, or his improper omissions, such an apparent authority and power has been vested in that other person, he is bound upon equitable principles by the use made of that apparent authority and power.” Lord Selborne also adds that the equitable charge will be good if there has been a positive statement honestly believed. It is true that in cases of conflicting equities the decision is often expressed to turn on representations made by the party postponed, as for instance in King v King [1931] 2 Ch 294. But it is seldom that the conduct of the person whose equity is postponed takes or can take the form of a direct representation to the person whose equity is preferred: the actual representation is in general, as in the present case, by the third party, who has been placed by the conduct of the party postponed in a position to make the representation most often, as here, because that party has vested in him a legal estate or has given him the indicia of a legal estate in excess of the interest which he was entitled in fact to have, so that he has in consequence been enabled to enter into the transaction with the third party on the faith of his possessing the larger estate. Such is the position here, which in their Lordships’ judgment entitles the appellants to succeed in this appeal. In the High Court, Gavan Duffy and Starke JJ also relied on a further or supplementary reasoning, based on the principle of an authority being acted upon to create the later equity, but acted upon either contrary to or in excess of the authority actually intended to be given. As they point out, the form of actual transfer was adopted “so that Olivia Sophia Heavener might deal with the lands as if they were her own and without the restrictions created by an instrument of mortgage under the Act of New South Wales”: she was thus necessarily trusted by the respondents as to the time and method of realisation (that is, in order to pay the cash due to her husband) and not to exceed the limits of her security. On this view the case falls within the general principles laid down in Brocklesby v Temperance Permanent Building Society [1895] AC 173. Lord Herschell LC thus sums up the rule: “Where a person has thus been intrusted with the possession of title deeds with authority to raise money upon them, the owner of the deeds cannot take advantage of any limitation in point of amount which he has placed upon the authority as against a lender who had no notice of it.” The same principle, it was held, had been applied in equity in the case of Perry-Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895. This decision of the House of Lords was followed in the later case of Rimmer v Webster [1902] 2 Ch 163, where certain stock had been transferred to a broker by the owner with instructions to sell it, but the broker abused his position as transferee of the stock in order to borrow money for his own purposes on its security: it was held by Farwell J that the borrower’s equity must prevail: Sir George Farwell thus stated the principle: “When … the owner is found to have given the vendor or borrower the means of representing himself as the beneficial owner, the case forms one of actual authority apparently equivalent to absolute ownership, and involving the right to deal with the property as owner, and any limitations on this generality must be proved to have been brought to the knowledge of the purchaser or mortgagee.”

[6.110]

Notes and Questions

1. According to the Privy Council, what was the conduct which led to the postponement of the interest of the first equitable interest holder? Was the failure to caveat relevant? Why was Abigail’s failure to search the Register apparently considered irrelevant? 448 [6.110]

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2. Consider again Breskvar v Wall (1971) 126 CLR 376 extracted at [5.95]. How did the competing equitable interests arise? Why did the Breskvars lose the priority dispute?

Creation of two inconsistent interests [6.115] It seems that the central issue in this category of case is whether the first interest

holder was negligent, or whether he or she took reasonable steps to protect his or her interest. If such steps were taken, it is highly likely that the first interest holder will be granted priority. If reasonable steps were not taken, however, it becomes important to consider whether the second interest holder’s conduct acts as a sufficient counter balance to the prior holder’s conduct.

Person-to-Person Financial Services Pty Ltd v Sharari [6.120] Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 Supreme Court MCLELLAND J: The substantial question for determination is as to the priority inter se of two unregistered and therefore equitable mortgages of a torrens title house property at Stanmore. The property was purchased by the mortgagor from the defendant pursuant to a contract dated 27 November 1981. On completion of the purchase on 23 December 1981 the mortgagor gave a first mortgage to a Mr A Tredgolde and a second $20,000 being part of the purchase price. The first mortgage to Mr Tredgolde was duly registered. The second mortgage to the defendant was however never registered notwithstanding requests by the defendant to his then solicitor to register it. No caveat was lodged by or on behalf of the defendant in respect of his interest as mortgagee. On 7 May 1982 pursuant to an application by the mortgagor, the plaintiff, a finance company, lent to the mortgagor a sum of $10,703, the repayment of which with interest was secured by another mortgage over the property given to the plaintiff on that date. The mortgagor had represented to the plaintiff that the only existing encumbrance over the property was the mortgage to Mr Tredgolde, and the plaintiff had on 6 May 1982 caused the title to be searched in the Land Titles Office. The search showed that the mortgagor was the registered proprietor of an estate in fee simple subject to the mortgage to Mr Tredgolde and that there were no other subsisting notations. The plaintiff advanced the money and took the mortgage in reliance on the result of the search and on the abovementioned representation by the mortgagor, and in the belief that the property was not encumbered otherwise than by the registered mortgage to Mr Tredgolde. On 10 May 1982 the plaintiff wrote to Mr Tredgolde’s solicitors requesting consent to the mortgage to the plaintiff (described as a second mortgage) and also requesting production of the certificate of title to enable registration thereof. It does not appear that there was any reply to this request, and the mortgage to the plaintiff was never registered. However, on 3 June 1982 the plaintiff lodged a caveat in respect of its interest as mortgagee. As between two equitable interests in property, the earlier in time is entitled to priority unless the circumstances are such as to make it inequitable as between the holders thereof that the earlier should have such priority. Such circumstances may be found where some act or omission by the holder of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist: see for example, J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 554, 555 and Heid v Reliance Finance Corporation (1983) 57 ALJR 683 at 684, 685, and 687; 49 ALR 229 at 232, 233 and 237. The omission relied on by the plaintiff in the present case is the failure of the defendant either to register his mortgage or lodge a caveat in respect of his interest as mortgagee. It is quite clear, as was held in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, that failure by the holder of an equitable interest to lodge a caveat in respect of that interest where a caveat might have alerted the acquirer of a subsequent equitable interest to the existence of the earlier interest of [6.120]

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Person-to-Person Financial Services Pty Ltd v Sharari cont. which he was unaware, does not necessarily result in the postponement of the earlier to the subsequent interest, but that case does not provide authority for the proposition that failure to lodge a caveat can never bring about the postponement of an earlier to a subsequent interest. Such a proposition would be inconsistent with the decision of the High Court in Butler v Fairclough (1917) 23 CLR 78 which was not over-ruled by, and in my view stands comfortably with, the decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales. It is to be noted that in the latter case Barwick CJ (with whom McTiernan and Owen JJ agreed) and Menzies and Windeyer JJ all expressed agreement with the conclusion and reasons of Jacobs JA in the Court of Appeal ((1970) 72 SR (NSW) 499; 92 WN 803) on this aspect of the case. In dealing with Butler v Fairclough, Jacobs JA said (504; 806): The real question of this aspect of the present case is whether the principle enunciated by Griffith CJ in Butler v Fairclough ((1917) 23 CLR 78 at 91, 92), is an absolute principle that a failure to give notice by lodging a caveat should be regarded as inducing any person subsequently dealing with the registered proprietor to regard the title as clear of any outstanding equitable interest or whether this principle is only applicable where the later person proposing to deal with the registered proprietor can, in all the circumstances then existing, safely so deal with him. His Honour went on to demonstrate that Butler v Fairclough established only the limited and not the general principle. The effect of a failure by the holder of an equitable interest to lodge a caveat will depend upon the particular circumstances. A critical point of distinction between the circumstances under consideration in Butler v Fairclough and those under consideration in J & H Just (Holdings) Pty Ltd v Bank of New South Wales is that the party whose conduct in failing to lodge a caveat was under consideration was in the former case an unregistered second mortgagee who did not have the certificate of title, and in the latter case an unregistered first mortgagee who did have the certificate of title. There is a considerable body of authority in other States subsequent to the decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, supporting the proposition that failure to lodge a caveat by the holder of an equitable interest is capable of bringing about postponement of that interest to a subsequent interest, and recognising the continuing authority of the decision in Butler v Fairclough. Reference may be made to Osmanoski v Rose [1974] VR 523; Taddeo v Catalano (1975) 11 SASR 492 and Clark v Raymor (Brisbane) Pty Ltd [1982] Qd R 479; affirmed [1982] Qd R 790: see also King v AGC (Advances) Ltd [1983] 1 VR 682. In my opinion nothing turns on any difference between legislative provisions in New South Wales and those in other States. As against this, there is a decision in this Court in Ryan v Nothelfer (Needham J, 18 February 1983, unreported, noted in Australian and New Zealand Conveyancing Report 1983 Issue 36, at 165) in which his Honour held that an unregistered second mortgage was not postponed to subsequent unregistered mortgage by reason of the failure of the second mortgagee to lodge a caveat. I think that the authority which would otherwise be commanded by this decision is diminished by two factors. First, the decision appears to have been given at least partly on the basis of a concession to the effect that “the mere failure by the plaintiff to lodge a caveat was not sufficient to postpone his interest”, a concession which, in the context of the factual background that the subsequent mortgagee had relied on a clear search of the title and took his interest in ignorance of the plaintiff’s mortgage, cannot in my view be reconciled with the decision in Butler v Fairclough. In accepting the concession, his Honour cites the following dictum from Heid’s case in the Court of Appeal, viz Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 481: “It is now firmly established that a failure to lodge a caveat to protect a prior interest will not of itself postpone that interest, although, in particular circumstances, it may be relevant in considering whether it is postponed”, which dictum is expressed to be founded on the decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales. There is an ambiguity in that 450 [6.120]

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Person-to-Person Financial Services Pty Ltd v Sharari cont. dictum centred on the words “of itself”. Those words should in my view be construed as meaning “necessarily”, and so construed the dictum is justified by J & H Just (Holdings) Pty Ltd v Bank of New South Wales, but so construed it is not at all clear that the dictum really supports the concession acted upon, and the approach adopted in Ryan v Nothelfer. The second factor affecting the authority of the last-mentioned case is that there is no reference in the judgment to any of the recent decisions in other States to which I have referred, and one may readily infer that they were not cited to his Honour. It seems inconceivable that if they had been cited, his Honour would not have discussed the question of the continuing authority of Butler v Fairclough. There is, I think, a conflict between Butler v Fairclough and Ryan v Nothelfer and since the former is binding on me, the latter must yield to it. In the present case there is evidence before me, which I accept, to the effect that it is the settled practice of competent solicitors in New South Wales acting for second or subsequent mortgagees, to ensure either the prompt registration of the mortgage or lodgment of a caveat. The failure by the defendant through his solicitor to conform to this practice would naturally lead those who searched, such as the plaintiff, to believe that there was no outstanding second mortgage (cf per Dixon J in Lapin v Abigail (1930) 44 CLR 166 at 205) and it is my opinion that the failure of the defendant, in the absence of registration of his mortgage, to lodge a caveat led the plaintiff to acquire its mortgage on the supposition that no unregistered second mortgage already existed, in circumstances which make it inequitable as between the parties that the defendant’s mortgage should have priority over that of the plaintiff. As between the plaintiff and the defendant, the defendant must suffer the consequences of any default of his solicitors. I should add that I see no basis for avoiding the result I have indicated by reason of the plaintiff’s not having obtained or formally requested the first mortgagee’s consent before making the loan and taking its own mortgage.

Reasonable belief that no further interest would be created

Jacobs v Platt Nominees Pty Ltd [6.125] Jacobs v Platt Nominees Pty Ltd [1990] VR 146 Full Court of the Supreme Court [Mr and Mrs Platt were the sole shareholders and only directors of Platt Nominees Pty Ltd, the registered proprietor. Mrs Jacobs (the appellant) was the Platts’ daughter, and she obtained an option to purchase the land for valuable consideration. Against her solicitor’s advice, the appellant chose not to lodge a caveat in respect of her equitable interest because she did not wish to worsen her strained relationship with her father. However, Mr Platt subsequently caused the company to sell the property to Perpetual Trustee Company Ltd. The appellant’s brother, pursuant to an earlier grant of authority, signed the contract on Mrs Platt’s behalf. Neither Mrs Platt nor the appellant knew anything about the sale.] CROCKETT, KING and GOBBO JJ: … Griffith CJ in Butler v Fairclough (1917) 23 CLR 78 at 91 [stated]: “A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat.” The statement was the subject of some reservation by at least four members of the High Court in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. There a registered proprietor of land had executed a memorandum of mortgage in favour of the bank to secure an overdraft and had deposited the duplicate certificate of title with the bank. The bank did not register the memorandum or lodge a caveat. The proprietor later created a further mortgage in favour of another [6.125]

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Jacobs v Platt Nominees Pty Ltd cont. lender who had searched the title and found no evidence of any encumbrance. On his claim to be registered in priority to the bank, the court held the bank’s priority had not been lost by its failure to lodge a caveat. Barwick CJ was of the view that Lord Wright’s comments on Butler v Fairclough were obiter and said, at 554: Whilst it may be true in some instances that “the register may bear on its face a notice of equitable claims”, this is not necessarily so and whilst in some instances a caveat of which the lodgment is noted in the certificate of title may be “notice to all the world” that the registered proprietor’s title is subject to the equitable interest alleged in the caveat this, in my opinion, is not necessarily universally the case. To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognised ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon’s remarks in Lapin v Abigail (1930) 44 CLR 166 at 205 with which I respectfully agree, point in this direction. Windeyer J said, at 558, that he thought too much had been read into the passage from Butler v Fairclough repeated by Lord Wright in Abigail v Lapin and went on to say: It is the practice of the Registrar-General to note a caveat upon the relevant folium in the register book, although the Act does not require him to do so and a caveat is not a dealing. A caveat noted in the register book is no doubt a notice, to anyone who searches at the Registrar-General’s Office, of the caveator’s claim. I understand that the Registrar-General records all documents as they are lodged and that he lists caveats as if they were dealings and that this record is available for inspection. It is perhaps a register kept under the Act within the meaning of s 43(2). However, 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. To say that would, it seems, be to equate the noting of a caveat in the register book with the registration of a dealing: it would make competing equitable interests depend not upon priority of creation in time and other equitable considerations, but upon priority of the lodgment of caveats. After all, the primary purpose of a caveat against dealing is not to give notice to the world of an interest. It is to warn the Registrar-General of a claim. The word caveat has long been used in law to describe a notice given to an official not to take some step without giving the caveator an opportunity to oppose it. Later, his Honour went on to say, at 559: “The Bank did not by not lodging caveat warning the Registrar-General represent to the appellant that it had no claim.” The decision in J & H Just’s Case was distinguished by Gowans J in Osmanoski v Rose [1974] VR 523 on the basis that the statutory provisions in the New South Wales cases differed significantly from those in the Victorian Act. It was also said that the fact that the bank held the duplicate title was a further significant distinguishing feature. As to the first, we are of the view that the Victorian legislation is not so different that it provides a necessary reason for distinguishing Just’s Case. This is particularly evident in the judgment of Windeyer J who described the practice in New South Wales in terms that made it substantially indistinguishable from the Victorian provisions. As to the matter of the duplicate title, this was certainly important but it was discussed in the context of demonstrating a further reason why the caveat as a method of self-protection was not necessary. It does not bear out a proposition that the holder of the prior equitable interest is expected to give notice to the world. Indeed, the duplicate title affords no assistance to the subsequent holder for it only prevents registration; it does not prevent creation of the second equitable interest. 452 [6.125]

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Jacobs v Platt Nominees Pty Ltd cont. On one reading, the judgment does not assert that mere failure to lodge a caveat without full consideration of all relevant circumstances can suffice to postpone the earlier equity. To the extent that it does, it is in our view in conflict with authority, in particular Just’s Case. But it is only necessary to say at this point that Just’s Case does not exclude the possibility that mere failure to lodge caveat may suffice providing all other relevant circumstances are considered. The same comments apply to Mitchelson v Mitchelson (unreported, King J, 13 November 1979). The last main authority on the question of competing equities namely, Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; 49 ALR 229, further confirms, if confirmation be needed, that all relevant circumstances must be considered. There the vendor had handed over a transfer and the title together with an acknowledgment of payment. Gibbs CJ, Murphy and Wilson JJ essentially decided the case against the equitable interest that was prior in time on the basis of estoppel. The appellant’s failure to lodge caveat was not seen as being fatal to his case. Mason and Deane JJ, in a joint judgment, saw difficulties in basing postponement of a first to a second equity on the doctrine of estoppel with its need to find the necessary repre-sentation but preferred a more general and fiexible principle that preference be given to the better equity. They said, at (CLR) 342; (ALR) 239: It may be that an equitable interest will not be postponed to an equitable interest created later in time merely because there is a casual (sic) nexus between an act or omission on the part of the prior equitable owner and an assumption on the part of the later equitable owner as to the non-existence of the prior equity. Fairness and justice demand that we be primarily concerned with acts of a certain kind – those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the nonexistence of the earlier interest. Thus, the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest would otherwise give (J & H Just (Holdings) Pty Ltd v Bank of NSW (1971) 125 CLR 546), notwithstanding that the person acquiring the later interest had, before acquiring that interest, searched the register book and ascertained that no caveat had been lodged. It is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority. In his reasons for judgment in this case the learned trial judge said: “I think that the common understanding of Victorian lawyers in general and conveyancers in particular has been for many years that priority may be lost where the only conduct on the part of the prior holder relied on is his failure to caveat.” After referring to a number of decisions including Osmanoski v Rose, his Honour said: “Most important of all, in King v AGC (Advances) Ltd [1983] 1 VR 682, the Full Court accepted that, despite Just’s Case, a prior holder may lose his priority where the only conduct relied on against him is his omission to caveat. This really concludes the matter from my point of view – I mean by that, of course, precludes the question now under consideration, the question of law, not the ultimate outcome of this litigation.” In our view, the learned trial judge was not thereby deciding that the matter was resolved by the mere failure to lodge caveat. It is true that in neither passage does his Honour expressly advert to the need to see the failure to lodge caveat as one circumstance to be considered with all other relevant circumstances. But we do not think that he rested his decision on that approach as an exclusive one. This is clear from the fact that he in fact went on to consider a range of circumstances before deciding the ultimate outcome. The second claimed misdirection in law was that the learned trial judge was in error in his view that detriment or loss was not necessary for the purposes of estoppel and that the making of the contract and the acquisition of the interest by the second holder was a sufficient interest for the purposes of [6.125]

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Jacobs v Platt Nominees Pty Ltd cont. estoppel. His Honour also expressed the view that for the purposes of the broad principle in the joint judgment in Heid’s Case it was not essential for the later owner to prove some additional detriment or loss. As to the latter view, we agree that detriment or loss is not essential though it will of course always be a relevant circumstance to be considered with all the circumstances of the case, as to whether loss or detriment is suffered as opposed to mere acquisition of the interest. It also needs to be noted that the notion of negligence which usually characterises this broad principle necessarily carries with it the notion of loss sustained by a victim of any negligence. But we are unable to agree with the proposition that acquisition of the interest suffices for the purposes of estoppel. In short, we are of the view that it is well established in the doctrine of estoppel that detriment is necessary; the bare alteration of one’s position represented by mere entry into a contract will not suffice, for the operation of estoppel in any question of postponement of equities for the creation of the later equity will in every case necessarily involve an alteration of the position of the second holder. [Their Honours held that the trial judge erred in law by proceeding on the basis that an alteration of position without detriment sufficed to found an estoppel. Their Honours went on to find that the trial judge had failed to take into account a number of relevant circum-stances, and had made a number of findings against the appellant that were not properly open on the facts. They continued:] It is now necessary to turn to the central part of Perpetual’s case, namely the failure of the appellant to lodge caveat. The learned trial judge found that it was normal and accepted practice in Victorian conveyancing practice for a solicitor acting for the grantee of an option to purchase land under the Transfer of Land Act to lodge a caveat immediately after the grant to protect the grantee’s interest in the land. The evidence certainly supported such a finding but there needs to be taken into account other evidence from the same witnesses. Thus Mr Hatch, an expert in conveyancing law, said that it was in order to search the title after contracts had been exchanged. It was not therefore a practice that was matched by a practice of searching a title before entering into a contract. This was a very relevant matter if it was to be found that it was reasonably foreseeable by the appellant that any purchaser would search a title to ascertain if there was a caveat before acquiring an interest in the property. A further matter that needs to be noted is the evidence that the solicitors for Perpetual did not lodge a caveat until 19 September, some 14 days after acquiring its equitable interest. This again was inconsistent with any settled practice of immediate lodging of a caveat after acquisition of an equitable interest, unless it be said that the practice was restricted to options to purchase. It is difficult to see how much significance can be placed on failure to lodge a caveat if there is not shown to be a general expectation that caveats will be lodged in all cases, and that searches are invariably made for the purpose of discovering any claims to interests in the land and not merely to discover options to purchase. It was the wider practice that was referred to in the authorities such as Lapin’s Case as “a settled practice”. There is the further matter of the effect of the Sale of Land Act 1962 and the amendments thereto passed in 1982. Section 32 of the Sale of Land Act 1962 was inserted into that Act by the Sale of Land Act (Amendment) Act 1982. That section required the vendor to give to the purchaser before any contract was signed a statement relating to certain matters. Subs (2) provides: The statements required by subs (1) shall contain the following matters: (a) … (b) A description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction; … The appellant relied upon these provisions in a number of ways. It was put that these provisions meant that a vendor would necessarily have to notify any purchaser of the presence of an option to purchase 454 [6.125]

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Jacobs v Platt Nominees Pty Ltd cont. as constituting a restriction affecting the land. It was also put that it was not possible to describe a conveyancing practice and the expectations based on this without including these provisions. So viewed, it was not the caveat but rather the s 32 statement that was the reasonably expected method of giving notice to others of the existence of any option. It was argued that the term restriction affecting the land did not cover an option to purchase. This seems a doubtful argument given the width of that expression and the general intention of the section. It is not necessary to decide this matter. It is sufficient to say that the section can properly be seen as part of any conveyancing practice and that it further diminishes the force of the argument that there is a settled practice in relation to the lodging of caveats after grant of an option to purchase. It is now necessary, after a somewhat laborious review of the arguments put on appeal, to bring this matter to conclusion. It is convenient to deal first with any postponement of the appellant’s prior equity on the basis of estoppel. This cannot, in our view sustain any postponement in the present case for two reasons. In the first place, the notion of a representation by the appellant which created an assumption of fact relied upon by Perpetual to its detriment is wholly inapposite to the present case. The primary purpose of a caveat is, as was said in Just’s Case to provide protection for the caveator not to give notice to the world. The practice of lodging caveats is at best that and not a duty, much less a duty to the world at large. In any event there was no settled practice proved that covered all options to purchase nor was it proved that there was a settled practice for unregistered transactions that conveyed that the prospective purchasers invariably searched the title with the relevant expectation before entering into any purchase. In addition, the existence of the obligations as to disclosure created by the changes to the Sale of Land Act further weakened the force of any argument as to the creation of any assumption. The doctrine of estoppel is more appropriate to the cases where parties armed the third party “with the power of going into the world under false colours”. (Lord Selborne LC in Dixon v Muckleston (1872) LR 8 Ch App 155 at 160, repeated in Heid’s Case at 339) by arming him with title deeds and evidence of payment. That is not the situation here. Secondly, the mere alteration of position cannot in our view sustain an estoppel in the present type of situation and, as there is no sufficient evidence of detriment, the estoppel argument cannot sustain any postponement of the prior equity. The second method of deciding the postponement question rests on what may be conveniently described as the broad principle in the joint judgment of Mason and Deane JJ in Heid’s Case. The starting point is that prima facia priority in time will decide the matter unless there be something “tangible and distinct having grave and strong effect to accomplish the purpose”: Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1857) LR 7 HL 496. As was said in the joint judgment in Heid’s Case at 341: “It will always be necessary to char-acterise the conduct of the holder of the earlier interest in order to determine whether in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the latter interest.” The joint judgment goes on to refer to negligence and estoppel as elements and to warn that mere casual links may not suffice and that failure to lodge a caveat does not in itself involve the loss of priority, being only one of the circum-stances to be considered. In our view the significant circumstance in the present case was the fact that the appellant had secured the option from her parents in such a way that it was inconceivable that her mother and father would join together to sell the motel in breach of the option. It was, in short, not reasonably foreseeable that her failure to lodge caveat exposed herself or others to a risk of a later sale. In this setting her explanation that she did not want to upset her father by lodging caveat was entirely consistent. … In the result we find that the evidence compels a finding that in fairness and justice the appellant should not be deprived of her prima facie priority in time and we propose to make appropriate orders [6.125]

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Jacobs v Platt Nominees Pty Ltd cont. accordingly.

[6.130]

Notes and Questions

1. Late in the judgment their Honours declared that the doctrine of estoppel was an appropriate way of rationalising the postponement of a first interest holder who arms a third party “with the power of going into the world under false colours”: Jacobs v Platt Nominees Pty Ltd [1990] VR 146 at 159. After distinguishing this situation on the facts before them, their Honours went on to decide the postponement question by reference to Mason and Deane JJ’s broad principle. The clear implication from the passage is that this broad approach is the preferable way to resolve a priority dispute between two inconsistent unregistered interests created by the same registered proprietor. To which category did Mason and Deane JJ apply the broad principle in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326? Query whether the two categories should be treated differently? 2. If using the broad approach, the question to be considered is whether the conduct of the first interest holder, in fairness and in justice, amounts to postponing conduct. In Heid, Mason and Deane JJ held that “fairness and justice” demand that an earlier interest holder be postponed only where it is reasonably foreseeable first, that the prior holder’s conduct would lead to the creation of a later interest; and secondly, that the second interest holder would assume the non-existence of the earlier interest. What is the precise nature of the duty owed? Is it a duty to avoid causing loss to third parties, or a duty to conserve one’s own interests? (See Nicholson, “Owning and Owing. In what Circumstances will the Responsibilities of Ownership Preclude or Postpone the Assertion of Rights of an Owner?” (1988) 16 MULR 784 at 808.) Irrespective of the precise formulation of the duty, can the creation of the second interest ever be reasonably foreseeable if the prior holder has taken appropriate steps to ensure the preservation of his or her interest? (See Sackville, “Competing Equitable Interests in Land under the Torrens System” (1971) 45 ALJ 396 at 400. See also Butler v Fairclough (1917) 23 CLR 78 at 92 per Griffith CJ.) 3. If the estoppel formulation of Gibbs CJ in the Heid case is preferred, detriment must be demonstrated by the holder of the subsequent interest. Consider the sorts of circumstances which could constitute the required detriment: see IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 (Nettle J, 16 October 2002); Mimi v Millenium Developments Pty Ltd (2004) V ConvR 54–687. In Mimi, a case concerning a dispute between the holders of two equitable interests under two contracts of sale from the same vendor, where the first holder had not caveated, Nettle J held in favour of the second equitable interest holder. The “reasonable expectation” existing in Jacobs was absent on the facts and there would have been clear detriment to the second holder if the first holder had been accorded priority. 4. In the Jacobs case, the court considered whether reasonable steps had been taken. The Appeal Division of the Victorian Supreme Court held that the appellant should not be postponed – despite her failure to lodge a caveat – because she reasonably believed that her mother would refuse to execute a contract that would affect the appellant’s interest. 456 [6.130]

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As it turned out, the appellant’s brother signed the contract to Perpetual Trustee Company Ltd on his mother’s behalf, but this “could scarcely have been foreseen” ([1990] VR 146 at 148). Would the result in Jacobs have been different had the mother been the sole registered proprietor? In other words, is it possible for the first interest holder to reasonably believe that a sole registered proprietor would not create an inconsistent interest? Has a first interest holder taken adequate steps to protect his or her interest if he or she holds a reasonable belief that the registered proprietor(s) will not create a subsequent inconsistent interest? If so, is this desirable?

Handberg v MIG Property Services Pty Ltd [6.135] Handberg v MIG Property Services Pty Ltd [2010] VSC 388 Victorian Supreme Court [A detailed outline of the facts is not provided. For the purposes of discussion, ANZ had a prior unregistered mortgage. Velos had a charge created subsequent to the interest of the ANZ. Who had priority? ROBSON J (footnotes omitted) What Is The Priority As Between ANZ Bank And Velos? The ANZ Bank unregistered mortgages were first in time. Prima facie priority in time will decide matters unless the prior equity holder’s conduct is such as to deny it priority over a subsequent interest holder. I find that the ANZ Bank by its conduct lost what otherwise would have been its priority in its equitable mortgages over the properties as against the Velos & Davis equitable charges. ANZ Bank did not lodge a caveat in respect of its unregistered mortgages. Mr Velos claims that due to the conduct of the ANZ Bank his charges should have priority against the equitable ANZ Bank mortgages. Mr Velos contends that as Mr Tiwari has taken an assignment from ANZ Bank he obtains not better interest than the ANZ had as against the Velos & Davis charges. Mr Velos contends that Mr Tiwari is also guilty of postponing conduct of his own which, cumulatively with the ANZ Bank’s own conduct, makes even greater the merits of Mr Velos having priority over the ANZ mortgages. I shall first consider whether the ANZ Bank’s conduct in the circumstances was sufficient to allow Mr Velos to take priority despite being second in time. It is well established that all relevant circumstances must be taken into account in deciding whether or not the ANZ Bank loses its priority. These circumstances include the allegation that Velos & Davis were in fact aware that S&D had given equitable mortgages to the ANZ Bank both by reason of their own inquiries and because Mr Tiwari told them. Before turning to examine the facts, I deal further with the law. In Heid v Reliance Finance Corporation Pty Ltd, Gibbs CJ, Murphy, Mason, Deane and Wilson JJ decided a case involving the deferment of a prior equitable interest on the basis of estoppel. Mason and Deane JJ (in a separate judgment) referred to a more general principle that preference be given to the better equity. They said: It may be that an equitable interest will not be postponed to an equitable interest created later in time merely because there is a causal nexus between an act or omission on the part of the prior equitable owner and an assumption on the part of the later equitable owner as to the non-existence of the prior equity. Fairness and justice demand that we be primarily concerned with acts of a certain kind -- those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest. Thus, the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest would otherwise give (J & H Just (Holdings) Pty Ltd v Bank of NSW) notwithstanding that the person acquiring the later interest had, before acquiring that interest, searched the register [6.135]

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Handberg v MIG Property Services Pty Ltd cont. book and ascertained that no caveat had been lodged. It is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority. In Jacobs case, the Appeal Division of the Supreme Court of Victoria (Crockett, King and Gobbo JJ) held that if estoppel is alleged in sustaining a postponement of a prior equity it was essential for the representee to alter his position on the faith of the representation to his detriment. As shown in the passage above from the judgement of Mason and Deane JJ in Heid’s case, the mere failure of the holder of a prior equitable interest in the land to lodge a caveat does not by itself involve loss of priority. See also the discussion of Ormiston JA in Moffett v Dillon, where he considers both approaches and expresses the view that the guiding principle is that “to resolve contests between equitable interests which might otherwise appear to be equal in the eyes of equity by declaring that the interest created earlier should take priority, unless the holder of the later interest could establish that it amounted to a ‘better’ interest.” He said the onus rests on the later holder to establish the better interest. Jacobs case establishes that the mere failure to lodge a caveat is not enough to postpone a prior equitable interest holder to a subsequent equitable interest. Jacobs case applied J&H Just (Holdings) Pty Ltd v Bank of New South Wales where the High Court had held that the mere failure to lodge a caveat does not necessarily involve the loss of priority which the time of the creation of the instrument would otherwise give. Previously in Victoria, Gowans J in Osmanoski v Rose had sought to distinguish J&H Just (Holdings) on the basis of that the statutory provisions in the New South Wales case were different to those in the Transfer of Land Act 1958. Nevertheless, Gowans J did hold that the subsequent interest holders had relied on a search of the register and the absence of any caveat. In Jacobs case the Full Court doubted the approach taken in Osmanoski v Rose. In J&H Just (Holdings), Barwick CJ, with whom McTiernam and Owen JJ agreed said of the failure to lodge a caveat: Whilst it may be true in some instances that “the register may bear on its face a notice of equitable claims”, this is not necessarily so and whilst in some instances a caveat of which the lodgment is noted in the certificate of title may be “notice to all the world” that the registered proprietor’s title is subject to the equitable interest alleged in the caveat this, in my opinion, is not necessarily universally the case. To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognized ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon’s remarks in Lapin v Abigail with which I respectfully agree, point in this direction. Of course, there may be situations in which such a failure may combine with other circumstances to justify the conclusion that “the act or omission proved against” the possessor of the prior equity “has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it that the prior equity was not in existence” cf per Knox CJ in Lapin v Abigail. This is the relevant principle to apply if it is claimed that the priority of a prior equitable interest has been lost in competition with a subsequent equitable interest. (Citations omitted) In Hili Mimi Millennium Developments Pty Ltd, Nettle J, after referring to J&H Just Holdings and Bryson J in double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd, held that: In short priority which might otherwise exist according to the time at which an interest was acquired may be lost where some act or omission by the holder of the earlier interest has led the holder of a later interest to acquire his interest upon the supposition that the earlier did not exist. 458 [6.135]

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Handberg v MIG Property Services Pty Ltd cont. He said further that the party seeks to reverse priorities “must not only show a change of position but also that he has suffered detriment by reason of the failure of the earlier interest holder to caveat.” I now apply these principles to this case… [an examination of the facts was then undertaken – the judge concluding] In Jacobs case there were good reasons for the prior interest holder not lodging a caveat. The prior interest holder was the daughter of the owner and expected that her father would not do anything to prejudice her interest without her being consulted. No such circumstances exist here to deny that the better interest or equities lie with Velos & Davis. The conduct of the ANZ Bank may only be the failure to lodge a caveat, but that by itself may be sufficient to defer priority if the circumstances otherwise make it fair and just to do so, particularly here where Mr Velos relied on the absence of a caveat and acted to his detriment in reliance. No explanation was offered by the ANZ why it did not follow usual practice and lodge a caveat notifying its unregistered mortgages. I can take judicial notice that the ANZ Bank is a major banking corporation and well aware of conveying practice and that of the purpose and function of caveats. Thus, taking into account the relevant circumstances surrounding Mr Velos taking his interest subsequent to the ANZ Bank, I find that on either an estoppel basis or on the broad principle in the joint judgment of Mason and Deane JJ in Heid’s case, that the fairness and justice of the situation are such that the earlier interest of the ANZ Bank ought to be postponed to the later interest of Mr Velos. Further, I am satisfied that the failure by the ANZ to lodge a caveat has led the holder of the later interest (Velos & Davis) “to acquire their interest upon the supposition that the earlier did not exist” and that they suffered detriment by reason of the ANZ to caveat by running up further legal fees and expenses.

[6.140]

Notes and Questions

1. Does Handberg v MIG Property Services Pty Ltd [2010] VSC 388 indicate that Jacobs v Platt Nominees Pty Ltd [1990] VR 146 will be be seen as a unique case and greater priority given to the lodgment, or failure to lodge, caveats? Consider Black v Garnock (2007) 230 CLR 438; 81 ALJR 1338. Has this High Court decision, particularly the judgment of Callinan J made the importance of caveating more significant. The relevant part of Callinan J’s judgment is noted at [6.145].

Black v Garnock [6.145] Black v Garnock (2007) 230 CLR 438 [The facts are detailed in the judgment of Callinan J.] CALLINAN J (footnotes omitted) It used to be the practice of careful conveyancers, acting for persons acquiring registrable estates or interests in Torrens title land, to lodge with the officials in charge of the Register, a caveat as soon as the agreement for the relevant dealing was made, in pre-emptive protection of their clients’ prospective legal estates or interests pending completion of their agreements and registration of the instruments perfecting them. It was a further practice of those conveyancers to effect the actual settlement of the agreement by the exchange of all relevant instruments and funds at that office, simultaneously with a search of the Register, to verify that no other such caveat or record of dealing had been lodged as might obstruct, delay or detract from the registration of their clients’ instruments to perfect their estates or interests. [6.145]

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Black v Garnock cont. The questions raised in this case would be unlikely to have arisen had those salutary practices not fallen into disuse, whether by reason of electronic recording of dealings or otherwise, although it is difficult to understand why some comparable prudent practice could not equally, and perhaps more easily, have been adopted here to accommodate electronic lodgment, searching and recording. The questions are as to the effect of the registration of a writ of execution, and the rights of purchasers whose transfer of Torrens title land was lodged subsequent to that. Facts On 17 September 2004 the appellants obtained judgment in the District Court of New South Wales for about $228,000 against the sixth respondent and her husband. Between 11 October 2004 and 19 August 2005 the appellants moved to bankrupt the sixth respondent and her husband, but later agreed to adjourn the hearing of the bankruptcy petition in exchange for assurances that the sixth respondent would sell property, including the Torrens title land in question here (the land), to raise funds to discharge their liabilities. On 15 July 2005 the sixth respondent and the first to fourth respondents (the purchasers) exchanged contracts for the sale of the land for the sum of $1,000,000. A deposit of $100,000 was paid by the purchasers. On 19 August 2005 the sixth respondent’s solicitors informed the appellants’ solicitors that although settlement of the land would occur on 24 August 2005, the appellants would probably receive little of the proceeds. In consequence, on 23 August 2005, the appellants obtained a writ of execution from the District Court of New South Wales. The next day, the purchasers’ solicitors made a search of the Register on which, until then, the writ of execution had not been registered. At about 9.20 am on 24 August 2005 the appellants’ solicitors notified the purchasers’ solicitors of the judgment in favour of the appellants, the currency of the bankruptcy proceedings, and that the appellants had obtained a charging order in respect of the deposit. To reinforce that caution, the first appellant told the principal of the purchasers’ solicitors that the price of the land was less than its market value, that the purchasers were related to the sixth respondent, that there were creditors other than the appellants, and that they intended to try to prevent the sale. At the purchasers’ solicitors’ request, the appellants’ solicitors provided, by facsimile to them, a copy of the charging order. Entry of the writ of execution on the Register was effected at 11.53 am on 24 August 2005 and settlement of the sale, without any intervening search of the Register, occurred almost two hours later. Case history The purchasers commenced proceedings in the Supreme Court of New South Wales on 28 September 2005 for orders that the appellants be restrained from executing the writ, cancellation of the recording of the writ, and related relief. On 7 October 2005 the purchasers were granted an interlocutory injunction to restrain execution, but on 2 December 2005 the Court (Lloyd AJ) dismissed the proceedings and discharged the interlocutory injunction. The purchasers appealed to the Court of Appeal of New South Wales which granted an interlocutory injunction to them subject to an undertaking as to damages: THE COURT ORDERS THAT: 1. Upon the [purchasers], by their counsel, giving the usual undertaking in accordance with rule 25.8 of the Uniform Civil Procedure Rules 2005, the [appellants] and their servants and agents be restrained from executing registered Writ for Levy on Property AB718530 (Writ No 908/03) issued on 23 August 2005 against any of the land contained in Folios 2/594272, 109/658087 and 110/658088 and known as “Wanaka” via Bombala, New South Wales pending determination of this appeal; 2. The costs of this application be the [purchasers] costs in this appeal; 460 [6.145]

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Black v Garnock cont. 3. The hearing of the appeal be expedited and listed on 22 February 2006; … The purchasers’ appeal to the Court of Appeal (Beazley and Ipp JJA, Basten JA dissenting) was successful. The decision of that Court was given on 1 June 2006. All of the judges considered the statutory position before 1976. Ipp JA, for the majority, observed that it had been settled law in New South Wales that a Sheriff’s sale under a registered writ of execution could confer no greater interest upon a purchaser than the judgment debtor had at the time of registration. That is, the purchaser under a writ of execution took the land subject to all interests, registered or unregistered, which subsisted at the time of the registration of the writ: Coleman v De Lissa. The underlying principle was that equitable interests could not be seized under a writ of fieri facias. The issue, therefore, was whether the amendments to the Real Property Act 1900 (NSW) (the Act) in 1976, introducing ss 105-105D, had the effect of reducing or postponing the rights of holders of equitable interests in land, whether they had caveated or not, during the period prescribed by the Act. The purchasers argued that their equitable interests in the land as purchasers under an unexecuted but enforceable contract were untouched by the registration of the writ: in substance that the amendments made no relevant changes to the law as it had been settled for many years. Ipp JA sought to reconcile s 105(1) of the Act, expressly providing as it does, that a writ does not create any interest in land, with s 112(1) of the Civil Procedure Act 2005 (NSW), which provides that a writ of execution “binds the land”. He referred to, and effectively adopted the meaning of “binds” in its application to a writ for the sale of goods: A [writ of execution] “binds” the execution debtor’s goods … from delivery of the writ to the Sheriff …; but this means only that no dealing with any of the goods which belong to the debtor when the writ becomes binding can alter the fact that they are goods which the writ requires the Sheriff to seize and sell. It gives the creditor neither property in the goods nor possession of them … Ipp JA went on to say: [T]he “binds the land” provision of s 112(1) of the Civil Procedure Act does not give the [appellants] priority of any kind over holders of equitable interests in the land. It follows that, subject to any provision to the contrary, express or implied, in the Real Property Act and the Civil Procedure Act, the interests of holders of equitable interests in the land have priority over whatever rights may accrue to judgment creditors upon registration of a writ … His Honour was of the further opinion that the conferral of a power upon the Registrar-General, by s 105(3) of the Act, to refuse to record a writ when it appears that the land is held by the registered holder as a fiduciary, shows that the Parliament intended to protect the rights of holders of equitable interests. To allow the construction advanced by the appellants would, his Honour said, be “strange” in light of the purpose of s 105(3). Accordingly, holders of equitable interests in property subject to a registered writ are entitled to orders to protect their interests notwithstanding the statutory scheme. Ipp JA expressly followed a decision of the Full Court of the Supreme Court of Queensland in Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd which turned upon the meaning of s 35 of the Real Property Act 1877 (Qld). His Honour held that the insertion of ss 105-105D in 1976 did nothing to reduce the rights of holders of equitable interests in land to seek orders to protect their interests before registration of a transfer by the Sheriff. He was of the opinion that the amendment was intended to deal with the specific problem of sales at an undervalue at a Sheriff’s sale; a problem that did not require “changes to legal and equitable principle otherwise than by the express terms of the amendments”. Given, his Honour said, that courts will recognise equitable rights and estates except in so far as they are prevented from doing so by legislation, the amendments were not to be interpreted to diminish the rights of the holders of equitable interests in this way. [6.145]

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Black v Garnock cont. Basten JA, who was of a different mind, quoted from the Second Reading Speech of the responsible Minister for the Bill introducing the amendments: Since the commencement of the Real Property Act on 1st January 1863, it has generally been acknowledged that the machinery provided by that Act for giving effect to sales in execution has not worked effectively. The breakdown is largely due to a judicial decision in Coleman v De Lissa [] in 1885 that, irrespective of the provisions of the Real Property Act, a transferee taking under a sale by the Sheriff or other court official selling pursuant to a writ of execution acquired only the beneficial interest of the execution debtor, burdened by any unregistered interests which might exist. The result of this judicial ruling has proved disastrous. Upon such a sale, because potential purchasers are buying an asset whose value cannot be ascertained, the maximum bid is usually a couple of dollars, not sufficient to cover the advertisement and conduct of the sale. As a result the judgment creditor usually gets nothing of the amount owing to him; the judgment debtor loses ownership of the land without any reduction of the judgment debt; a purchaser from the Sheriff or from the district court bailiff may get a windfall or more probably, if unregistered interests affect the land, gets nothing. The obvious solution is to provide, legislatively, that a purchaser at a sale in execution takes the estate or interest then appearing upon the register. The provisions of the Bill are designed to implement this principle. His Honour weighed up the competing considerations: There are, in principle, three different ways of approaching the legal issues raised in this case. The first, adopting the perspective of the judgment debtor and the Sheriff, is to ask at what point in time the power of the judgment debtor, as the registered proprietor of the land, to convey the land to a third party, is suspended and vested in the Sheriff (assuming for present purposes that the withdrawal and conferral of such powers occurs at the same moment). The second approach is to look at the matter from the point of view of a purchaser from the registered proprietor and ask whether the statutory scheme demonstrates a clear intention to deprive a bona fide purchaser for value of the benefit of the purchase, obtained from the registered proprietor at a time when her power to convey an estate in the land was unconstrained. The third approach, is to take the perspective of a Sheriff’s purchaser, namely that, by relying upon the register, he or she had no reason to suppose that the Sheriff could not convey the title of the registered proprietor, as established by the register at the date on which the writ was recorded. There are two other perspectives which could be considered. One is that of the judgment creditor, who seeks to assert an entitlement to have the Sheriff sell the property, in knowledge of the existing equitable interest in the purchasers. Another is that of the Registrar-General, who may be invited to register a transfer to a Sheriff’s purchaser, whilst a transfer to the purchasers from the registered proprietor is awaiting registration, being the document lodged earlier for registration. However, for present purposes these can be put to one side. Referring to apparent effect, Basten JA said: The apparent effect of these provisions is twofold. First, they preclude the purchaser for valuable consideration from the registered proprietor having his or her interest immediately recorded in the register, unless the application were lodged prior to the application to record the writ, or the transfer had the Sheriff’s consent. Secondly, the Sheriff’s purchaser will be entitled to have the transfer to him or her registered, pursuant to s 105A(1)(a) during the protected period. The purchasers from the registered owner will thus be pre-empted, unless they caveated their interest before the recording of the writ. Later he said: The answer to the purchasers’ submission is not that they had no “title” because they had no registered title … Rather, they did have a title but, until their interest was recorded under the Real Property Act, it remained defeasible by the registration of another interest which obtained the protection of s 42(1) of the Real Property Act. The effect of recording the writ was to allow 462

[6.145]

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Black v Garnock cont. the Sheriff to sell precisely that interest which was vested in the then registered proprietor, subject to any registered encumbrance, but free of any unregistered estate or interest. His Honour was influenced by the purpose of the amendments discernible from the Second Reading Speech and the language of the amendments themselves: Given that the very purpose of the 1976 Amendment Act was to allow a sale in execution of a writ by the Sheriff to defeat any unregistered interest in the land, it is perhaps unfortunate that the Parliament did not expressly provide for that consequence. Nevertheless, the consequence follows inexorably from the statutory scheme and must be accepted. Unregistered interests in Real Property Act land have always been defeasible by registration of another interest. Where the holder of the unregistered interest controls the certificate of title or otherwise believes that the registered proprietor will not seek to create a later inconsistent interest which may be registered, a caveat to protect the unregistered interest may be thought unnecessary. The statutory scheme with respect to the registration of writs of levy, subverts such comfortable assumptions, by vesting in a third party, who does not hold the certificate of title and is not on the register, a right and obligation to sell the land as validly and effectually as if by the registered proprietor, as described in s 115(1) of the Civil Procedure Act. Basten JA pointed out, correctly, that reliance by the majority on Austral Lighting was misconceived: With respect, that conclusion is true, so far as it goes, but it is beside the point. In neither case was the interest of the purchasers (or the mortgagee) recorded on the register prior to the recording of the writ. That part of s 35 dealing with interests notified by caveat was irrelevant even in Austral Lighting itself, because it was limited to caveats lodged “prior to the date of the registration of the writ”. In the present case, the fact that the purchasers had a caveatable interest is beside the point, because they did not seek to lodge a caveat prior to the registration of the writ. The discussion … of Part 7A of the Real Property Act, dealing with caveats, does not relevantly advance the argument. His Honour summarised his conclusions in this way: On the reasoning set out above, the recording of the writ on the register prevented, for a period of six months, the registration of any prior interest acquired by the purchasers. The delivery of the writ to the Sheriff empowered that officer to sell the interest of the judgment debtor in the land, as recorded in the register under the Real Property Act, subject to such encumbrances as were recorded on the title at the date of the recording of the writ. The equitable interest of the purchasers, not being identified in a dealing lodged before the lodgment of the writ, became, upon lodgment of the writ, defeasible by a sale in execution of the writ within the protected period. Accordingly, the purchasers were not entitled to the relief they sought in the Equity Division. The appeal should be dismissed with costs. The appeal to this Court The appellants’ appeal to this Court has as its object the obtaining of damages pursuant to the detailed undertaking given by the purchasers pending the determination of the appeal to the Court of Appeal. The purposes and objects of the Torrens system of title were to simplify conveyancing, to introduce a greater assurance, indeed certainty, of title and in consequence to reduce the expense of establishing and protecting title under the old land titles system. In his Second Reading Speech for the Bill which introduced the Real Property Act 1857 (SA), the model for like legislation throughout Australia, Sir Robert Torrens said this: The system of retrospective or derivative title is the grand source of complication, uncertainty, and expense, attending the existing practice. Whenever real estate is transferred, the history of the property has to be traced back to the original grant from the Crown, through all the intermediate hands, every mortgage deed, release, conveyance, settlement, must be produced and carefully examined, to see that there are no outstanding equities affecting the title. This renders conveyancing a laborious and costly process; but if after the labour has been [6.145]

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Black v Garnock cont. expended and the cost incurred, the fruits of it could be secured and held available for future occasions, we should not have so much to complain of. The grievance is, that this labour and outlay has to be repeated again and again each time the property is dealt with. The solicitor of an intending purchaser or mortgagee is not content to accept the opinion given after full enquiry by the solicitor of a recent purchaser, it may be, only ten days before. He too must be furnished with an abstract and examine all documents for himself, and this process must be gone over again and again every time the property is dealt with, each transaction adding to the labour and cost of the subsequent one and increasing the risk and uncertainty. The chain of evidence, however lengthened, is no stronger than its weakest link, and in proportion as documents of title are multiplied, so are the risks that in one of them, an important word may have been omitted or some formality in execution neglected. Heavy as are the certain costs of conveyancing, the contingent risks of expensive costs in law and equity inherent in the system of derivative titles is probably much more burdensome to the land owner. The first and leading principle of the measure which I introduce is therefore designed to cut off the very source of all costliness, insecurity, and litigation by abolishing altogether the system of retrospective titles, and ordaining that as often as the fee simple is transferred the existing title must be surrendered to the Crown, and a fresh grant from the Crown issued to the new proprietor. The principle next in importance prescribes that Registration per se and alone shall give validity to transactions affecting land … This method is designed to give confidence and security to purchasers and mortgagees through the certainty that nothing affecting the title can have existence beyond the transactions of which they have notice in the memoranda endorsed on the grant. The other States quickly moved to enact similar legislation. Of the New South Wales Act, the Land Titles Registration and Transfer Act 1862 (NSW), the Attorney-General, Mr Hargrave said: The object of the former bills and of the present measure [is] to facilitate and simplify the transfer of landed property; and thus [save] the country the great trouble and expense incurred in conveyancing. Measures almost identical with that introduced by Mr Torrens in South Australia [have] been passed in Queensland, Victoria and Tasmania, and, with some variations, in New Zealand, and [I feel] bound to say [that] … the colony would be benefited by the adoption of Mr Torrens’ system. The legislation has served the country very well. It has generally achieved all of the objects that its author had hoped that it would. The principal way in which the legislation has achieved its objects has been the elevation of the Register above all else. The Register has the first and last word on all relevant titles and interests. In general, it operates on the basis of “first in first served”. It would be unfortunate if the best of its features were to be eroded by electronic registration of dealings. The practices did vary between the States, but one useful feature was the notation in pencil on the relevant folio in the original book of titles at the Registrar-General’s office of any instrument, almost immediately after it was lodged, but before it could be fully processed and registered. Inevitably, processing took some time and checking, but in the meantime the pencil notation, which could be erased on registration of the instrument, served as a notice to anybody searching the Register that a caveat or instrument had been lodged and could, on request, be inspected. Provision was generally made in essentially the same sorts of ways for the lodgment and noting of a caveat, not just to forbid registration of dealings not yet the subject of an instrument lodged with the Registrar, but also to serve as a notice to anybody interested in the land, and troubling to search the Register, that there was some other dealing or transaction on foot of which any interested person should be aware. I respectfully disagree therefore with the limited operation and purpose of a caveat which Barwick CJ sought to attribute to it in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, in which he said: 464 [6.145]

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Black v Garnock cont. Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title, it may operate to give such notice. That the provisions relating to caveats have utility for the two purposes is apparent from the provisions which I will relevantly set out: [His honour then set out the relevant extracts from 74F-74R of the NSW Torrens legislation] It can be seen from those provisions that the Act contains a complete code for the lodgment, recording, maintenance, removal, renewal and lapsing of caveats. They mesh neatly with the system of registration of titles and dealings generally. In doing so, they also give effect to the purposes of the Act and the means by which it gives priority to instruments according to their time of lodgment. The provisions of the Act to which I referred in Hillpalm Pty Ltd v Heaven’s Door Pty Ltd, s 31B(2) defining the “Register” to include “dealings registered … under this or any other Act”, and s 32(7) which requires the Registrar-General to maintain a record of “action taken in respect of, a computer folio and such other information, if any, relating to the folio as the Registrar-General thinks fit” similarly reflect the policy of the Act, of comprehensive notification to, and on the Register. In J & H Just (Holdings) Barwick CJ also said this: To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognised ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon’s remarks in Lapin v Abigail [] with which I respectfully agree, point in this direction. I must respectfully disagree. What is much more likely to be subversive of the whole of the scheme of the Torrens system is that a person interested in, or entitled to deal with, land, who has not acted fraudulently, might suddenly and unexpectedly be saddled with, or postponed to, an equitable estate or interest in land which could have been, but was not made the subject of protection by prompt lodgment of an instrument or the filing of a caveat pending the lodgment. I am not speaking of course about a contest between two holders of competing equitable interests or estates, neither of whom has thought to avail himself of either of the statutory means of protection of his interest that I have just mentioned. Subject to other registered estates or interest, their respective entitlements will fall to be adjusted according to ordinary equitable and proprietary principles. It is critical to keep in mind, in cases concerning land under the Torrens system, that, as Barwick CJ said on another occasion and Gummow and Hayne JJ repeat in this case: The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. No one doubts that the purchasers here could have lodged a caveat immediately after the exchange of contracts. That they had that right, and that upon doing so an appropriate notation on the Register would have served as a notice to all others of their dealing with the land, is accepted on all sides. It is unnecessary in this case to define precisely the nature of their interest after the contracts were exchanged: whether it was an actual equitable interest in the land, or an interest measurable by their right, conditional or otherwise, to obtain specific performance, or whether it was an interest commensurate with the deposit that they paid, does not matter: on any view it gave rise to a caveatable interest. [6.145]

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Black v Garnock cont. The fact that the purchasers might have protected themselves by lodging a caveat here may not be decisive of this case, but that the Act enabled them to do so, and also provided for a comprehensive public register of information relating to the folio to which they could have had timely recourse to protect themselves, are factors relevant to the proper construction and reconciliation of the two enactments governing the respective rights and interest of the parties. I do not think it is any answer to say, in relation to the omissions of the purchasers, and to other matters to which I will refer, that, effectively, the interdiction against the registration of their interest by grant of an injunction of the court is to be equated with, and is no different from, a caveat, and that therefore they should be entitled to registration without regard to, and not subject to, a, or the, writ of execution. An injunction does not serve as a general notice to all the sufficiently interested world, as a caveat does. An injunction may not be noted on the Register as a caveat may be. An injunction is not to be elevated to the same level as a caveat. The lodgment of a caveat does not preclude the seeking and granting, in an appropriate case, of an injunction as the provisions which I have set out show: in any event, an injunction, to be effective, needs to be sought and obtained with the same expedition as the lodgment of a caveat. The relevant legislation which is analysed in the judgment of Gummow and Hayne JJ makes it clear, that although writs of execution do not create proprietary interests in land, they are capable of registration on the title and, for the period of their effective subsistence, confer rights upon the Sheriff to deal with the land by and on the face entirely of the Register. It is therefore of no relevance that the judgment which founds the writ may not in any particular case be for a large sum of money. I pointed out earlier that the majority in the Court of Appeal were influenced in reaching their conclusion by the Queensland case of Austral Lighting. In that case the Full Court of Queensland (Connolly J, Campbell CJ and Demack J agreeing) considered s 35 of the Real Property Act 1877 (Qld) which provided that a transfer, in consequence of a sale under a writ of execution, “shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar-General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register”. It seems to me that there Connolly J failed, in the same way as the majority in the Court of Appeal did here, to give full effect to the words in the section that any transfer pursuant to a Sheriff’s sale “shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar-General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register”. All of this is to emphasise the importance of lodgment, and the priority that it confers. It also clearly implies that nothing lodged after the registration of the writ is to affect the title that the sale under the writ will pass, because it is only after lodgment, the step leading to notification, that “other encumbrances liens and interests” can be entered on the Register. To take the view of Connolly J that resort to the Court for protection and priority of an equitable interest should be available regardless that the writ of execution has earlier been recorded on the Register, is to fail to give effect to the clear purposes of the legislation to clarify, provide certainty and avoid litigation, and indeed to the language of the section itself.

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Black v Garnock cont. For these, and the reasons given by Gummow and Hayne JJ, I would allow the appeal and join in the orders proposed by them.

Retaining the title deeds

J & H Just (Holdings) Pty Ltd v Bank of New South Wales [6.150] J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 High Court [The first equitable mortgagee, the Bank of New South Wales, retained the duplicate certificate of title but did not register the mortgage or lodge a caveat in respect of it. The registered proprietor, Josephson, subsequently created a second equitable mortgage in J & H Just (Holdings) Pty Ltd. The second mortgagee accepted the registered proprietor’s explanation that the land was unencumbered (which was seemingly confirmed by a search of the Register) and that the duplicate certificate was with the bank for safe custody. In the priority dispute that followed, the second mortgagee argued that the first mortgagee should be postponed because of its failure to lodge a caveat.] BARWICK CJ (with whom Owen J concurred): … Much has been said in the course of this case about the failure of the Bank to lodge with the Registrar-General a caveat against dealings. It is important in this connexion to observe the nature and purpose of what is sometimes called an “unofficial caveat”, distinguishing a caveat lodged by a private person from a caveat lodged by the Registrar-General, for example, under ss 12(f) or 83 of the Act. Its form is scheduled to the Act. See 16th Schedule. It is directed to the Registrar-General and may properly be given by a person claiming an estate or interest in the land, against dealings with which it is lodged. It must describe the estate or interest claimed. But it is not a registrable instrument: nor is the Registrar-General required by the Act to enter a notation of it on the relevant certificate of title, though the form of the caveat provided in the schedule to the Act does make provision on its reverse side for a record to be made of the entry of its particulars in the register book. Now by s 8(1)(a) of Act No 30 of 1938 however the Registrar-General is authorised to place “notifications” on the Register. In practice however the caveat is given a number: and a note of its lodgment and of the estate or interest claimed, is made on the relevant certificate of title, but not necessarily at the time of the lodgment of the caveat. Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title, it may operate to give such notice. If the caveator does not take proceedings in due time against the person who has lodged a dealing for registration, and the dealing is registered, awareness of the existence of the caveat, and through it, that an estate or interest is claimed by the caveator, will be irrelevant except possibly as an element in establishing fraud in the procurement of the registration. But of itself such awareness will not vitiate the registration. … [I]t was the respondents’ conduct in thus arming the mortgagee with the capacity to become the registered proprietor and able to deal with others as such and not any failure by them to lodge a caveat that was decisive in Abigail v Lapin [1934] AC 491; 51 CLR 58. Their Lordships’ decision was an application of Kindersley V-C’s judgment in Rice v Rice (1854) 2 Drew 73 (61 ER 646) from which Lord Wright quotes a passage [1934] AC 491 at 503-504; 51 CLR 58 at 68. A passage from the judgment of Knox CJ in the case was adopted as setting out the relevant principles for resolving the competition of the parties’ interest in the land. Ultimately “the case then becomes one of an agent [6.150]

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J & H Just (Holdings) Pty Ltd v Bank of New South Wales cont. exceeding the limits of his authority but acting within its apparent indicia” per Lord Wright [1934] AC 491 at 508; 51 CLR 58 at 72, I emphasise these aspects of the decision Abigail v Lapin by the Privy Council because, once it is recognised that the respondents’ conduct in handing over the memoranda of transfer and the duplicate certificates of title provided the ratio decidendi, much of what Lord Wright says about the consequences of a failure by a claimant to an equitable interest to lodge a caveat and particularly his comments on Butler v Fairclough (1917) 23 CLR 78 became, in my opinion, obiter. Whilst it may be true in some instances that “the register may bear on its face a notice of equitable claims”, this is not necessarily so and whilst in some instances a caveat of which the lodgment is noted in the certificate of title may be “notice to all the world” that the registered proprietor’s title is subject to the equitable interest alleged in the caveat this, in my opinion, is not necessarily universally the case. To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognised ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon’s remarks in Lapin v Abigail (1930) 44 CLR 166 at 205 with which I respectfully agree, point in this direction. Of course, there may be situations in which such a failure may combine with other circumstances to justify the conclusion that “the act or omission proved against” the possessor of the prior equity “has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it that the prior equity was not in existence” cf per Knox CJ in Lapin v Abigail (1930) 44 CLR 166 at 183-184. This is the relevant principle to apply if it is claimed that the priority of a prior equitable interest has been lost in competition with a subsequent equitable interest. In general an earlier equity is not to be postponed to a later one unless because of some act or neglect of the prior equitable owner. In order to take away any pre-existing admitted title, that which is relied upon for such a purpose must be shown and proved by those upon whom the burden to show and prove it lies, and … it must amount to something tangible and distinct, something which can have the grave and strong effect to accomplish the purpose for which it is said to have been produced: per Lord Cairns LC in Shropshire Union Railways and Canal Co v The Queen (1875) LR 7 HL 496 at 507. The Act (sic) or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority. This in effect means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity: Lapin v Abigail per Dixon J (1930) 44 CLR 166 at 204. In my opinion, the failure to lodge a protective caveat cannot properly be said necessarily to be such an act or default. It could not properly be said to be so in the present case. Mention should now be made of a second reason why in this case the failure to lodge a caveat could not be held to be privative of the Bank’s priority. The Bank held the certificate of title and a memorandum of mortgage in registrable form. Whilst there is no express provision of the Act which forbids the registration of a dealing without the production of the duplicate certificate of title, it is the practice of the Registrar-General’s office to refuse to accept an instrument of transfer or mortgage for registration without production of the duplicate certificate of title, unless the certificate is already in the Registrar-General’s hands. See Baalman & Wells: Land Titles Office Practice (NSW) (3rd ed, 1952), at pp 225, 226. Thus a person in the situation of the Bank could reasonably rely upon this practice and his possession of the duplicate certificate of title as a reasonably sufficient protection. 468

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J & H Just (Holdings) Pty Ltd v Bank of New South Wales cont. WINDEYER J: … Too much has I think been read into the statement by Griffith CJ in Butler v Fairclough (1917) 23 CLR, at 91 – repeated by Lord Wright in the Privy Council in Abigail v Lapin [1934] AC, at 502; 51 CLR, at 66: A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat. It is the practice of the Registrar-General to note a caveat upon the relevant folium of the register book, although the Act does not require him to do so and a caveat is not a dealing. A caveat noted in the register book is no doubt a notice, to anyone who searches at the Registrar-General’s Office, of the caveator’s claim. I understand that the Registrar-General records all documents as they are lodged and that he lists caveats as if they were dealings and that this record is available for inspection. It is perhaps a register kept under the Act within the meaning of s 43(2). However, 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. To say that would, it seems, be to equate the noting of a caveat in the register book with the registration of a dealing: it would make competing equitable interests depend not upon priority of creation in time and other equitable considerations, but upon priority of the lodgment of caveats. After all, the primary purpose of a caveat against dealings is not to give notice to the world of an interest. It is to warn the Registrar-General of a claim. … I can understand that a bank may, for good reasons, not wish to give notice to all the world that it has a charge over a customer’s land to secure his overdraft. It may prefer to protect itself by obtaining and retaining possession of the duplicate certificate of title, without producing which no one can register a dealing with the land. I interpolate here that I use the words “duplicate certificate of title” to denote the deed issued to the registered proprietor in distinction from the corresponding folium of the register book. That is the common usage of the term; and it is I think the sense of the words in s 40; but I am aware that s 32(1) states that “The Registrar-General shall keep a book, to be called the ‘register-book’, and shall bind up therein the duplicates of all grants and certificates of title”. If, as I see the case, the equitable interest of the Bank is not to be lost or postponed because the Bank did not lodge a caveat, it seems to me irrelevant to enquire whether the appellant was prudent or imprudent in not prosecuting further enquiries before it lent money to the registered proprietor thinking it had the land as security. The conduct of the appellant would only be material if the Bank, by some conduct on its part, had lost the priority in equity which arose from the priority of its transaction in point of time. The Bank did not by not lodging a caveat warning the Registrar-General represent to the appellant that it had no claim. It relied upon its possession of a registrable instrument and a clean duplicate certificate of title. It is not to suffer because the registered proprietor made a statement to the appellant that was very far from frank in explanation of the Bank’s having his duplicate certificate of title. I would dismiss the appeal.

[6.155]

Notes and Questions

1. The decision in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 was endorsed by Tadgell J in Avco Financial Services Ltd v Fishman [1993] 1 VR 90. In Avco’s case, the first equitable mortgagee (who also held a registered mortgage) failed [6.155]

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to lodge a caveat but retained possession of the title deeds. The plaintiff acquired a second equitable mortgage after searching the title and after an employee of the first mortgagee confirmed the existence of the registered mortgage but failed to disclose the existence of the unregistered mortgage. Tadgell J held that the employee’s verbal statement did not contain a relevant concession and that, even if it had, the first equitable mortgagee would not have been bound by it. ([1993] 1 VR 90 at 95.) Thus the first interest holder was not postponed because, by retaining possession of the title deeds, it had taken reasonable steps to protect its interest. Tadgell J stated: In the case of Torrens Title land, a registered first mortgagee would usually be expected to hold or to have dominion over the duplicate certificate of title. Moreover, it is notorious that registration of a second or subsequent mortgage cannot ordinarily be procured without production of the duplicate certificate of title: Robinson, Transfer of Land in Victoria (1979), p 348. The plaintiff’s letter of enquiry to the bank indicates that the plaintiff was aware of the practice. The letter itself suggests that the plaintiff was not prepared to make a loan in reliance only on the absence of a caveat showing the existence of a mortgage subsequent to the bank’s registered first mortgage. Indeed, I think the plaintiff was not entitled to rely at all on the absence of any such caveat to indicate that there had been no unregistered second mortgage given to the bank over the Fishmans’ property. Notwithstanding some earlier authority, the current view seems to be that the essential purpose of a caveat is protective; it is not to give notice: J & H Just (Holdings) Pty Ltd v Bank of New South Wales, at 556, per Barwick CJ; Jacobs v Platt Nominees Pty Ltd, at 149-151. A registered first mortgagee who has possession of or dominion over the duplicate certificate of title would have no occasion to lodge a caveat to protect any subsequent mortgage he takes from the registered proprietor at a time before a further mortgage is granted to any other party. He would know that no other mortgage could be registered without his consent. He would therefore expect in any event to receive notice, as good as or better than notice which a caveat could afford him, of anyone’s intention to register another mortgage. Counsel for the plaintiff relied on Osmanoski v Rose [1974] VR 523, in which Gowans J held that the failure of the holder of an equitable interest to protect it by lodgment of a caveat resulted in its postponement in favour of the holder of an equitable interest subsequently acquired. In that case the registered proprietors executed a sale note in favour of the applicants as purchasers, who did not initially lodge a caveat. Thereafter the registered proprietors executed a second sale note in favour of the respondents as purchasers who, having made a search of the title and found no caveat, executed a contract of sale in terms different from those of the second sale note and completed the purchase. The applicants then lodged a caveat and sought to prevent registration of a transfer to the respondents. They failed because the respondents demonstrated that they had made and completed their contract in reliance on the absence of a caveat which, it seems, Gowans J thought they were entitled to have expected to find if there were any prior purchaser’s equity to protect. Osmanoski v Rose did not altogether escape criticism by the Full Court in Jacobs v Platt Nominees Pty Ltd but, whether or not it can still be wholly regarded as good law, it is in my opinion distinguishable from the present case. On no view can it be said that the plaintiff, before making its advance, could reasonably have expected the defendant bank to have lodged a caveat to protect any second mortgage it had taken. The bank had no need to do so, as the plaintiff should have realised. Secondly, the evidence is that the plaintiff did not in fact rely, in making its advance to and taking its mortgage from the Fishmans, only on the absence of the lodgment of a caveat by the bank. Indeed the plaintiff relied also on its own enquiries of the bank, but I think the results of the enquiries did not justify the reliance.

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2. It has been suggested that the outcome in Avco’s case seems “difficult to justify”. See Neave, “Towards a Uniform Torrens System: Principles and Pragmatism” (1993) 1 APLJ 114 at 128. Do you agree? Should a first interest holder who retains the certificate of title always be entitled to priority? Would the result in Avco or J & H Just have been different had the second interest arisen pursuant to a contract of sale? 3. A prior holder who does not lodge a caveat will generally not have taken adequate steps to protect his or her interest where he or she fails to take possession of the duplicate certificate: Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ, yet note Abigail v Lapin [1934] AC 491 at 502 per Lord Wright. In Taddeo v Catalano (1975) 11 SASR 492, however, the mortgagee who held the certificate of title agreed not to release it without first consulting the prior interest holder. Jacobs J held that the prior holder, by making this arrangement, had taken reasonable steps to preserve her interest (at 500). 4. The cases extracted in this section suggest expressly or impliedly that where there is no alternative means of protection for a first equitable interest, the failure to lodge a caveat assumes considerable importance. The following are all cases where first interest holders were postponed: the holder of an equitable charge (Butler v Fairclough (1917) 23 CLR 78; Clark v Raymor (Brisbane) Pty Ltd [No 2] [1982] Qd R 790); the holder of a second mortgage (Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745; Lensworth Finance Pty Ltd v Whittenbury (unreported, Victorian Supreme Court, 1 September 1970)); the holder of an equitable interest pursuant to a specifically enforceable contract (Osmanoski v Rose [1974] VR 523 (see Note 1); Mimi v Millenium Developments Pty Ltd (2004) V ConvR 54–687; cf Bamford v Loy (1982) NSW ConvR 55-043); the holder of an equitable interest in a mining lease (Barnes v James (1902) 27 VLR 749); and the holder of an equitable profit à prendre (Connolly v Noone [1912] St R Qd 70) The thread that unites these cases is the fact that the prior holder failed to lodge a caveat where there was no other method of protection available, and that this failure led to the postponement of the prior holder. In other words, the prior holder failed to take appropriate steps to ensure the preservation of the interest, which meant that it was reasonably foreseeable that the second interest holder would acquire an interest on the assumption that an earlier interest did not exist. This conclusion requires the court to examine the conduct of the second interest holder to determine which party has the better equity. This leads to an important question: what is the significance of the second interest holder’s failure to search the register? In the “arming conduct” scenario, the first interest holder’s failure to lodge a caveat is still considered relevant even where the second interest holder did not search the register. The rationale for this view is that the second holder was misled into acquiring an interest by other acts or omissions of the first holder, and that searching the title would not have revealed the existence of the earlier interest. Where the only relevant act or omission is the first holder’s failure to lodge a caveat, however, the second holder’s failure to search the register assumes great importance. It seems that the second holder cannot argue that he or she was influenced by the absence of a caveat in these circumstances. Thus, in the language of negligence, it can either be said that: [6.155]

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1 the failure to caveat did not cause the second holder to acquire his or her interest with the assumption that the earlier interest did not exist; or 2 the second interest holder voluntarily assumed the risk of the existence of the earlier interest. Under either analysis, it is submitted that the prior holder’s failure to caveat cannot be considered relevant to the resolution of the priority dispute where the second holder did not search the register. This accords with Lapin v Abigail (1930) 44 CLR 166 at 184 per Knox CJ, 186-187 per Isaacs J, and 205 per Dixon J; Lynch v O’Keefe [1930] St R Qd 74 at 106-107 per Henchman J; and Osmanoski v Rose [1974] VR 523 at 528 per Gowans J. It is worth comparing this approach with that taken in Clark v Raymor (Brisbane) Pty Limited [No 2] [1982] Qd R 790, where the only relevant conduct was the prior equitable chargee’s failure to caveat. The second interest holder did not search the Register before entering into the contract of sale, but did so before handing over the purchase moneys. The Full Court rejected the chargee’s arguments that the later search was irrelevant and that the relevant time to assess the question is when the equitable right is acquired. Do you agree with this decision? 5. Where the title is computerised, in most jurisdictions, a computer printout of the title (inaptly named the “certificate of title”) is provided to the registered proprietor. This document may be used in much the same way as the duplicate certificate of title. However, there is strong support from banks and from the Land Titles Offices themselves for a system under which the computer printout is not used as a form of security in the way a duplicate certificate of title has been used. The easiest way to achieve this result is to not issue any certificate at all to the registered proprietor. Certificates of title are not routinely issued in all jurisdictions and as we move to an increasingly electronic environment, even less likely to be so in the future. If certificates are removed from the system in the future, the body of law concerning the relevance of taking possession of the duplicate certificate of title will become much less important. Note, however, that the High Court has reaffirmed that an equitable mortgage can be created by the use of the certificate of title in the manner described above: Theodore v Mistford (2005) 221 CLR 612.

Lodging the relevant documents for registration

IAC (Finance) Pty Ltd v Courtenay [6.160] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 High Court [The Courtenays purchased the land from the registered proprietor and mortgaged it back. The Courtenays, in accordance with established practice, did not lodge a caveat and allowed the mortgagee to lodge the transfer for registration. The transfer was lodged, but the mortgagee’s solicitor subsequently withdrew the transfer. One day later, the mortgagee contracted to sell the property to Denton, who knew about the transfer that had been lodged and then withdrawn. The purchase by Denton was being financed by IAC (Finance) Pty Ltd. The Courtenays pursued a number of arguments: one was that this was a case of competing equitable interests and that their interest, prior in time to those of Denton and of IAC (Finance) Pty Ltd, should have priority.] KITTO J: … I turn to the appellants’ third contention. In relation to each of the appellants, the case is one of competing equitable interests, with the addition that the Courtenays have not only the prior equity but also a statutory right to registration. Neither can be postponed to the interests of the appellants unless the Courtenays have by act or omission made it inequitable that they should be 472 [6.160]

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IAC (Finance) Pty Ltd v Courtenay cont. allowed to insist upon the priority which order in time prima facie gives them. The general principle applicable in such a case is thus stated in the judgment of the Privy Council in Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58: the possessor of the prior equity is not to be postponed to the possessor of a subsequent equity unless the act or omission proved against him has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it, that the prior equity was not in existence: [1934] AC 491 at 498, 499; (1934) 51 CLR 58 at 63. The facts concerning the appellants’ transactions with respect to the land are as follows. It was in September 1959 that Miss Austin agreed to sell to Denton the land she had already sold to the Courtenays. According to the learned trial judge’s findings, which must be accepted, the Courtenays had no knowledge until some time in 1960 that Miss Austin contemplated a second sale of the land. However, she had entered into a contract to sell to Denton on 17th September 1959, the price (£26,000) being made payable as to £1,500 in cash as a deposit, as to £5,000 by second mortgage to the vendor, and as to the balance in cash on completion. It was contemplated that the cash to be paid on completion would be raised partly by a first mortgage, and in fact it was so raised from IAC. Settlement took place on 23rd November 1959. By that time Miss Austin had got the Courtenays to agree to resell the land to her for £22,275, and a contract was entered into. It had not been completed, however, when the time came for settlement of her sale to Denton. Settlement of that sale took place in the office of Miss Austin’s solicitor. Denton’s solicitor arrived there before the representative of IAC. He had been told by a search clerk of the existence in the Registrar-General’s office of certain notations indicating that the land had been the subject of a transfer to the Courtenays and a mortgage to Miss Austin, and that both instruments had been lodged for registration but uplifted. While awaiting the arrival of IAC’s representative, Denton’s solicitor, who at that stage was under the misapprehension that the transfer and mortgage he had been told about related to other land, mentioned the instruments to Miss Austin’s solicitor, and was told that in fact they related to the land his client was buying. He asked what was the nature of the withdrawal of the instruments from the Registrar-General’s office, and received the answer that Miss Austin had purchased the land back from the Courtenays. He was shown the contract of sale which the Courtenays had executed, but he did not ask whether it had been completed or whether the purchase money had been paid. Miss Austin’s solicitor spoke of having withdrawn the Courtenays’ instruments for registration as a way of settling the resale from the Courtenays to Miss Austin; and apparently Denton’s solicitor was satisfied to take it, without further inquiry, that the Courtenays’ interest in the land as purchasers from Miss Austin had ceased. The representative of IAC’s solicitor was not present until after the conversation on this topic had finished. His principal had learned by search that the Courtenays’ transfer and mortgage back had been withdrawn and that on the register Miss Austin’s title was clear. It was in this situation that the settlement took place. IAC advanced £16,000 to Denton and that sum together with about £3,000 was paid to Miss Austin’s solicitor. A transfer by Miss Austin to Denton and a first mortgage by Denton to IAC were then handed to IAC’s solicitor. As to the remaining £5,000, promissory notes from Denton were given and accepted in place of the second mortgage for which the contract had provided. On 23rd November 1959 the transfer to Denton and its mortgage to IAC were lodged in the Registrar-General’s office for registration, and were still awaiting attention there when the litigation commenced … Hardie J found as a fact that Denton, before the settlement of its contract of purchase from Miss Austin, received through its solicitor positive and unambiguous notice, by the oral statements made by her solicitor in the conversation which preceded the settlement, that the Courtenays had been the owners (his Honour meant, of course, the beneficial owners) of the subject land at the date of Miss Austin’s contract with Denton, and his Honour held that nothing contained in the contract of resale or said in the conversation before the settlement justified the conclusion that the resale [6.160]

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IAC (Finance) Pty Ltd v Courtenay cont. agreement had been carried out, or that Miss Austin had been restored to the position of beneficial owner of the land. This is plainly correct. Denton’s solicitor took the chance that the Courtenays’ rights as purchasers from Miss Austin had ceased. Miss Austin’s solicitor no doubt meant him to understand that that was so, and he saw the contract; but he did not trouble to go into the question whether the contract had been completed, and in particular he made no inquiry of the Courtenays or their solicitor. The question, however, is not whether he acted wisely or unwisely, reasonably or unreason-ably; and it is not to the point that what he was told gave his client notice of the Courtenays’ rights. This is not a case of a competition between a legal interest and an equitable interest. The question is whether Denton is entitled in equity to insist that the Courtenays’ statutory right to get a legal title be postponed to its own; and in order to succeed it must show that by “something tangible and distinct having grave and strong effect to accomplish the purpose” ([1934] AC 491 at 504; (1934) 51 CLR 58 at 68) the Courtenays led it to acquire its interest in the belief that the Courtenays’ interest did not exist. Denton’s solicitor having been told enough to show that the Courtenays’ interest existed unless by or under the contract of resale to Miss Austin it had been terminated, what was there to induce the belief that it had been so terminated? Nothing whatever, beyond the statement of Miss Austin’s solicitor to that effect; and for that statement the Courtenays neither gave any authority nor can properly be held responsible. The only ground suggested for holding that they should be postponed to Denton because of the representation made by Miss Austin’s solicitor is that by letting him lodge their transfer for registration they put him in a position to take advantage of the Registrar-General’s practice in the matter of withdrawals, and, having done that, by not entering a caveat to guard against the possibility of an unauthorised withdrawal they provided him with the opportunity of persuading Denton that the Courtenays no longer had any interest in the land. But the question is not whether anything they could possibly have done would have prevented the deception of Denton’s solicitor; it is whether their conduct was such that the deception was a natural consequence, so that they may fairly be said to have “armed” Miss Austin’s solicitor, as Lord Selborne would have said, “with the power of going into the world under false colours”: Dixon v Muckleston (1872) LR 8 Ch 155 at 160. I am prepared to assume, though I do not say it was established, that all the solicitors concerned were well aware of the Registrar-General’s practice. Even so, the answer to the question, in my opinion, is that in the circumstances it was not reasonably to be foreseen by the Courtenays or their solicitor that a third party might, without inquiring of them, part with money on an assumption that, contrary to all ordinary experience, their transferor’s solicitor had their authority to withdraw from registration the transfer which to all appearances they were absolutely entitled to have registered. It is true that a caveat would have given notice to the world of the continuing claim of the Courtenays to an interest as purchasers of the land; but the mere lodging of the transfer gave clear notice that the interest had come into existence, and put persons in the position of Denton upon inquiry as to whether the interest had ceased. We have been reminded that in Butler v Fairclough (1917) 23 CLR 78 Griffith CJ said: If a man having a registrable instrument neither lodges it for registration nor lodges a caveat to protect it, it is clear that a registrable instrument later in date, but lodged before his, will have precedence, notwithstanding notice of the earlier instrument received before lodging his own. That is by reason of the express provisions of the Statute: (1917) 23 CLR 78 at 92. But the Courtenays did lodge their transfer for registration, and in my judgment it is not to be laid at their door that Denton’s solicitor was deceived by the assurances of a rogue. In my opinion the appeals fail and should be dismissed.

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IAC (Finance) Pty Ltd v Courtenay cont. [Taylor J delivered a judgment to similar effect on this point. Dixon CJ decided the case on another basis.]

[6.165]

Notes and Questions

1. Why did Kitto J take the view that the Courtenays had taken “reasonable steps to protect their interest”? 2. On the facts of IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, it was purely fortuitous that the transfer was lodged for registration. Would the result have been different if the transfer had not been lodged? It is clear that the second justification for non-postponement would no longer be applicable because the second holder would not have had notice of the prior holder’s interest. But could it be said that the prior holder had taken adequate steps to preserve his or her interest? Was the position of IAC the same as that of Denton? 3. Sackville argues that the prior holder will not be postponed even where a registrable instrument has not been lodged, provided that he or she reasonably believes that a party other than his or her solicitor has lodged the instrument for registration: Sackville, “Competing Equitable Interests in Land under the Torrens System” (1971) 45 ALJ 369 at 400. Do you agree? 4. A different, but analogous, situation to that in the IAC case arose in King v AGC (Advances) Ltd [1983] VR 682. In the King case, it was held that the prior chargee who held an equitable interest in a flat and adjacent garage was not to be postponed to a subsequent purchaser. The chargee had lodged a caveat with respect to the flat – but not the garage – and the purchaser only searched the title to the garage. This occurred because the Registrar had mislaid the title to the flat and the solicitors for the purchasers, not wanting to wait until it was found, proceeded with the sale relying upon the clear title to the garage. The Full Court of the Victorian Supreme Court held that the position with respect to the equitable interests in the flat and the garage, although technically separate, should not be considered separately. This was because pursuant to the strata titles legislation the flat and the garage could not be disposed of separately. The Full Court held that the caveat on the flat was sufficient to protect the chargee’s interest in both the garage and the flat. Thus the chargee’s failure to lodge a caveat on the garage was not fatal. 5. The computerisation of Torrens titles and dealings in them has rendered less important the findings in the IAC (Finance) case on the relevance of lodgment of documents in priority disputes. For example, in Queensland the time gap between lodgment and registration has been reduced to 2-3 days. Nevertheless, a time gap still remains.

[6.165]

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Moffett v Dillon [6.170] Moffett v Dillon [1999] 2 VR 480 Court of Appeal [Moffett entered into a terms contract to sell his land to Dillon. After defaulting on a promissory note and being served with a notice of rescission, Dillon gave an equitable charge to Moffett “for the purpose of securing all moneys due and payable … pursuant to” the contract. Moffett lodged a caveat to protect the charge. Subsequently Dillon executed a mortgage in registrable form in favour of Westpac. Various other transactions took place. In the course of proceedings concerning this fact situation, the court had to determine whether Moffett’s prior equitable charge had priority over the equitable mortgage of Westpac.] BROOKING JA: … I turn now to the merits. The first question is that of priority. It is conceded that at the time the bank took its mortgage it had full actual knowledge, not casually acquired, of the creation and continued existence of the charge. At least in the circumstances of the present case, this is fatal to the contention that the later equitable interest should prevail over the earlier. I know of no decision in which a later equity has been held to prevail where its holder acquired it with knowledge of the creation and continued existence of the earlier equity. I defer consideration of whether circumstances are conceivable in which that result could be arrived at. One might ask rhetorically how it can be equitable to postpone the prior interest to one which was acquired by a person who knew that an interest already existed and chose to proceed with the transaction and acquire a competing interest which he would then contend defeated the pre-existing interest. Knowing that someone was already the holder of an equitable interest, he has chosen to acquire a rival one from a person who in the eye of equity is not entitled to create that interest: Phillips v Phillips (1861) 4 De GF & J 208; 45 ER 1164. He then comes before a court of equity claiming that the very conflict he has chosen to create should be resolved in his favour. What do the cases, and what does principle, suggest the response of the court should be? The authorities use language suggesting that a later equitable interest can never prevail over an earlier one where the holder of the later interest had at the time of its acquisition notice of the earlier interest. (I exclude the case where although there was notice of the coming into existence of the earlier interest the holder of the later interest had by the time of its acquisition a belief that the earlier interest no longer existed.) The rule is correctly stated in terms of “notice” of the earlier interest. The present case is one of admitted actual and full knowledge. This is either to be regarded as actual notice or, according to the analysis of Pomeroy, Equity Jurisprudence, 5th ed, (1941), paras 591 et seq, to be treated as having the same consequences as notice. [Brooking JA then referred to a number of judicial statements to the effect that a subsequent equitable interest holder who has notice of a prior equitable interest, cannot gain priority: Lapin v Abigail (1930) 44 CLR 166 at 182 per Knox CJ and 204 per Dixon J; Abigail v Lapin (1934) 51 CLR 58 at 70; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. At 590 per Taylor J. Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 276 per Kitto J and continued.] In Taddeo v Catalano (1975) 11 SASR 492 the claim of the holder of the subsequent equity to priority was held by Jacobs J to fail by reason of his having had notice of the prior equity. This decision was referred to by Olsson J, speaking in effect for the Full Court, in Wu v Glaros (1991) 55 SASR 408, where the same result was reached. At 415 Olsson J said: … if the holder of the subsequent equity acquired it with notice of the prior equity, his claim for priority necessarily fails in any event, unless it can be shown that the possessor of the prior 476 [6.170]

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Moffett v Dillon cont. equity has been guilty of some act or omission which has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it, that the prior equity was no longer in existence. This seems to lay down a rule which will not admit of any further qualification. In addition there is the decision of Windeyer J in Finlay v R & I Bank of Western Australia Ltd (1993) NSW ConvR 55-686, where it was accepted at 59,925 that the equitable interest later in time must in any event be postponed to the earlier one if taken with notice of it. Finally comes Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266. The two members of the Court of Appeal who dealt with the matter, Davies JA at 273-274 and McPherson JA at 287-289, held that notice to the bank of the earlier equity was fatal to its claim that its own equity was to be preferred. I shall return a little later to what was said by Davies JA. … The best known doctrine of equity regarding the effect of notice on priorities concerns the bona fide purchaser for value of the legal estate. It is often said that the doctrine of notice does not apply as between purchasers of equitable interests. See, for example, Garrow’s Law of Real Property, 5th ed (1961), p 172; Helmore, The Law of Real Property in New South Wales, 2nd ed, (1966), p 507; Leake on Property in Land, 2nd ed, (1909), p 354; Ashburner’s Principles of Equity, 2nd ed, (1933), pp 55-6; Underhill & Hayton, Law Relating to Trusts and Trustees, 15th ed, (1995), p 931. But this means only that the rule that a bona fide purchaser for value without notice of a prior equity takes free from it is confined to purchasers of the legal estate and does not extend to purchasers of an equity. As Professor Butt points out (Land Law, 3rd ed, (1996), para 1936), the absence of a “purchaser for value without notice” doctrine for competing equitable interests does not mean that the fact of notice cannot be fatal where the competition is not between prior equity and subsequent legal estate but between two equities. The decisions and judicial dicta referred to above recognise the deeply rooted rule or principle that a person taking with notice of an equity takes subject to it, since his conscience is affected by the equity of which he had notice: Pilcher v Rawlins (1872) LR 7 Ch App 259; Midland Bank Trust Co Ltd v Green [1981] AC 513 at 528 per Lord Wilberforce. The rule applies whether the estate or interest taken by the purchaser is legal or equitable and whether the equity held by a third person in relation to the same subject matter does or does not amount to an equitable interest according to the distinction that has been drawn between “mere equities” and equitable interests. The rule is illustrated, as regards the taking of an equitable interest with notice of a pre-existing one, by the early case of Willoughby v Willoughby (1787) 1 TR 763; 99 ER 1366. There Lord Hardwicke LC said that it was against conscience that an equitable mortgagee who had taken with notice of a prior equitable interest should assert that his mortgage was entitled to priority. Lord Eldon determined without hesitation that a purchaser with notice of a vendor’s lien was affected by it: Mackreth v Symmons (1808) 15 Ves Jun 329 at 341; 33 ER 778 at 783. The decision is cited in Dart, Treatise on the Law and Practice Relating to Vendors & Purchasers of Real Estate, 6th ed, (1888), p 825. The rule operates to prevent the over-reaching of what has been described as a “mere equity”: such an equity will prevail against a subsequent purchaser of an equitable interest who had notice of the equity: Phillips v Phillips (1861) 4 De GF & J 208 at 217; 45 ER 1164 at 1167; Cave v Cave (1880) 15 Ch D 639 at 646-647; Westminster Bank Ltd v Lee [1956] Ch 7 at 18-20; National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1237-1238; per Lord Upjohn (compare what Lord Wilberforce said at 1254); Megarry & Wade, Law of Real Property, 5th ed, (1984), pp 146-7; Megarry (1955) 71 LQR 480 at 481-482; Lewin on Trusts, 16th ed, (1964), p 598; Pomeroy’s Equity Jurisprudence, 5th ed, (1941), para 688 (“with notice of any existing equitable estate, interest, claim, or right, in or to the same subject-matter, held by a third person”; at the end of the paragraph the example is given of an equity to have a mistake in an instrument corrected). [6.170]

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Moffett v Dillon cont. The following observations of Lord Browne-Wilkinson, speaking in effect for the House of Lords in Barclays Bank Plc v O’Brien [1994] 1 AC 180 at 195, are noteworthy for their breadth: The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). What was there said is unaffected by later decisions dealing with Yerkey v Jones (1939) 63 CLR 649, including in particular Garcia v National Australia Bank Ltd (1998) 194 CLR 395, except in relation to the use made of constructive notice in O’Brien’s case outside the field of competing interests in property … The rule that a person taking with notice of an equity takes subject to it is distinct from the rule that where the equities are equal the first in time prevails. As already mentioned, it extends to the protection of equities which (according to the distinction that has been drawn) do not amount to equitable interests. As regards competition between prior and subsequent equity where the prior equity is not of this character and the holder of the subsequent equity had no notice of it, reference should be made to Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265; Shiloh Spinners Ltd v Harding [1973] AC 691 at 721 per Lord Wilberforce; Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, 3rd ed, (1992), paras 427-35 and 813 and Parkinson (ed), Principles of Equity, pp 78-86. In the present case there are two reasons for treating the charge as unaffected by the bank’s mortgage. The first is the rule that a person taking with notice of an equity takes subject to it. The second is the rule that where the equities are equal the first in time prevails. As regards the second rule, no good reason has been advanced for postponing the prior equity. The only ground put forward to us by the bank was that its mortgage is a registrable instrument whereas the charge (as is conceded) is not. Reliance was placed on what Kindersley V-C said in Rice v Rice (1853) 2 Drewry 73 at 78-79; 61 ER 646 at 648 about the relevance of “the nature and condition” of the respective interests or their respective natures and qualities. Registrability, and its absence, are the only features relied on in this case and in my view this point of distinction is not relevant for the purpose of determining whether the prior interest has lost its priority. Sir Richard Kindersley himself invoked “the same broad principles of right and justice which a Court of Equity applies universally in deciding upon contested rights”, and it has much more recently been said that general questions of fairness and justice must be considered: Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326 at 341 per Mason and Deane JJ. On this approach it is these broad principles of right and justice which guide the court in determining whether the merits are equal (Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 276 per Kitto J; Heid’s case at 339 per Mason and Deane JJ), the best equity being that which on the whole is the most meritorious: Lapin v Abigail (1930) 44 CLR 166 at 185-186 per Isaacs J. The better equity does not mean, where two equitable securities are in competition, the better, in the sense of more efficacious, security. To my mind there is no reason for preferring an equity created by a registrable instrument to one created by an instrument that is not registrable or one that is not created by any instrument, registrable or not. Counsel for the bank was unable to refer us to any decision or dictum in support of his contention. Acts done, or omitted to be done, by or on behalf of a party in relation to the register kept by the Registrar of Titles will often bear on whether a prior equity is to be postponed, but the mere fact that one equity is created by a registrable instrument and the other is not has no bearing on that question. I now return to the rule that a person taking with notice of an equity takes subject to it. Earlier I deferred consideration of whether circumstances are conceivable in which an equity acquired with 478 [6.170]

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Moffett v Dillon cont. notice of a prior equity could nevertheless be held to prevail over it. I made reference to Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 273, where Davies JA said this (omitting footnotes): Generally, indeed almost universally, where the holder of an equity acquired it with notice of a prior equity, its claim to priority must fail. There are nonetheless exceptions to this of which the most obvious are an agreement to postpone or waiver of priority. There may also be other conduct on the part of the holder of the prior equity which may estop her from asserting her priority. I have said that there are two rules or principles at work in cases like the present, the rule that a person taking with notice of an equity takes subject to it and the rule where the equities are equal the first in time prevails. As regards the second rule, I have referred to the wide view taken by Mason and Deane JJ in Heid v Reliance Finance Corp Pty Ltd at 341 that broad principles of right and justice will guide the court in determining whether the equities are equal. As what I have already written should make plain, I do not regard the question whether a person who acquired an equity did so with notice of a prior equity as no more than a consideration to which regard is to be had in determining whether one of the equities is better than the other. I regard the rule about notice as a distinct and fundamental one and I do not consider that Mason and Deane JJ intended to question its existence or to subsume this particular matter of notice under a broad question so as to make it no more than a consideration bearing upon which was the better equity. I have drawn attention to a number of statements which suggest that there are no exceptions to the rule that a person who acquires an equity with notice of a prior one takes subject to it. But I see no reason to doubt that, as Davies JA suggested in Platzer’s case, in what would be an unusual case, priority would be accorded to a subsequent equity which was acquired with notice of the prior one. But where this occurred, it would be the result, not of having regard to general considerations of right and justice, but of some doctrine or principle (such as estoppel) recognised by courts of equity and attracted by the facts of the particular case. It is recognised in the passages cited above from Wu v Glaros (1991) 55 SASR 408 at 415 and The Laws of Australia, Subtitle 28.2, General Land Law, para 48 that the rule that notice of the prior equity means that the later equity cannot prevail is subject to an exception where the holder of the earlier equity has induced a belief on the part of the later holder that the earlier equity no longer existed … ORMISTON JA: I have had the benefit of reading the judgment of Brooking JA in draft form and, subject to what appears below, I agree both in the reasoning and in the conclusions which he has reached. The primary issue on this appeal concerned the priority as between the two equitable interests created by the first respondent Dillon, namely the equitable charge granted to the appellant and the later mortgage granted to the respondent bank, which for the purpose of the proceedings all parties agreed should be treated as unregistered and therefore equitable. In my opinion the learned judge was correct in concluding that the appellant’s charge had priority over the bank’s equitable mortgage inasmuch as it was the security and interest first created. It was not contended in argument before this court, though it had been earlier argued and was in the appellant’s original written submission, that the charge was a document capable of being registered under the Transfer of Land Act 1958. However, the bank’s argument that it had priority, because its equitable mortgage was capable of registration and the appellant’s charge was not, seems on analysis to be unsustainable. The bank contended that the question could be answered by ascertaining which was the better instrument, security or “bundle of rights”. But this approach is misconceived. The issue is not which document is easier to enforce or which creates the better or more effective security, but which party has the better equity. In other words, which of the parties should be entitled first to enforce their securities or other interests, which in the ordinary course of events will be the security or [6.170]

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Moffett v Dillon cont. interest first created unless there be some act or default which, having regard to “broad principles of right and justice” would make it inequitable as between the parties that the holder of the first interest should retain its initial priority? See Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326 at 336 and esp 339-342 and cf Lapin v Abigail (1930) 44 CLR 166 at 204; Avco Financial Services Ltd v White [1977] VR 561 at 567; Cash Resources (Australia) Pty Ltd v BT Securities Ltd [1990] VR 576 at 586 and Jacobs v Platt Nominees Pty Ltd [1990] VR 146 at 149-152 and 159-160 (FC). Expressions such as “the merits” and “the better equity” unfortunately connote, even though they have not been intended to express, some inquiry as to which security is objectively the more effective and they also connote, which perhaps is more objectionable, that in some way ordinarily one can ascertain the “better” equity as a matter of determining comparative strength or enforceability, an inquiry which, apart from asking which is first in point of time, is one to be avoided. Merits, in equity, are those matters which impinge, broadly speaking, on the conscience of those who seek its aid or are otherwise subject to its jurisdiction. So priority is to be resolved against the holder of the prior equity only if the other party can establish the first holder’s want of “merits” or comparative lack of “merit”. That is essentially a negative inquiry into behaviour on the part of the holders of each of the equitable interests as to whether they can be shown to have been obtained or enforced in a manner which is so unconscionable or otherwise inequitable so as to deprive the holder of the earlier interest of the priority to which it is otherwise entitled, whether that behaviour be evidenced by fraud, unfairness, negligence, the wrongful creation of particular assumptions by representations or the like or in a number of other ways which reflect on the behaviour of the holders of each of the interests: see Heid at 340-342. Many of these matters are set out in Ch 8 of Meagher, Gummow & Lehane, Equity: Doctrines & Remedies, 3rd ed, (1992), paras 803-860, but see especially the 10 categories of exception from the general rule referred to in paras 807-818. The question which party could, or could more easily, obtain registration of or enforce its security must thus be seen as irrelevant. The contest before registration of any interest under the Transfer of Land Act 1958 is between two (or more) holders of equitable (or possibly legal) interests (whether registrable or not) and indefeasibility can only become relevant after regis-tration. Indefeasibility must be seen as a principal reason for allowing the lodging of caveats, a form of statutory injunction which enables the true merits in law and equity to be determined before the consequences of registration intervene: cf Abigail v Lapin (1934) 51 CLR 58 at 64-65 (PC). The parties’ merits are resolved so that registration can proceed only if the lodging party has acquired legal or equitable priority of interest. Here the chargee was first in time. The bank was well aware of his claim before it obtained or sought to register its equitable mortgage, and, unless he had acted so as to lose or abandon his priority, he should be preferred, even to the extent of perpetually restraining the registration of the equitable mortgage without the consent of the appellant. The bank has shown no basis for this court to hold that its rights should be afforded priority, so as to defeat the rights of the appellant under his charge, albeit that the appellant’s interest is not in fact capable of registration. No authority was cited to us whereby a party was held incapable of obtaining equitable relief in circumstances where that party had no registrable interest but in equity had priority over the holder of a registrable interest. Until registration the right to registration is therefore irrelevant, at least as a general rule. It would be unfortunate if the principles of indefeasibility could in equity indirectly affect the parties’ rights before any indefeasible right had arisen by registration. The warnings given by the caveat procedure are designed to avoid injustices of that kind. As to the other basis upon which Brooking JA would dismiss the cross-appeal and give priority to the appellant’s charge, I have greater difficulty and, for the present, I feel obliged, regrettably, to withhold my concurrence with it. Fortunately, each analysis produces the same result, but the only submissions contained in the parties’ outlines and the only detailed argument addressed by counsel for the cross-respondent (Moffett) was one which depended upon his interest’s simple priority in time. It was 480 [6.170]

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Moffett v Dillon cont. by chance that the court discovered that the bank took with clear knowledge of the earlier interest, although that may have been able to be inferred from the existing material before the court. In answer to a question from the court counsel for the bank acknowledged that fact and conceded he knew of no case in which the holder of the later interest took priority where it had knowledge of the earlier interest. I do not recall any detailed argument on this other basis for none had yet been put on behalf of Mr Moffett, although I am reminded that counsel in response adopted the argument, though without exposition. What Brooking JA has to say about notice or knowledge is, with respect, attractive both in its logic and its simplicity but, as he acknowledges, there must be some qualifications other than cases where the holder of the later interest may have been led to believing that the interest is no longer enforceable. As suggested by Davies JA in Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 273 the rule must also be subject to the effects of an agreement to postpone the earlier interest, such as is commonly found in deeds of priority, by explicit waiver of priority or, I would suggest, by reason of any estoppel arising from the creation in the later holder of a belief that the earlier interest would be postponed or would not be insisted upon in whole or in part: cf also as to prioritisation agreements Cheah v Equiticorp Finance Group Ltd [1992] 1 AC 472 (PC) and Gough, Company Charges, 2nd ed, (1996), Ch 42, pp 1095-1103. This in turn suggests that the apparently simple requirements of the first proposition, namely that the holder of the later interest is postponed if that holder has notice of the earlier interest, may not be so easily established as they have been in the present case. This would be the more difficult if the principle were to be treated as dependent upon notice in the sense that that has been understood in courts of equity for many centuries, that is notice capable of consisting of actual, imputed or constructive notice and subject to the restrictions contained in provisions such as s 199 of the Property Law Act 1958. Unfortunately what constitutes notice “is a point of some nicety”, as Storey modestly described the matter in his Commentaries on Equity Jurisprudence at para 399 of the 3rd English edition. For myself it might seem simpler, were it not arguably contrary to principle, to resolve contests between equitable interests which might otherwise appear to be equal in the eyes of equity by declaring that the interest created earlier in time should take priority, unless the holder of the later equitable interest could establish that that amounted to a “better” interest. It appears accepted that, if the later holder is to be preferred, the onus rests on that claimant to demonstrate why: see General Finance Agency and Guarantee Co of Australia Ltd v Perpetual Executors and Trustees Association of Australia Ltd (1902) 27 VLR 739 at 742-743, referred to with apparent approval by Mason and Deane JJ in Heid at 341 and cited in Meagher, Gummow & Lehane (3rd ed), para 803. In that case Holroyd J preferred to follow the reasoning of Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496 at 507 where he said that, before a person could be deprived of the priority which priority in time gave, it must be proved that that person had done something or been guilty of some omission which would render it equitable that he or she should be deprived of that priority. Holroyd J contrasted that with the opinion of Kindersley V-C in Rice v Rice (1853) 2 Drewry 73; 61 ER 646 where he said that the maxim that the first in time is stronger in law is the last rule to be applied in determining which equity should prevail. As Holroyd J said at 743, “The two definitions may come to the same thing”, but it may be of importance on whom should lie the burden of proof. At least until Heid’s case there seemed consistent authority supporting an approach giving the interest first in time priority over other interests unless and until any such other interest could be shown in equity to be the better interest. A passage frequently cited is that of Dixon J in Lapin v Abigail (1930) 44 CLR 166 at 204, where he said, inter alia, “The act or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority”. (Emphasis added.) Those words were cited with approval by Barwick CJ (with whom McTiernan and Owen JJ agreed) in J & H Just (Holdings) Pty Ltd v Bank of NSW [6.170]

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Moffett v Dillon cont. (1971) 125 CLR 546 at 554-555, by Gillard J in AVCO v White at 567 (with some adaptation); by Murphy J in Heid at 347 (though there are passages in that judgment with which I should prefer not to express agreement); and in King v AGC (Advances) Ltd [1983] 1 VR 682 by Young CJ at 683 and by Marks J (with whom Murray J agreed) at 687. Moreover, Dixon J’s approach as to onus seems also to have been derived directly from Lord Cairns’s speech in the Shropshire Union Railways case at 507: see Lapin v Abigail at 204. As his Honour had said earlier of Abigail’s subsequent interest at 203-204: Prima facie his equitable interest is to be postponed to the prior equitable interest of the appellants … The question, therefore, is whether for any reason appearing in evidence, the appellants lost their priority. In general an earlier equity is not to be postponed to a later one unless because of some act or neglect of the prior equitable owner. Further the same approach can be seen in the judgments of the other members of the court, although they differed as to their conclusion. Gavan Duffy and Starke JJ (who dissented but who were upheld by the Privy Council) followed the same passage from the Shropshire Union Railways case to which I have already referred: at 196. See also per Knox CJ at 183-184 and Isaacs J at 184-185. It is therefore not surprising that in the Privy Council the proper approach to the issue of onus was expressed in almost identical terms. Lord Wright speaking for their Lordships said at 68: The opinion of the Vice-Chancellor [in Rice v Rice (1853) 2 Drew 73; 61 ER 646] no doubt has not been approved insofar as he says that priority in time is only taken as the test where the equities are otherwise equal: it is now clearly established that prima facie priority in time will decide the matter unless as laid down by Lord Cairns LC in Shropshire Union Rys and Canal Co v The Queen, that which is relied on to take away the pre-existing equitable title can be shown to be something tangible and distinct having grave and strong effect to accomplish the purpose. Subsequently, at least until Heid’s case, the approach of affording priority to the equitable interest first created in the absence of proof of any better later equity seems largely to have been accepted. Even if one may read what Kitto J. said in Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 276 as requiring a broader approach and requiring satisfaction that the later interest holder has not taken with notice of the earlier, he had previously referred to “the priority which order in time prima facie gives” an earlier taker of an equitable interest: see IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 575. Thereafter a series of three cases in the High Court appeared to countenance the preference to be given the prior interest unless the later holder established a better equity: see the judgment of Barwick CJ in Just v Bank of New South Wales, in the passage cited above; Breskvar v Wall (1971) 126 CLR 376 at 388 per Barwick CJ (with whom Owen and Windeyer JJ agreed), at 399 per Menzies J; and, arguably, Forsyth v Blundell (1973) 129 CLR 477 at 498 per Walsh J (with whom Mason J agreed on this point). There remains then the question whether Heid’s case should be taken as imposing some new or different rule so far as the establishment of priority is concerned. On one view no change to the existing law was either foreshadowed or expressed, inasmuch as Gibbs CJ (with whom Wilson J concurred) cited the passage of Kitto J in Latec Investments already referred to and then asked whether the appellant, whose interest was “first in time”, had acted so as to lose his priority. Murphy J was content to cite the passage from the judgment of Dixon J in Lapin v Abigail, also referred to above, but in the course of a judgment which would otherwise provide no assistance. It is the judgment of Mason and Deane JJ which has been taken to express a new approach in Australia to the question of priorities and was so accepted in cases such as Jacobs v Platt and Platzer v Commonwealth Bank. Although the judgment commenced in conventional terms by stating at 339: Where the merits are equal, the general principle applicable to competing equitable interests is summed up in the maxim qui prior est tempore potior est jure – priority in time of creation 482 [6.170]

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Moffett v Dillon cont. gives the better equity. But where the merits are unequal and favour the later interest, as for instance where the owner of the later equitable interest is led by conduct on the part of the owner of the early interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest … However, after pointing out difficulties in the way of adopting a general formula as to the manner in which a prior interest might lose its priority, they said at 341 that it was “preferable to avoid the contortions and convolutions associated” with the earlier formulations and “to accept a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances”. Thus they then said: It will always be necessary to characterize the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest. I would prefer to conclude that the court had said nothing which should be taken to have varied the apparent rules as to onus of proof in circumstances where competing priorities are raised, inasmuch as the majority did not seek to do so. Nor am I inclined to believe that Mason and Deane JJ intended to do so, although their statement of principle at 341 is sufficiently wide to lead to a conclusion that none of the prima facie rules previously adopted should be treated otherwise than as mere guides to the determination of which interest in fairness and justice should be preferred. Their Honours referred at 339 to the issue of notice and thereafter to a number of cases dependent upon notice but said nothing as to who must show the better equity. For the present I would prefer to assume that the burden rests on the holder of the later equitable interest to show that that interest should be preferred over the interest created first in time. It follows that I do not find it necessary to express any view as to the order in which the court should take into account, on the one hand, the date upon which an equitable interest was first created and, on the other, evidence of alleged knowledge or notice, actual, constructive or imputed. What Brooking JA says as to notice and its importance in the law of equity is, if I might say so, most persuasive and there seems, on what I have read, to be much force in the contention that notice is critical to the ascertainment of priorities, even in relation to equitable interests. However, I am not entirely confident that Mason and Deane JJ in Heid’s case would have given knowledge or notice any greater significance than any of the other matters which may be taken into account to determine whether an interest is postponed “in fairness and in justice”. In the absence of detailed argument on that subject I would prefer to reserve my opinion on that. I must emphasise, nevertheless, that it still seems to me that one ought to take the interest first created and then inquire whether any event has occurred which would result in that interest being postponed to a later interest. If that still be the correct approach, as I believe it to be, then the existence of notice or knowledge of the kind here admitted is strictly speaking irrelevant, for that is not a factor which would permit a court exercising its equitable jurisdiction to conclude that the later interest should be preferred. It would only become relevant if there were some other factor which might point to the later equitable interest as being the “better equity”, were it not for the existence of relevant notice or knowledge which would deny that characterisation of the later interest and would deny its being preferred, subject again to what has been said in Heid’s case. It seems to me the present issue can be resolved in the same way whichever approach one takes. I have preferred to conclude, as was held below and as the appellant has argued, that Moffett as holder of the equitable interest first in time should be preferred unless and until the bank established that it had the better equity in the sense of a better equitable interest, and that is what the bank failed to do. There are, however, real questions of principle at issue as to whether the doctrine of notice is relevant to priority between two equitable interests. It may be seen that upon the test I have preferred there was no question of the appellant’s establishing the existence of notice in the bank. What the [6.170]

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Moffett v Dillon cont. bank would have had to do is to show that it took its interest for value without notice or had the better equity for some other reason, or that is what I believe s the essence of the present difference of opinion. The better view, although I would not wish to resolve it finally in present circumstances, seems to be that the principle favouring the bona fide purchaser without notice has been one not ordinarily applied (except in circumstances which have been criticised) as between competing equitable interests: see, for example, Butt, Land Law in Australia, para 1936; Parkinson (ed), The Principles of Equity (1996), p 75; Sykes, Law of Securities, 5th ed, (1993), p 405; Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, 3rd ed, (1992), para 849; Sir Frederick Jordan, Chapters on Equity in New South Wales, pp 66-67 and Pomeroy’s Equity Jurisprudence, 5th ed, (1941), vol 2, p 945. The reason for this broad proposition may be traced, at least in part, to the observations of Lord Westbury in Phillips v Phillips (1861) 4 De GF & J 208 at 215-216; 45 ER 1164 at 1166: I take it to be a clear proposition that every conveyance of an equitable interest is an innocent conveyance, that is to say, the grant of a person entitled merely in equity passes only that which he is justly entitled to and no more. If, therefore, a person seised of an equitable estate (the legal estate being outstanding), makes an assurance by way of mortgage or grants an annuity, and afterwards conveys the whole estate to a purchaser, he can grant to the purchaser that which he has, viz, the estate subject to the mortgage or annuity, and no more. The subsequent grantee takes only that which is left in the grantor. Hence grantees and incumbrancers claiming an equity take and are ranked according to the dates of their securities; and the maxim applies, “qui prior est tempore potior est jure”. The first grantee is potior – that is, potentior. He has a better and superior – because a prior – equity. The first grantee has a right to be paid first, and it is quite immaterial whether the subsequent incumbrancers at the time when they took their securities and paid their money had notice of the first incumbrance or not. This passage has been cited on numerous occasions subsequently and I refer only in addition to the enthusiastic adoption and detailed citation of the judgment by Pomeroy in his work in both vol 2, p 163 and vol 3, pp 14-17 where he referred to Lord Westbury’s “remarkable grasp of principles and wonderful power of generalisation”. The earlier history of the rule, consistent with Lord Westbury’s conclusions, may be seen at pp 160-4 of the celebrated essay by DEC Yale in his Introduction to vol II of Lord Nottingham’s Chancery Cases (Selden Society vol 79). Nevertheless, as Pomeroy also points out in vol 3, pp 10-13, there are statements by judges both in England and the United States which would appear to expand the doctrine to give the purchaser without notice rights where the later interest acquired is only an equitable interest. The same doubts are reflected in the judgments from members of the High Court in Latec Investments v Hotel Terrigal. Although the differences are only hinted at in the judgment of Kitto J, they are directly described by Taylor J as “a considerable conflict of opinion between Lord Westbury and Lord St Leonards” at 285-286 and by Menzies J, who observed that “eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question”: at 289-291. The difficulties are abundant and I am not prepared to resolve them on this appeal. I would add only that I am not persuaded that, when Kitto J referred to an equitable interest having been “innocently acquired” in his statement of principle at 276, he meant to exclude an interest acquired by a subsequent holder of an equitable interest who took with only constructive or imputed notice of an earlier interest. Perhaps the solution lies in Lord Westbury’s analysis which would allow of the second interest holder to take an interest but only subject to the earlier equity. If that be so, that later holder of an equitable interest would have to show why he or she should be preferred over the earlier equitable interest holder. This might involve some nice balancing of competing equities of the kind contemplated by the High Court in Heid’s case but, as a generalisation only, such an inquiry may be cut short by it being demonstrated that the later holder knew of the earlier interest when he or she 484 [6.170]

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Moffett v Dillon cont. took. So, subject to the possible existence of rights under a prioritisation or subordination deed or other contract (cf Cheah) or by reason of a common assumption created by the holder of the prior interest at the time the later holder acquired his or her interest (or the like), there would be little reason for further examination as to which party held the “better equity”, the later holder facing an effectively insuperable hurdle at that stage. However, without resolving all these difficulties, I would prefer to reiterate that Mr Moffett’s interest was created first in time and nothing had been demonstrated in this case to show that the bank’s later interest should be preferred in equity … [Buchanan JA agreed with the judgment of Brooking JA.]

Perpetual Trustee Company Ltd v Smith [6.175] Perpetual Trustee Company Ltd v Smith [2010] V ConvR 54-779 Full Federal Court of Australia [The respondents had used their equity in their home to generate income during retirement. The scheme under examination involved the retirees selling their homes to a company, Money for Living Property Holdings Pty Ltd (MFLPH). In return, they received a lump sum, annuity and a life tenancy. Perpetual Trustee lent money to MFLPH entities to finance the purchase the properties. When disputes arose between the parties, the retirees claimed that their interests were protected as tenants, Perpetual alleged that they had an indefeasible title though the registered first mortgages. In the resolution of the dispute the Full Federal Court considered the relevance of notice to the competing equities test, and the correct formulation of the test. The manner in which the relevant Victorian legislation created an exception to indefeasibility for tenancies led the Full Federal Court to consider that the matter should resolved by application of the common law principles as if both interests were unregistered. However, even if Perpetual Trustees had a legal interest, the notice that they had would prevent them gaining priority over the tenancies. The following extract deals with the resolution of the matter on the assumption both interests were equitable.] MOORE AND STONE JJ… Introduction …In the case of all the respondents, the equitable interest of the tenants preceded the interests of the mortgagees. If the equities between the retirees and Perpetual were equal then the retirees’ interest, being first in time would take priority. That principle does not apply where the merits as between the parties are not equal. In this case it might be argued, although Perpetual made no such argument, that by giving MFLPH a registrable transfer and certificate of title, the retirees had armed MFLPH with the ability to enter into the mortgages, without Perpetual having any knowledge of their interests. Thus, it might be argued, although Perpetual did not, that the retirees had an obligation to correct the impression so created by lodging caveats to protect their interest. While Perpetual’s failure to raise the question of notice might be regarded as fatal to its claim (see Barclays Bank plc v Boulter [1998] 1 WLR 1) we propose to consider the question. We disagree with the primary judge’s comment that the failure to caveat was “of no moment” because the only purpose of a caveat would have been to prevent registration. His Honour’s comment overlooks the capacity of a caveat to give notice “to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat”; Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ. This purpose is not inconsistent with the capacity of a caveat to give notice as the following comment of Barwick CJ in J & H Just (Holdings) Pty Limited v The Bank of New South Wales (1971) 125 CLR 546 at 552, indicates: Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator … The purpose of the [6.175]

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Perpetual Trustee Company Ltd v Smith cont. caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title, it may operate to give such notice. [Emphasis added] The conduct of the retirees in giving MFLPH the ability to create the subsequent mortgages to Perpetual would indicate that the merits would be with Perpetual unless Perpetual had, at the very least, constructive notice of the retirees’ interests. While a caveat may give notice of an unregistered interest there is no obligation to caveat. To hold otherwise would be to convert a facility that the TLA provides into an obligation. If the circumstances are such as to give notice in some other way, so that the later interest holder is, or ought to be, aware of the prior interest, the failure to caveat, in so far as notice is concerned, will be immaterial. In the absence of a caveat it is necessary to consider all the relevant circumstances in determining the issue of notice; Heid v Reliance Finance Corporation Proprietary Limited (1983) 154 CLR 342 per Mason and Deane JJ. In the present circumstances, it beggars belief that the appellant did not have notice, at the very least constructive notice, of the retirees’ interests. In the absence of clear evidence to the contrary (and there was none) the inescapable inference is that Perpetual did have notice. Perpetual entered into many mortgages with MFLPH and made extensive funds available to it. In the normal course of events a lender in Perpetual’s position would approve a loan facility on which MFLPH could draw in respect of the individual mortgages. Whether or not this was the case here, it is inconceivable that Perpetual would have agreed to make extensive funds available to MFLPH without having any idea of the nature of their business. There were in the appeal book extracts from various affidavits which indicated that the personnel in charge of settlement of the mortgages were not aware of the retirees interests or even, as least in some cases, that they were in possession. This is hardly surprising given the comparatively mechanical nature of settlement procedures however no evidence was apparent or was drawn to our attention as to the arrangements pursuant to which the loan moneys were made available. The absence of evidence on the point suggests that there was no evidence that would have assisted Perpetual in this regard. In any event, the very name of the company granting the mortgages, Money for Living Property Holdings Pty Ltd, would or should have alerted the mortgagee to the need to make enquiries. Furthermore, the fact that the mortgaged properties were residential premises occupied by an elderly person or an elderly couple should have alerted a potential purchaser or mortgagee of the need to make enquiries. The situation here is quite different from that pertaining in cases such as Caunce v Caunce [1969] 1 WLR 286 and Williams and Glyn’s Bank Ltd v Boland [1980] 2 All ER 408. In both these cases the prior unregistered interest in the matrimonial home being claimed was that of the wife whose husband had created the later interest. In Caunce v Caunce it was held that the wife’s occupation was not notice of her unregistered interest (arising from her contributions to the purchase price) because it was consistent with the title offered to the bank by the husband. In Williams and Glyn’s Bank the issue was whether the wife was “in actual occupation” of the matrimonial home within the meaning of s 70(1)(g) of the Land Registration Act 1925 (UK). The Court rejected the view that the wife’s occupation should be regarded as a “shadow” of her husband’s and held that because the wife was physically present on the land she should be regarded as being in actual occupation. Occupation by the retirees cannot be so explained in relation to title offered by a company such as MFLPH. It was not necessary for the retirees to caveat their interests in order to alert any future purchaser or mortgagee to their interest in the property. The fact of their occupation was constructive notice of their interest which would thus prevail even against a bona fide purchaser of the legal interest; Barnhart v Greenshields (1853) 9 Moo PCC 18, 14 ER 2004; Hunt v Luck [1902] 1 Ch 428. Irrespective of whether Perpetual’s interest is regarded as legal or equitable the result is the same. In the absence of an obligation to caveat and in the light of their actual possession, there was no postponing conduct on the part of the retirees. As such the merits did not lie with Perpetual and therefore, in a competition 486 [6.175]

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Perpetual Trustee Company Ltd v Smith cont. between the two equitable interests the prior interest of the retirees would prevail; Rice v Rice (1854) 2 Drew 73, 61 ER 646; Lapin v Abigail (1930) 44 CLR 166 at 204 per Dixon J, quoted with approval by Barwick CJ in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 555. The protection afforded by s 42(2)(e) strips the registered mortgagee of the indefeasibility that would otherwise protect it. In the competition between Perpetual and the tenants in possession the interests of the tenants must take priority over those of Perpetual… DOWSETT J… Moore and Stone JJ have demonstrated that s 42(2)(e) deprives Perpetual of the protection of registration but otherwise leaves questions of priority between conflicting equitable interests to be resolved by reference to general principles. It is appropriate that I now examine those principles. In Rice v Rice (1853) 2 Drew 73; 61 ER 646, in the latter reference at 648, the Vice-Chancellor discussed various formulations of the relevant rule as to priority between competing equities, concluding that: “And I think the meaning is this: that, in a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to; i.e. that a Court of Equity will not prefer the one to the other, on the mere ground of priority of time, until it finds upon an examination of their relative merits that there is no sufficient ground of preference between them, or, in other words, that their equities are in all other respects equal; and that, if the one has on other grounds a better equity than the other, priority of time is immaterial. In examining into the relative merits (or equities) of two parties having adverse equitable interests, the points to which the Court must direct its attention are obviously these: the nature and condition of their respective equitable interests, the circumstances and manner of their acquisition, and the whole conduct of each party with respect thereto. And in examining into these points it must apply the test, not of any technical rule or any rule of partial application, but the same broad principles of right and justice which a Court of Equity applies universally in deciding upon contested rights. Now, in the present case, each of the parties in controversy has nothing but an equitable interest; the Plaintiff’s interest being a vendor’s lien for unpaid purchase money, and the Defendant Ede having an equitable mortgage. Looking at these two species of equitable interests abstractedly, and without reference to priority of time, or possession of the title-deeds, or any other special circumstances, is there anything in their respective natures or qualities which would lead to the conclusion that in natural justice the one is better, or more worthy, or more entitled to protection than the other?” At 649, his Lordship observed: One special circumstance that occurs is this, that the equitable mortgagee has the possession of the title-deeds. The Vice-Chancellor then discussed various authorities and continued: We have here, then, ample authority for the proposition or rule of equity that, as between two persons whose equitable interests are of precisely the same nature and quality, and in that respect precisely equal, the possession of the deeds gives the better equity. I should observe that in the last paragraph on 649 his Lordship points out that there are certain exceptions to the proposition concerning possession of the title deeds. However those exceptions are not relevant for present purposes. In Avco Financial Services Ltd v Fishman [1993] 1 VR 90, at 93, Tadgell J said: Even without temporal priority, an equity which is supported by possession regularly obtained of title deeds, or their equivalent, will generally enjoy priority over a competing equity not supported by such possession: Rice v Rice. A claimant of an equitable security who is not only first in time but who relies in competition with another such claimant also on possession of title deeds, or the equivalent, is likely to be in a very strong position as against the other; and [6.175]

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Perpetual Trustee Company Ltd v Smith cont. the position must be yet stronger if the equitable claimant second in time knew, when he obtained his equity, that the legal proprietor through whom he claims it was not in possession of the title deeds or an equivalent. This paragraph is cited with apparent approval by the learned authors of Meagher, Gummow and Lehane at [8-015]. It seems that possession of indicia of title has long been a major consideration in the ranking of competing equities. The principle of competing equities has been discussed in numerous High Court cases. In Latec Investments at 276, Kitto J said: In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v Rice … But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest. Gibbs CJ adopted this statement in Heid v Reliance Finance Corporation (1983) 154 CLR 326 at 333 and continued: In the present case the interest of the appellant was first in time. The question therefore is whether his conduct in handing to Gibby a completed memorandum of transfer, containing an acknowledgement of payment and accompanied by the certificate of title, thus enabling Connell Investments to represent itself to Reliance Finance as having a title free from outstanding equitable interests, has the consequence that Reliance Finance has the better equity, and that the appellant’s interest should be postponed to that of Reliance Finance. His Honour then referred to other cases in which a proprietor had armed another with “the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of incumbrance or adverse equity”, citing Rice v Rice. At 339, Mason and Deane JJ said: Where the merits are equal, the general principle applicable to competing equitable interests is summed up in the maxim qui prior est tempore potior est jure - priority in time of creation gives the better equity. But where the merits are unequal and favour the later interest, as for instance where the owner of the later equitable interest is led by conduct on the part of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest …. A common illustration of conduct on the part of the owner of an equity which postpones his interest is the arming of a third party with the indicia of title, such as the delivery of title deeds and an instrument of transfer of the property containing or accompanied by an acknowledgement that the third party has paid the consideration for it in full. Generally speaking in this situation a person who acquires an interest from a third party for value without notice of the prior interest takes in priority …. To use the words of Lord Selborne L.C. in Dixon v Muckleston …, words which have often been repeated in the cases to which we have referred, the owner of the first equity is said to have “armed” the third party “with the power of going into the world under false colours”. Much has also been said in the cases about the relevance to the question of priorities of failure to lodge a caveat notifying an earlier equity. The decision of the High Court in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 is often cited as authority for the proposition that failure to lodge such a caveat “cannot properly be said necessarily to be such an act or default” (per Barwick CJ at 555). However it is relatively clear that Barwick CJ was saying only that as the relevant party (the “Bank”) had possession of the indicia of title, it was entitled to rely on such possession as protecting its position. On the other hand, at 553 Barwick CJ observed, concerning the conduct of other parties: 488

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Perpetual Trustee Company Ltd v Smith cont. The lodgement of a caveat by the respondents even whilst they were still registered proprietors might well have been thought appropriate, once the duplicate certificates of title and executed memoranda of transfer had been given to the mortgagee. This would be a means of safeguarding themselves against an abuse of the authority which they had given their mortgagee. The respondents in this respect were in a very different situation to that of the Bank. The holder of the executed memoranda of transfer and the duplicate certificate of title was in a position to have the transferee registered as proprietor. Once that person was registered the legal estate in the land would vest in the transferee. But in the case of the Bank no change in the register could properly take place without its concurrence. The difference in the need of the parties for protection against the registration of dealings is thus quite clear. At 552 his Honour observed, concerning the nature of a caveat: Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title, it may operate to give such notice. In Osmanoksi v Rose [1974] VR 523, Gowans J considered that the caveat system in force in Victoria differed from that in New South Wales, with which the High Court was concerned in Just. After referring to various sections of the Act his Honour observed at 528: In my view, the presence of these provisions distinguishes the situation dealt with in the New South Wales cases that have been cited. In my opinion, where these and other provisions are taken into account, it cannot be said that the purpose of the caveat system under the Victorian Act is solely to provide protection for the person lodging the caveat by providing for an injunction against the Registrar until notice is given. That may be one of the purposes, but it is not the sole purpose. And it is not the effect of the system. The lodging of a caveat under the Victorian Act operates, whether a “cloud” or a “blot” or by whatever name it is called, as an obstacle to a registered proprietor making title to a purchaser and to a purchaser obtaining title from the registered proprietor. His Honour then continued: In the present case there are four relevant circumstances operating as between the parties: (1) that the possessors of the prior equity did not lodge a caveat, notwithstanding the fact that the vendors retained the certificate of title; (2) if they had done so it would have resulted under s 89(2) of the Act in a memorandum of the caveat being entered on the certificate of title and in its preventing a dealing by the vendors, as registered proprietors, being registered until the memorandum of the caveat had been cancelled or the caveat had expired; (3) a search was made for a caveat by the possessors of the subsequent equity before they acquired their interest; and (4), they were induced to acquire their interest and pay the balance of their purchase moneys by the absence of any caveat affecting the certificate of title. The Appeal Division of the Supreme Court of Victoria has doubted the correctness of the decision in Osmanoksi v Rose. See Jacobs v Platt Nominees Pty Ltd [1990] VR 146 at 151. However the Court there observed: But it is only necessary to say at this point that Just’s Case does not exclude the possibility that mere failure to lodge a caveat may suffice providing all other relevant circumstances are considered. I turn to the way in which the primary Judge dealt with the question of conflicting priorities. It is curious that the pleadings seem to say nothing about the issue. However it is clear that it was raised and considered. As I have said his Honour concluded that the effect of s 42(2)(e) was to give absolute priority to the interests of a tenant in possession so that any consideration of conflicting equities was irrelevant. We have rejected that view. [6.175]

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Perpetual Trustee Company Ltd v Smith cont. On the question of conflicting equities, Perpetual focusses primarily upon the failure to caveat. However that conduct must be seen in light of the fact that the various retirees supplied MFLPH with the indicia of title and memoranda of transfer necessary to put itself in the position of registered proprietor and to charge the land in favour of Perpetual. There can be little doubt that Perpetual made advances in the expectation that it would receive the benefit of those charges. The actual events have not been canvassed in detail, transaction by transaction, as would be necessary in order to deal properly with this matter. I suspect that, in the context of a class action, necessarily different cases have been treated in a generic way. Whilst it may be true, as Moore and Stone JJ suggest, that Perpetual has not fully developed the arguments available to it concerning conflicting equities, there is a real risk that this context has caused the proceedings to miscarry. In my view reliance on failure to caveat inevitably raises for consideration the retirees’ conduct in equipping MFLPH with their indicia of title and memoranda of transfer. The points are inextricably connected. Below, I set out the various factors taken into account by the primary Judge in considering the competing equities. After each factor I insert my comments. (i) (T)he earlier equitable interest in the property of the retirees I have generally regarded as a stronger claim than the later interest of Perpetual. As can be seen from the above authorities, that proposition will be true only where the equities are equal. As I have said, if one equity holder takes with notice of a pre-existing equity, he or she will generally take subject to it. The present case seems not to have been conducted on the basis that Perpetual took with notice, or at least his Honour seems not to have proceeded on that basis. (ii) (F)airness and justice does not require or indicate the earlier equitable interest of the retirees should be postponed. This is a conclusion rather than a reason for reaching a conclusion. (iii) (A)ny lack of notice by Perpetual is only one aspect of the circumstances I have taken into account, which does not displace the earlier interest of the retirees; This seems to mean that any lack of notice to Perpetual of the existence of the retirees’ interests is only one aspect of the circumstances to be taken into account. The proposition may be correct, but it offers no basis for concluding that one equity should be preferred to another. As I have observed above, if Perpetual had such notice, it would have taken subject to the relevant retiree’s equity, and no question of competing equities would have arisen. (iv) (P)erpetual knew by itself, or its agents, that the properties were occupied, or at the very least expected that the properties would be tenanted, even if Perpetual did not know the exact terms of the Contract of Sale or Agreement for Sale of Real Estate or of the lease. If I am wrong in this regard as to knowledge or expectation, this would still not alter my view as to the competing position. It is important to note that this is a reference to knowledge of which somebody was, or might be in possession, not knowledge of the nature of that person’s right to possession. Thus his Honour was not considering the position of a party taking with knowledge of a prior equity. Rather, the suggestion is that Perpetual, if it knew, or ought to have known that the retirees were in possession, ought to haveinquired as to the basis of such possession. I am not sure of the meaning of the last sentence in the above extract from the judgment at first instance. In my view the only factor (other than temporal priority) militating in favour of the retirees’ equities having priority is the assertion that Perpetual knew that the premises were, or might be occupied. If neither proposition is proven, then I would have thought that the retirees’ position was, at the least, seriously undermined. His Honour’s apparent ambivalence about the issue seems to suggest that the state of Perpetual’s knowledge was unclear. The question is not referred to elsewhere in the reasons. However the primary Judge may have been referring to a passage in the evidence to which we were referred by counsel for the retirees as follows: 490 [6.175]

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Perpetual Trustee Company Ltd v Smith cont. And I take it you make no inquiry of whether the property that’s sought to be purchased with the loan funds, if there is a property to be purchased with the loan funds, is tenanted or not?– No. No. In fact you accept that it may be tenanted at that point in time? It could be tenanted?– Yes. Yes, it could be and you accept the risk that it could be tenanted?– Yes. This evidence, taken in isolation, is a little difficult to evaluate. However there appears to have been other evidence pointing towards Perpetual’s solicitors, Galilee and Associates, having had access to the contracts of sale, or some of them. The solicitors appear to have obtained copies of some of the relevant documents on or about 15 November 2004. However the consequences of this fact seem not to have been identified or evaluated in the reasons for judgment. It is not clear to me that the learned primary Judge made any findings as to Perpetual’s state of knowledge save that it knew, by itself or its agents, that the properties were occupied “or at the very least expected the properties to be tenanted” and, as appears below, that it had “constructive notice of the retirees’ rights”. His Honour does not decide whether Perpetual had actual knowledge or was to be taken to have the knowledge of its “agents”. The words “even if Perpetual did not know the exact terms of the Contract of Sale or Agreement for Sale of Real Estate or of the lease” suggest that the only finding is that Perpetual knew that somebody was, or might be, in possession, presumably at some time prior to the grant of each of the relevant mortgages. Much depends upon whether Perpetual knew, or ought to have known that the respective retirees were to remain in possession of the premises after settlement (as opposed to their being in possession prior to settlement). The distinction between possession by an owner who has agreed to sell, and possession by a third party may also be important. Whilst there is substantial authority for the proposition that knowledge that a tenant is in possession may fix a purchaser with knowledge of the terms of the tenancy, that proposition says nothing about the possession of a vendor under an uncompleted contract of sale. See Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 504-5. The distinction reflects common sense. Whilst occupation by somebody other than the owner may suggest a tenancy, presence of the owner suggests occupation pending completion of the contract of sale, which almost invariably provides for vacant possession on completion. I am unable to discern from the reasons for judgment the factual basis upon which it was asserted that Perpetual had any relevant knowledge as to occupation or the extent of that knowledge. In its submissions in reply on appeal Perpetual refers to AB 1905 at para 8(h) and the evidence of Mr Wingate at AB 2784-2786, paras 28 and 29. Whether this evidence was challenged or accepted, and how it may have inter-related with other evidence in the case is not clear. However it suggests due inquiry and limited information. (v) (T)he retirees were in fact in possession of the property which I regard as significant, although not “decisive”. For reasons which I have given, the significance of this factor may depend upon whether Perpetual knew that anybody was in possession, and whether or not it knew that the persons in possession were the vendors. (vi) (P)erpetual had constructive notice of the retirees’ rights and it took its interest subject to them, and this occurs even if the tenant is in possession pursuant to additional entitlements. I am not sure why it is said that Perpetual had constructive notice of the retirees’ right or as to the meaning to be attributed to that expression. (vii) (P)erpetual in failing to investigate the interest of the retirees did so at its “peril”. Such a general proposition cannot be used as a basis for assessing conduct for the purpose of determining respective equities. It may be that the circumstances of a particular case would justify that view, but it is not clear to me that it is so in this case. [6.175]

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Perpetual Trustee Company Ltd v Smith cont. (viii) (W)hilst the retirees did not lodge timely caveats, the failure of the retirees to lodge a caveat is explicable. They were in fact still registered proprietors. In any event “the exception in s 42(2)(e) makes the failure to lodge a caveat of no moment, because it takes away from the registered proprietor the paramountcy which actual registration confers; and the only purpose of a caveat is to prevent such registration.” This proposition begs the question in two respects. First, it depends upon his Honour’s view (which we have rejected) that s 42 confers absolute priority on the interests of lessees in possession. That the primary Judge was considering the question of conflicting equities was the result of his acceptance of the possibility that he was wrong on that point. Secondly, the proposition fails to deal with the fact that as registered proprietors, the retirees passed the indicia of title and memoranda of transfer to MFLPH without protecting themselves against their misuse. Even if a failure to caveat, by itself, could not be a basis for preferring Perpetual’s interests to those of the retirees (a proposition which appears to be inconsistent with the observation concerning Just in Platt Nominees at 151), that is not the present position, given that the retirees had armed MFLPH with their indicia of title and memoranda of transfer. (ix) (F)urther, I do not regard the failure to lodge a timely caveat as sufficient to postpone the retirees’ interests, particularly as there was no evidence that Perpetual relied on the registration or absence of caveat.. If the failure to caveat is taken in isolation, the comment may be valid. However it does not deal with the consequences of arming MFLPH with the indicia of title and memoranda of transfer. It must be at least arguable that Perpetual dealt with MFLPH upon the basis that the latter was entitled to be registered as proprietor. (x) (N)o retiree consented to or ratified the mortgage to Perpetual. Had there been a consent or ratification, it may have amounted to conduct which led to Perpetual’s equity being preferred to that of the relevant retiree. The absence of such consent or ratification says nothing. In my view, determination of the respective priorities of the interests of the retirees and those of Perpetual necessitated clear findings of fact justified by reference to the evidence. With all respect, the findings appear to be at best ambiguous. More important is the failure to address the real issue in this aspect of the case - namely the effect of the retirees’ conduct in arming MFLPH with indicia of title and memoranda of transfer. Had the retirees established that Perpetual took with notice, it would not have been necessary to consider the respective merits of the competing equities. However the case seems not to have been decided on the basis that Perpetual took with notice, but rather upon comparison of the merits. In my view the primary Judge failed to address the true significance of the retirees’ failure to caveat. Given that if the equities are equal, the first in time will prevail, Perpetual bore the burden of establishing that its interests should have priority. However I am unable to determine from the facts, as they are presently before the Court, how the question of priority should be resolved. It is difficult to identify the facts which were raised and relied upon by the parties as being relevant to its resolution.

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Perpetual Trustee Company Ltd v Smith cont. However my views concerning the learned primary Judge’s conclusions lead me to conclude that he erred. The appeal should be allowed and the relevant orders set aside, the matter being remitted for further consideration, limited to the question of priority. However, as I am in dissent, the actual orders which I favour are of no importance. In all other respects I agree with the reasons of Moore and Stone JJ and with their conclusions.

[6.180]

Notes and Questions

1. What role do you think notice should have in a system of title by registration. Could it not be argued that notice should not be the determining factor. Notice of itself is not to be imputed as fraud in a Torrens system. 2. The doctrine of notice encompasses actual, constructive and imputed notice and arguably all are applicable to this type of dispute: see IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 per Nettle J. Cf with the comments of Ormiston JA above in Moffett v Dillon [1999] 2 VR 480. Consider the complications (if any) that may arise from an acceptance of the view of Brooking JA in Moffett v Dillon. See generally Butt, “Priority between Unregistered Torrens Title Interests” (1999) 73 ALJ 538; McConvill, “Equity in Torrens System” (2001) 8 APLJ 191; Rodrick, “Resolving Priority Disputes between Competing Equitable Interests in Torrens System Land – which Test?” (2001) 9 APLJ 172. Doesn’t the decision of Perpetual Trustee Company Ltd v Smith [2010] V ConvR 54-779 highlight the difficulties associated with notice?

PRIOR EQUITY AND SUBSEQUENT UNREGISTERED INTEREST Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [6.185] Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 High Court [Latec was the mortgagee of land owned by Hotel Terrigal. Hotel Terrigal went into arrears and Latec wished to exercise its power of sale under the New South Wales Torrens statute. It conducted an auction on an unfavourable day of the week with little time for proper advertisement. The property failed to sell and some weeks later, Latec sold it to its wholly owned subsidiary, Southern Hotels. Southern became the registered proprietor. The sale price was substantially lower than the reserve price. Subsequently, Southern gave the MLC Nominees, a trustee for debenture holders, a floating charge over its assets, including the land in question. Some five years later, Hotel Terrigal sought to have the sale to Southern set aside on the basis that the power of sale had been conducted fraudulently. The court found on the evidence that Latec and Southern had been fraudulent and that, therefore, Hotel Terrigal had a right to have the contract and transfer set aside. The court then had to consider the priority position as between Hotel Terrigal and MLC.] KITTO J: … But, as I have said, the mortgagor took no step to establish its equity of redemption for nearly five years. One reason was that the voluntary liquidator had no funds available for litigation. But whatever the full tally of the reasons may have been, if there were nothing more to consider than the bare fact of the delay it may be that the mortgagor would not be precluded from asserting its rights even after so long a time: see Fysh v Page (1956) 96 CLR 233 at 243. But an important change in the situation occurred a little more than a year after the sale. On 18th March 1960, the first appellant [6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. executed a trust deed in respect of debentures to be issued, and it put out to the public a series of prospectuses which led many persons to take up debentures. The prospectuses showed, as the fact was, that the purchaser of the mortgaged property, the second appellant, had joined in the trust deed as a guarantor and had given the trustee, who is the third appellant here, a floating charge over all its assets as security for the debentures. Each prospectus, moreover, contained an explicit statement that the Hotel Terrigal was owned by the second appellant. The statement, of course, would have been true if the second appellant’s title had been unimpeachable by the mortgagor, and neither the trustee nor the persons who took up debentures were given any cause to doubt it. It is a fair inference that the liquidator of the mortgagor company had notice of what was happening, for he was the auditor of the mortgagee. After another two and a half years the floating charge crystallised. The trustee of the debenture deed appointed a receiver of both the first and the second appellants, but it was not until a year later still that a new liquidator of the purchaser was appointed and the present proceedings were begun. In these circumstances the trustee, with the support of its co-appellants, contends that the mortgagor ought not to be given the relief to which, according to the views I have expressed, it would otherwise be entitled. As between the trustee and the mortgagor I am of opinion the contention should succeed. In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having given rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v Rice (1853) 2 Drew 73 at 78 (61 ER 646 at 648). But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest. In the present case it seems to me that there is much to be said for holding that, since during the long period of the mortgagor’s delay in setting up the invalidity of the purchaser’s title persons were induced to lend money on debentures in the belief that an unencumbered fee simple in the subject property formed part of the security under the trustee’s floating charge, the mortgagor ought not to be allowed to insist upon its equity of redemption as against the equitable interest of the trustee. But apart altogether from any question of estoppel by conduct, in my opinion the equitable charge of the trustee for the debenture holders stands in the way of the mortgagor’s success because it was acquired for value and without any notice either of the existence of the mortgagor’s right to set aside the sale or of any facts from which such a right might be inferred. The trustee, of course, has not the legal estate; its rights are purely equitable; but the case falls within one of the categories described in the judgment of Lord Westbury in Phillips v Phillips (1861) 4 De G F & J 208 at 218 (45 ER 1164 at 1167) in which the legal estate is not required in order that a defence of purchase for value without notice may succeed. It is the case of a suit “where there are circumstances that give rise to an equity as distinguished from an equitable estate – as, for example, an equity to set aside a deed for fraud, or to correct it for mistake” (1861) 4 De G F & J 208 at 218 (45 ER 1164 at 1167). In such a case, his Lordship said, if the purchaser under the instrument maintains the plea of purchase for value without notice “the Court will not interfere” (1861) 4 De G F & J 208 at 218 (45 ER 1164 at 1167). It is true that if the mortgagor in the present case was entitled to have the mortgagee’s sale set aside it had more than a mere equity: it had, as I have pointed out, an equity of redemption, and such an interest, being in respect of an estate in fee simple, has been considered an equitable estate ever since Lord Hardwicke decided Casborne v Scarfe (1737) 1 Atk 603 (26 ER 377) see also (1738) 2 J & W 194 App (37 ER 600). But each of the illustrations Lord Westbury chose was also a case where the equity was accompanied by an equitable interest which might constitute an equitable estate. So much had been shown by 494 [6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. decisions of most eminent judges, at least twice in the ten years before his Lordship spoke: see Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015); Gresley v Mousley (1859) 4 De G & J 78 (45 ER 31), and Lord Westbury’s judgment gives every indication of an intention to state systematically the effect of previous decisions, and not to depart from them in any degree. The illustrations, therefore, make it clear, it seems to me, that the cases to which his Lordship was referring were not only those in which there is an assertion of an equity unaccompanied by an equitable interest as was held to be the case in Westminster Bank Ltd v Lee [1956] Ch 7 and National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] Ch 9 – indeed he may not have had them in mind at all – but those in which an equity is asserted which must be made good before an equitable interest can be held to exist. In the latter class of cases the equity is distinct from, because logically antecedent to, the equitable interest, and it is against the equity and not the consequential equitable interest that the defence must be set up. That the defence of purchase for value without notice (in the absence of the legal estate) is a good defence against the assertion of the equity in such a case had been established long before Lord Westbury’s time. In Malden v Menill (1737) 2 Atk 8 at 13 (26 ER 402 at 405), for example, Lord Hardwicke had refused rectification of an instrument for mistake, as against a purchaser of an equitable interest without notice, on the ground that the mistake should not “turn to the prejudice of a fair purchaser”. Such cases as Garrard v Frankel (1862) 30 Beav 445 (54 ER 961) and Bainbrigge v Browne (1881) 18 Ch D 188 were soon to be decided on the same principle. See generally Halsbury’s Laws of England (3rd ed), Vol 14, p 537, par 1008. The reason of the matter, as I understand it, is that the purchaser who has relied upon the instrument as taking effect according to its terms and the party whose rights depend upon the instrument being denied that effect have equal merits, and the court, finding no reason for binding the conscience of either in favour of the other, declines to interfere between them. Consequently the party complaining of the fraud or mistake finds himself unable to set up as against the other the equitable interest he asserts; but the fact remains that it is against the preliminary equity, and not against the equitable interest itself, that the defence of purchase for value without notice has succeeded. The maxim qui prior est tempore is not applicable, for it applies only as between equitable interests, the logical basis of it being that in a competition between equitable interests the conveyance in virtue of which the later interest is claimed is considered, as Lord Westbury pointed out, to be innocent, in the sense of being intended to pass that which the conveyor is justly entitled to and no more: (1861) 4 De G F & J 208 at 215 (45 ER 1164 at 1166). Where a claim to an earlier equitable interest is dependent for its success upon the setting aside or rectification of an instrument, and the court, notwithstanding that the fraud or mistake (or other cause) is established, leaves the instrument to take effect according to its terms in favour of a third party whose rights have intervened, the alleged earlier equitable interest is unprovable against the third party, and consequently, so far as the case against him discloses, there is no prior equitable interest to which his conveyance can be held to be subject. On the principle to which Lord Westbury referred it seems to me inevitable that the mortgagor’s claim in the present case to have the mortgagee’s sale and the transfer to the purchaser “set aside”, that is, treated as if they were only a sale and transfer of the mortgage, should fail as against the trustee for the debenture holders, though it should succeed as against the mortgagee and the purchaser. It appears that the mortgage was a second mortgage and that after the sale the purchaser paid off the first mortgage. The purchaser is entitled therefore to stand in the shoes of the first mortgagee. The result is that the mortgaged property is subject, first, to the purchaser’s rights in respect of the discharge of the first mortgage; secondly, to the trustee’s charge; and thirdly, to the purchaser’s rights as notional transferee of the second mortgage under the (otherwise invalid) sale. The mortgagor is entitled to anything that may remain of the property or its proceeds after these encumbrances have

[6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. been satisfied. The indications seem to be that after the rights of the trustee have been satisfied there will be nothing left, and for that reason it seems unnecessary to make an order for working out the rights of all parties in detail. MENZIES J: … The second question – that is, the question of priority between Terrigal’s and MLC Nominees’ equitable rights – I find one of substantial difficulty. If the maxim “Qui prior est tempore potior est jure” applies, Terrigal’s right to have the conveyance set aside and to be restored to the register, without regard to MLC Nominees’ equitable interest, prevails, but the appellants’ contention is that this right is a mere equity and the maxim has no application when the contest is between such an equity and an equitable interest of the character held by MLC Nominees. This contention rests upon the line of authority based upon Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164). Lord Westbury there said: Hence grantees and incumbrancers claiming in equity take and are ranked according to the dates of their securities; and the maxim applies, “Qui prior est tempore potior est jure”. The first grantee is potior – that is, potentior. He has a better and superior – because a prior – equity. The first grantee has a right to be paid first, and it is quite immaterial whether the subsequent incumbrancers at the time when they took their securities and paid their money had notice of the first incumbrance or not … Now, the defence of a purchaser for valuable consideration is the creature of a Court of Equity, and it can never be used in a manner at variance with the elementary rules which have already been stated … But there appear to be three cases in which the use of this defence is most familiar … Thirdly, where there are circum-stances that give rise to an equity as distinguished from an equitable estate – as for example, an equity to set aside a deed for fraud, or to correct it for mistake – and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere: (1861) 4 De G F & J 208 at 215-218 (45 ER 1164 at 1166, 1167). In Cave v Cave (1880) 15 Ch D 639, Fry J, referring to the defence of purchaser for value without notice, said: That defence, as we all know, has been the subject of a great deal of decision, and it is by no means easy to harmonize the authorities and the opinions expressed upon the subject. Criticisms upon old cases lie many strata deep, and eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question. The case of Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164) is the one which has been principally urged before me, and that, as being the decision of a Lord Chancellor, is binding upon me, notwithstanding the subsequent comments upon it of Lord St Leonards in his writing: (1880) 15 Ch D 639 at 646. His Lordship went on to cite the passage I have already quoted from Lord Westbury’s judgment in Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164) and, having come to the conclusion that he was dealing with a contest between equitable estates and not between an equitable estate and a mere equity, concluded: Therefore I shall conclude that, within the case of Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164), the interest of the plaintiff in this case is an equitable interest, and not merely an equity like the equity to set aside a deed, and therefore it must take its priority according to the priority of date: (1880) 15 Ch D 639 at 649. There is, however, as Fry J said, another line of cases, the authority of which is beyond question, establishing that where there is an equity to have the voidable conveyance of an estate set aside, there remains in the conveyor, notwithstanding the conveyance, an equitable estate which may be devised or transferred. Thus, in Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015), Lord St Leonards, speaking of a conveyance by an heir at law to his solicitor, said: I do not deny that a deed may be so fraudulent as to be set aside at law; this, however, is not such a case; but I will assume that the conveyance might have been set aside in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney 496 [6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. under circumstances which would give a right in this Court to have the conveyance set aside? In the view of this Court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all question as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this Court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised: (1852) 2 De G M & G 623 at 630 (42 ER 1015 at 1018). Likewise, in Gresley v Mousley (1859) 4 De G & J 78 (45 ER 31), Knight Bruce LJ, in deciding that a conveyor of land who has an equity to be relieved against a sale, has a devisable interest in the property sold, said that the Lords Justice were bound by the cases cited to the Court, including Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015). He added that, if the Lords Justice were not so bound, “I still think that the decisions were correct and ought to be followed” (1859) 4 De G & J 78 at 90 (45 ER 31 at 35). The argument that Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015) proceeded on a sound principle, which seems to have been accepted, was as follows: “When a decree is made for setting aside a conveyance it relates back, and the grantee is to be treated as having been, from the first, a trustee for the grantor, who, therefore, has an equitable estate, not a mere right of suit” (1859) 4 De G & J 78 at 86 (45 ER 31 at 34). As to the conveyance inter vivos of such an interest carrying the right to sue the original conveyee, see Dickinson v Burrell (1866) LR 1 Eq 337. If there is a difference between the two lines of authority, that difference seems to me to arise from concentration upon different aspects of what follows from a voidable conveyance. Thus, Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164), in so far as it says that a person with the right to have a voidable conveyance set aside has but a mere equity, directs attention to the right to have the conveyance set aside as a right to sue which must be successfully exercised as a necessary condition of there being any relation back of the equitable interest established by the suit. Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015) directs attention to the result of the eventual avoidance of the conveyance upon the position ab initio and throughout of the persons by whom and to whom the conveyance of property was made and says that, in the event of a successful suit (which may be maintained by a devisee), the conveyor had an equitable estate capable of devise and that the conveyee holds, and has always held, as trustee. There is no doubt that the two lines of authority are well established. See, for instance, Halsbury’s Laws of England (3rd ed), Vol 14, pars 1009 and 1030. Furthermore, there is room for the application of each in appropriate circumstances. Thus, if Terrigal were a person instead of a company and the question were whether, in the circumstances here, that person had a devisable interest in the hotel property by virtue of his equity to have the conveyance to Southern set aside, Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015) would require an affirmative answer on the footing that, in the circumstances, Terrigal had an equitable interest in the hotel property. Where, however, the question arises in a contest between Terrigal and MLC Nominees, the holders of an equitable interest in the hotel property acquired without notice of Terrigal’s rights, the authority of Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164) is (i) that the contest is between Terrigal’s equity to have the conveyance set aside and the equitable interest of MLC Nominees and (ii) that in that contest, Terrigal’s equity is not entitled to priority merely because it came into existence at an earlier time than the equitable interest of MLC Nominees. In the circumstances here, therefore, the maxim “Qui prior est tempore potior est jure” has no application. The conclusion I have just expressed with regard to the second matter in issue makes reference to the third matter unnecessary. [6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. Accordingly, it is because I think that the equitable estate of MLC Nominees takes priority over the equity of Terrigal that I would allow this appeal. I agree that, in the circumstances, the course we should follow is that proposed by Kitto J. TAYLOR J: … This contention was based upon an observation of Lord Westbury in Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164), a case in which the proposition was asserted in argument that a court of equity “would give no relief whatever to any claimant against a purchaser for value without notice” (1861) 4 De G F & J 208 at 215 (45 ER 1164 at 1166). His Lordship was “struck with the novelty” (1861) 4 De G F & J 208 at 215 (45 ER 1164 at 1166) of the proposition and for the purpose of dealing with it found it “necessary to revert to first principles” (1861) 4 De G F & J 208 at 215 (45 ER 1164 at 1166). He said: I take it to be a clear proposition that every conveyance of an equitable interest is an innocent conveyance, that is to say, the grant of a person entitled merely in equity passes only that which he is justly entitled to and no more. If, therefore, a person seised of an equitable estate … makes an assurance by way of mortgage or grants an annuity, and afterwards conveys the whole estate to a purchaser, he can grant to the purchaser that which he has, viz, the estate subject to the mortgage or annuity, and no more. The subsequent grantee takes only that which is left in the grantor: (1861) 4 De G F & J 208 at 215 (45 ER 1164 at 1166). Having further examined the doctrine he went on to say: “where there are circumstances that give rise to an equity as distinguished from an equitable estate – as for example, an equity to set aside a deed for fraud, or to correct it for mistake – and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the Court will not interfere” (1861) 4 De G F & J 208 at 218 (45 ER 1164 at 1167). However, in the case before the Court on that occasion the plaintiffs had, as his Lordship found, an equitable estate and so what passed to the defendants by virtue of the deed upon which they relied was necessarily subject to the plaintiff’s earlier interest and, so, the case was not affected by the quoted proposition. Lord Westbury’s observations were quoted by Fry J in Cave v Cave (1880) 15 Ch D 639 but this again was a case in which the plaintiffs were held to have an equitable interest in the subject-matter of the litigation. In the present case it is contended on behalf of the MLC Nominees that after the sale and transfer to Southern Hotels, Hotel Terrigal had on the view of the facts most favourable to it nothing more than a mere equity to set aside the transaction and, as I understand the argument, this proposition is put upon the authority of the examples given by Lord Westbury of cases where the right which is being asserted is “an equity as distinguished from an equitable estate – for example, an equity to set aside a deed for fraud, or to correct it for mistake”. But to my mind the argument misconceives the significance of Lord Westbury’s observation and the assertion that Hotel Terrigal had nothing more than a mere equity is made in the face of abundant authority to the contrary to which I shall presently refer. [His Honour referred to a number of authorities in support of his view that an equitable interest existed and continued:] I regard these authorities as establishing that where the owner of property has been induced by fraud to convey it the grantor continues to have an equitable interest therein and that that interest may be devised or assigned inter vivos and that the grantor’s interest in the property does not come into existence only if and when the conveyance is set aside. These cases, however, have nothing to say concerning the principles upon which the priority of competing equitable interests is to be determined. But they do serve to indicate that where a grantor is entitled to set aside a conveyance for fraud he has, in every sense of the term, an equitable interest in the subject land and that if he is to be postponed to an equitable interest acquired without notice at 498

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. some later time it is not because it can be said, in the sense in which the appellants use that expression, that he has a mere equity as distinguished from an equitable estate; if he is to be postponed then there must be some other reason. In his “Chapters on Equity in New South Wales” the late Sir Frederick Jordan mentions that “The equitable assignee of property other than a chose in action takes subject to any equities which are in substance interests in the property; but not subject to equities in the nature of rights of set-off” ((6th ed, 1945), p 61). He then makes reference to the proposition that as against a person who has an equity as distinguished from an equitable estate, the defence of purchaser for value without notice may be maintained by a person who has an equitable interest only. But on the authority of Stump v Gaby (1852) 2 De G M & G 623 (42 ER 1015) and other cases to which I have referred he expressed the view that an equity is in itself an equitable estate and the real principle upon which the title of the owner of a subsequent equitable estate has been allowed to prevail is that the claimant under the prior equity has been estopped by his conduct from disputing the title of the person who has purchased the interest in good faith. For this proposition the learned judge cited Hunter v Walters (1871) 7 Ch App 75; Bickerton v Walker (1885) 31 Ch D 151; and French v Hope (1887) 56 LT 57; and these are cases where, if the proposition advanced in this case be sound, it would have been unnecessary to enquire whether the claimant earlier in point of time had been negligent or to examine the consequences of that negligence. It must be remembered that there was a considerable conflict of opinion between Lord Westbury and Lord St Leonards concerning the availability of the defence of purchaser for value without notice in the case of competing equitable interests and this is to be noticed in Lord St Leonard’s writings in the year following the decision in Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164). (Sugden, The Law of Vendors and Purchasers, 1862.) He maintained that the defence was always available to the bona fide purchaser of an equitable interest and observed (798) that: “Till the case of Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164) the validity of the defence against an equitable title appears not to have been questioned”. Yet that case, which Lord St Leonards thought departed from the earlier law, did not deny the availability of the defence to a subsequent purchaser of an equitable interest without notice of an earlier interest which was of the character under consideration in the present case. It cannot, of course, be disputed at the present time that the defence of purchaser for value without notice of a prior equitable interest cannot be generally maintained but it does appear that it has always – that is to say, both before and after Phillips v Phillips (1861) 4 De G F & J 208 (45 ER 1164) – been allowed to prevail where the person entitled to the earlier interest required the assistance of a court of equity to remove an impediment to his title as a preliminary to asserting his interest. In such cases it seems that the court will not interfere and to me it does not seem to matter much whether it be said that this is because, as Lord Westbury’s observations suggest, that a plaintiff seeking to set aside a deed for fraud or to reform it for mistake is, at that stage, asserting an equity as distinguished from an equitable estate, or, because a plaintiff in such cases will be denied the assistance of a court of equity to remove the impediment to his title if, before he seeks that assistance, an equitable interest in the subject property has passed to a purchaser for value without notice of the plaintiff’s prior interest. I prefer the latter as a more precise statement of the law and, indeed, I think this is the true meaning of Lord Westbury’s observations. But either statement leads to the same result which in the present case means that the interest of the MLC Nominees should be taken to prevail over that of Hotel Terrigal.

[6.185]

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Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) cont. For these reasons I am of the opinion that the appeal should be allowed and that it should be otherwise disposed of in the manner suggested by Kitto J.

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Notes and Questions

1. Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 concerned Torrens land. The principles set out would apply equally to general law land. 2. In Breskvar v Wall (1971) 126 CLR 376, the High Court took the view that the right to have a sale set aside because of fraud was an equitable interest. No detailed analysis was undertaken, presumably in view of the fact that, in the circumstances, the interest of the Breskvars would be defeated by the subsequent equitable interest of Alban Pty Ltd even if they had a full equitable interest. 3. After you have read the decision in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 extracted at [6.45], consider again whether you think Kitto and Menzies JJ found that the mortgagor had a proprietary interest in the land. Were the competing interests the same in the Latec and Swanston Mortgage cases? 4. In a priorities dispute, the categorisation of the interests may be vital to the outcome and yet there remain many areas of uncertainty in relation to whether particular interests are equitable interests or equities. In this regard, consider the following areas: • a common intention constructive trust • a Baumgartner unconscionability constructive trust • a right to have a transaction set aside for fraud, mistake, undue influence • a contract of sale which is specifically enforceable because it has been partperformed • promissory estoppel (Waltons Stores) • a right arising under the Garcia principles. See Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; Muschinski v Dodds (1985) 160 CLR 583 at 614 per Deane J; Swanston Mortgage Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409; Parsons v McBain (2001) 192 ALR 772; Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793; Patmore v Upton (2004) 13 Tas R 95. 5. The constructive trust based on unconscionability seems to raise special difficulties. In Baumgartner v Baumgartner (1987) 164 CLR 137 and in two other High Court cases, Muschinski v Dodds (1985) 160 CLR 583 and Giumelli v Giumelli (1999) 196 CLR 101, the remedial and highly discretionary nature of rights arising pursuant to the trust and the need to protect the position of third parties have been emphasised. Thus, for example, it was suggested by Deane J that the enforceability of rights arising under a constructive trust may not be operative until the date the court so decrees they will be operative. In Re Sabri (1996) 137 FLR 165 at 178, Chisholm J emphasised that there was no “absolute or fixed” rule as to when the interest under a constructive trust arises (see also Youssef v

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Victoria University of Technology [2005] VSC 223). It is arguable that a person who seeks the exercise of the court’s discretion in her or his favour on the basis that it would be unconscionable for the legal title holder to retain sole title, does not hold an equitable interest under a constructive trust in the period of time before the court has made its decision. Such a person may be viewed as holding an equity – a right to go to court to seek an equitable remedy in relation to the property in question (see Dal Pont, “Timing, Insolvency and the Constructive Trust” (2004) 24 Aust Bar Rev LEXIS 3; cf Levine, “Does Equity Treat as Done that which Ought to be Done?” (1997) 5 APLJ 74). However, in Parsons v McBain (2002) 109 FCR 120; 192 ALR 772 the court found that the constructive trust was not simply a remedy which came into existence when so decided by a court: rather it is a substantive right which comes into being at the time of the conduct which gives rise to its imposition. (Note, however, that the trust involved was a common intention constructive trust.) It has been argued that such a trust is more in the nature of an institutional constructive trust: see Edgeworth, Rossiter and Stone, Sackville and Neave Property Law – Cases and Materials (7th ed, LexisNexis, Sydney, 2004), p 444. See also Jabbour v Sherwood [2003] FCA 529. Statutory provisions which may affect priority

Between settlement and registration – protection provisions [6.195] Section 43A of the Real Property Act 1900 (NSW) provides:

Real Property Act 1900 (NSW), s 43A [6.200] Real Property Act 1900 (NSW), s 43A (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. (2) No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act. (3) Registration under Division 1 of Part 23 of the Conveyancing Act 1919 shall not of itself affect the rights of any person contracting or dealing in respect of estates or interests in land under the provisions of this Act. (4) Nothing in subsection (2) or (3) operates to defeat any claim based on a subsisting interest, within the meaning of Part 4A, affecting land comprised in a qualified folio of the Register.

IAC (Finance) v Courtenay [6.205] IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 High Court [The facts of the case are extracted at [6.160]. The following extract from the judgment of Taylor J relates only to his Honour’s comments on s 43A.] TAYLOR J:… It is, however, not unreasonable to assume that the section was intended to achieve some object. And that object, it seems, was to make some appropriate provision for “filling” what has been called [6.205]

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IAC (Finance) v Courtenay cont. the “gap” left in s 43 by the “settled law” concerning that section (Baalman – supra, at p 177). Does the section, then go further than merely to afford a so-called protection against notice and operate to give to the holder of a registrable memorandum of transfer priority over an earlier equitable interest where he has, without notice thereof, paid his purchase money and obtained his registrable instrument? The suggestion that it does is based upon the contention that the holder of a registrable instrument in such circumstances is enabled to assert, as against the prior equitable interest, that he has by virtue of the section a legal estate in the land acquired without notice of the earlier interest and that he is, therefore, entitled to perfect his title by registration. Such a construction, it is said, does some violence to the terms of the section but it is, it seems to me, the result, which notwithstanding its “ungainly approach” to the subject (See Baalman, supra, at p 177), the section was intended to produce. A further suggestion is that the section was intended to advance in point of time the protection afforded by s 43 upon registration. That is to say, that the concluding words of the section – “legal estate” – should be understood to mean “the estate of a registered proprietor”. But if it was intended so to advance the unqualified protection given by s 43 upon registration it would have been a simple matter to say so. To my mind the expression “a legal estate” was used advisedly and with a view to affording, at the most, the same measure of protection as that given at common law to a person who has acquired a legal estate in land without notice of some prior equitable interest. Some light is, I think, thrown on this particular problem by the provisions of s 42(d) of the Act which, itself, was introduced into the Act at the same time as s 43A. That sub-section contains an exception from the conclusiveness of a registered proprietor’s title in respect of any tenancy “whereunder the tenant is in possession or entitled to immediate possession … of which … the registered proprietor before he became registered as proprietor had notice against which he was not protected”. The italicised expression, it seems to me, is intended as a reference to the measure of protection afforded by s 43A. So read the provision acknowledges that the protection afforded by s 43A is not unqualified and provides some indication that the expression in subs (1) of the section – “legal estate” – is not to be understood as synonymous with “the estate of a registered proprietor”. Further, if the other view as to the meaning of the expression “legal estate” were to be entertained, it would have been unnecessary for the purposes of the section to make the specific provisions contained in subss (2) and (3)…

Barlin Investments Pty Ltd v Westpac Banking Corporation [6.210] Barlin Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671 Supreme Court of NSW Judgment 1 These proceedings raise the question of which of a number of unregistered dealings in respect of a strata unit situated in Fairfield has priority. With one exception, which I will come to, the facts are not substantially in dispute. Factual background 2 The plaintiff, Barlin, is a property investor. On 28 February 2003, it entered into a put and call option with Equipped Constructions Pty Ltd in respect of premises Barlin owned at Fairfield. Equipped Constructions proposed to redevelop the site as residential and one or more commercial strata units. Barlin exercised the put option and, on 13 October 2004, the resulting contract of sale settled. The purchase price of the property was funded in part by Capital Finance Australia Limited, which took a 502 [6.210]

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Barlin Investments Pty Ltd v Westpac Banking Corporation cont. first registered mortgage over the property as security. In addition, Barlin provided vendor’s finance of $400,000. That loan was secured by an unregistered mortgage over the property. Under the terms of that mortgage, the loan was repayable on 14 October 2005. On 19 November 2004, Barlin lodged a caveat to protect its interest under the mortgage. 3 In connection with the sale, Equipped Constructions also agreed to sell to Mr Barill and Mr Cattalini, the two directors of Barlin, or entities associated with them, two of the residential units on completion of the redevelopment for a combined price of $625,000. Those units were lots 34 and 36 in the proposed strata plan. 4 Although Equipped Constructions had not paid the debt of $400,000, on 28 November 2005, for reasons which are not clear, Barlin withdrew its caveat. However, at that time, it did not press for payment of its loan, expecting to be able to set off the purchase price of the two units against the amount owed to it. 5 On 7 August 2008, the strata plan in respect of the development was registered and the existing folio identifiers for the property were cancelled and replaced by a new folio identifier. 6 Following registration of the strata plan, the directors of Barlin sought to complete the acquisition of lots 34 and 36 and to setoff the purchase price against the amount owed. Settlement, however, did not occur and there were further meetings between representatives of Barlin and representatives of Equipped Constructions relating to the arrangements between them. Following those meetings, on 19 May 2009, Barlin’s solicitors wrote to the solicitors for Equipped Constructions referring to the meetings and saying: 7 On 24 September 2009, the second defendant, Mr Michael Chiha (Mr Chiha), entered into a contract to buy Lot 33 from Equipped Constructions for $430,000. Mr Chiha is related to Mr Joe Chiha, a director of Equipped Constructions. Mr Chiha did not file an appearance in the proceedings and according to Mr Raphael, who appeared for Barlin, neither he nor Mr Joe Chiha can now be found. 8 On 1 December 2009, the first defendant, Westpac (formerly St.George Bank) agreed to lend Mr Chiha $342,000 for the purpose of purchasing Lot 33. Settlement of that sale occurred on 8 December 2009. At that time, the only dealing recorded in the Register maintained by the Office of Land and Property Information (LPI) in respect of Lot 33 was the first registered mortgage to Capital Finance. At the time of settlement, Westpac paid the sum of $335,360 and Mr Chiha paid the sum of $24,000 from the first home owner’s grant. Capital Finance was paid the sum of $359,360 in discharge of the amount owing under its mortgage. It is not clear whether the balance of the purchase price was paid and, if so, where it came from. Relying on that fact, Mr Rafael suggested in closing submissions that the sale to Mr Chiha was in some way fraudulent. However, that allegation was not pleaded and there is no evidence to support it. In the transfer from Equipped Constructions to Mr Chiha, Equipped Constructions acknowledged receipt of $430,000. In the absence of any other evidence, I accept that acknowledgement as accurate. 9 On 9 December 2009, Westpac ’s settlement agent lodged for registration the following documents: • Discharge of mortgage from Capital Finance in connection with its first registered mortgage; • Transfer from Equipped Constructions to Mr Chiha; • Mortgage from Mr Chiha to Westpac. 10 Those dealings (together the Chiha Dealings) were lodged by what is commonly referred to as the “Bulk System”. Under that system, batches of documents are lodged with LPI in bulk by frequent users. At the time the documents are delivered, they are left with an LPI employee at the bulk lodgment counter. Cheques presented for payment of registration fees are separated from the documents and presented to cashiers who provide receipts for the presented cheques. The documents [6.210]

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Barlin Investments Pty Ltd v Westpac Banking Corporation cont. themselves are placed in “batts” for processing by an examination officer. No distinctive reference is given to the individual documents at that stage and no document details are entered into the Integrated Titling System (ITS) on which the Torrens Register is maintained. Documents waiting lodgment are allocated to an examination officer and are generally processed within 24 hours of presentation. Once examined, the documents are accepted for lodgment, in which case they are given a distinct reference and are entered into the ITS. Alternatively, if not accepted, they are returned to the lodging party. 11 On 10 December 2009, before the Chiha Dealings had been entered onto the ITS or assigned distinctive references, the solicitor for Barlin discovered that Lots 34 and 36 had been sold to other purchasers. As a result, on that day Barlin’s solicitor lodged caveats over Lots 33 and 75, which, at the time, were the only lots that were still registered in the name of Equipped Constructions. Those caveats were lodged by what is referred to as the ″face to face″ system of lodgment. Under that system, a document is examined at the time it is presented. If it is in registerable form it is given a distinct reference and entered into the ITS at that time. 12 The result is that the caveat in respect of lot 33 was entered into the ITS before the Chiha Dealings, and before the Chiha Dealings were given distinct references. 13 On 11 December 2009, the Chiha Dealings were examined and were given distinct references at that time. However, because of the caveat, the dealings were not registered and LPI sent Westpac a requisition in respect of those dealings referring to the caveat. 14 On 4 May 2010, Westpac lodged a lapsing notice with LPI in respect of the caveat. 15 On 22 June 2010, Barlin commenced these proceedings against Westpac seeking an extension of the caveat. 16 On 24 June 2010, the third and fourth defendants, Mr and Mrs Mitchell, entered into a contract to buy Lot 33 from Mr Chiha for $385,000. Coincidentally, St.George (now Westpac) agreed to lend Mr and Mrs Mitchell $347,500 in respect of that purchase to be secured by a first registered real property mortgage over lot 33. It appears that the persons at Westpac who were responsible for that loan were unaware that these proceedings had been commenced. 17 On 29 June 2010, the contract for purchase of lot 33 by Mr and Mrs Mitchell was settled. At that time, Mr and Mrs Mitchell paid the sum of $60,991.77 and drew a bank cheque from their account with Westpac in the sum of $281,600.24. The total of those two amounts, $342,592.01, represented the amount owing under the mortgage from Mr Chiha to Westpac. At the same time, Mr Chiha gave Mr and Mrs Mitchell a real property transfer formally acknowledging receipt of $385,000 and transferring his estate in lot 33 to Mr and Mrs Mitchell and Mr and Mrs Mitchell gave Westpac a real property mortgage. 18 Although Westpac was aware of the caveat, as I have said, the relevant persons at Westpac were unaware of the application for an extension of the caveat. They believed that the caveat would lapse in accordance with the lapsing notice. It is unclear why Mr and Mrs Mitchell’s solicitor went ahead with the settlement in the light of the caveat. 19 The matter came before the court on 30 June 2010, at which time an order was made for an extension of the caveat. Subsequently, directions were made for the proceedings to continue on pleadings and for Mr Chiha and then Mr and Mrs Mitchell to be joined as defendants. 20 By its amended statement of claim, Barlin seeks a number of declarations to the effect that its interest take priority over those of Westpac and Mr and Mrs Mitchell. Mr and Mrs Mitchell have filed a cross-claim seeking declarations to the opposite effect and an order under s 74MA of the Real Property Act 1900 (NSW) (RPA) that Barlin withdraw its caveat. 504

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Barlin Investments Pty Ltd v Westpac Banking Corporation cont. The issues 21 Westpac advances five reasons for why its interest should take priority over that of Barlin. First, it says that Barlin gave up its security in lot 33 as a consequence of the agreement recorded in the letter dated 19 May 2009 from Barlin’s solicitors to the solicitors for Equipped Constructions. Second, it says that, by virtue of s 74H(4) of the RPA, the caveat did not prevent the registration of the Chiha Dealings and that, as soon as the transfer to Mr Chiha is registered, it will, by virtue of ss 42 and 43 of the RPA, extinguish the interest claimed by Barlin. Third, it submits its equitable interest takes priority over the equitable interest claimed by Barlin. Fourth, it claims that its interest is given priority over the interest claimed by Barlin by s 43A(1) of the RPA. Lastly, it claims that it is subrogated to the rights of Capital Finance under its registered mortgage. With some variations, which I will explain, Mr and Mrs Mitchell rely on the same or similar arguments. Did Barlin agree to give up its interest in lot 33? 22 In my opinion, it did not. Although the letter dated 19 May 2009 purports to record the terms of an agreement reached between Barlin and Equipped Constructions under which it appears Barlin was to give up its unregistered mortgage in exchange for, among other things, a mortgage over lot 75, there is no evidence that that agreement was ever accepted by Equipped Constructions. On the contrary, the evidence suggests that Equipped Constructions either did not regard itself as bound by the agreement or alternatively repudiated it when it sold lots 34 and 36 to third parties, despite the fact that the terms of the agreement contemplated that those units would be leased out for a period and would ultimately be sold to Balesgrow Pty Ltd (a company associated with Mr Barill) and Mr and Mrs Cattalini. In addition, there is no evidence that Equipped Constructions paid Barlin’s solicitors’ reasonable fees as contemplated by para 6 of the letter dated 19 May 2009. The letter does not specifically record that Barlin would release the unregistered mortgage it held over the property. If the letter did record the terms of a binding agreement by which Barlin agreed to release its unregistered mortgage, it seems to me that that release was conditional on Equipped Constructions performing its obligations under the agreement, which it did not. 23 Mr Newton, who appeared for Westpac, pointed to the fact that the letter contemplated that Barlin would lodge a caveat over lot 75, which is what it did. Mr Newton submitted that that conduct provided some evidence that the agreement had been performed. There are, however, two difficulties with that submission. First, the evidence is at best equivocal. The caveat was lodged by Ms Wilson, a secretary employed by the solicitor for Barlin. She explained that she lodged caveats over lots 75 and 33 because they were the only two lots still owned by Equipped Constructions. The lodgment of those caveats is consistent with Barlin’s claim that it still had the benefit of the original unregistered mortgage. Second, the evidence does not provide an answer to the point that there is no evidence that Equipped Constructions complied with the terms of the agreement. Did s 74H(4) of the RPA permit registration of the Chiha Dealings notwithstanding the caveat? 24 Section 74H(4) of the RPA provides: Where, at the time when a caveat is lodged under section 74F to protect a particular legal or equitable estate or interest in land, a dealing which relates to the same land has been lodged for recording in the Register and is in registrable form, the caveat does not prohibit the recording in the Register of that dealing. Section 74F relevantly provides: (1) Any person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled. Sections 74F(1) and 74H(4) must be read together with ss 36(1A) and (1B), which provide: [6.210]

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Barlin Investments Pty Ltd v Westpac Banking Corporation cont. (1A) When the Registrar-General accepts a dealing, memorandum or caveat presented for lodgment, the Registrar-General shall allot thereto a distinctive reference. (1B) A dealing, memorandum or caveat is lodged, within the meaning of this Act, only when the Registrar-General has, under subsection (1A), allotted thereto a distinctive reference. 26 Mr Newton submitted that there is a distinction between the expression “is lodged” used in s 36(1B) (and its grammatical equivalents) and the expression “may lodge” used in s 74F(1). The latter expression is in the active voice. It refers to the act of someone physically presenting a caveat to LPI for the purpose of that document being recorded in the Register. On the other hand, the expression “is lodged” is in the passive voice and derives its meaning from s 36(1B). A dealing, memorandum or caveat “is lodged” when it is allotted a distinctive reference by the Registrar-General. Or, to put the point another way, s 74F(1) focuses on the acts of the caveator, whereas section 36(1B) is concerned with the acts of the Registrar-General. Section 74H(4) applies when a caveat is lodged in accordance with s 74F(1) - that is, when the caveator presents the caveat for lodgment. Therefore, that section says that, provided a dealing has been presented for registration, a caveat that is lodged subsequently cannot prevent the registration of that dealing. 27 In my opinion, there is no merit in this argument. That is so for three reasons. 28 First, there is no merit in the proposition that s 74F(1) is concerned with the presentation of a document for registration by the caveator whereass 36(1B) is concerned with acceptance by the Registrar-General. Both sections are concerned with lodgment. Necessarily, lodgment involves both presentation and acceptance of the thing being lodged. The purpose of s 36(1B) is to identify with precision when the series of acts which constitute lodgment is complete. Section 74F(1) confers on certain persons a right to lodge a caveat. It does not purport to identify the time when the exercise of that right is to be treated as being effective. That is determined by s 36(1B), which expressly applies to caveats as well as dealings and memoranda. Section 74H(4) simply says that a caveat that is lodged in accordance with s 74F - that is, a caveat which meets the requirements of s 74F, such as the requirement in subs (1) that the person lodging the caveat ″claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act″, and that is lodged within the meaning of s 36(1B) - does not prevent the registration of a document that was lodged before the caveat. 29 Second, the argument depends on a confusion. It depends on construing s 74H(4) by reference to s 74F and has as its premise the proposition that implicit in s 74F is a special meaning of “lodge” because that section uses the active tense and is, therefore, concerned with the conduct of the caveator, not the conduct of the Registrar-General. However, the conclusion of the argument is that the term “lodged” in the expression “has been lodged” in s 74H(4) also has a special meaning in relation to the lodgment of a dealing. That special meaning is that the dealing should be regarded as having been lodged as soon as it is presented for lodgment so that such a dealing takes ″priority″ over a caveat that is presented for lodgment after the dealing, but is ″lodged″ within the meaning of s 36(1B) before the dealing. That is, the argument starts with the proposition that a special meaning should be given to the notion of lodging a caveat because of the wording of s 74F(1) but ends with the conclusion that a special meaning should be given to the notion of lodging a dealing for the purpose of s 74H(4). Moreover, that special meaning is said to attach to the expression “has been lodged for recording in the Register”. Like the term (“is lodged”) defined in s 36(1B), that expression is in the passive tense. The only difference is that it is in the past tense and has appended to it the words “for recording in the Register”. The past tense cannot make a difference. Nor can the additional words. Those words add nothing to the notion of lodgment. By using the words “has been lodged” the draftsperson must have intended to pick up the definition of the expression “is lodged” in s 36(1B). 30 Third, there can be no reason for treating the lodgment of a dealing for the purpose of s 74H(4) differently from the lodgment of a dealing for other purposes. Indeed, doing so would only lead to confusion. 506 [6.210]

Unregistered Interests in Torrens Land: Nature and Priorities

CHAPTER 6

Barlin Investments Pty Ltd v Westpac Banking Corporation cont. Does Westpac’s equitable interest take priority over that of Barlin’s? 31 The traditional principle employed to determine priority between competing equitable interests is that, where the merits are equal, the earlier in time prevails over the later: Rice v Rice [1853] EngR 1102; (1853) 61 ER 646 at 648. However, later cases have emphasised that that principle should not be applied mechanically and that the real task of the court “is to determine where the better equity lies”: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation) [1965] HCA 17; (1964-1965) 113 CLR 265 at 276 per Kitto J; approved in Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30; (1983) 154 CLR 326 at 333 per Gibbs CJ (Wilson J agreeing), 339 per Mason and Deane JJ. 32 One circumstance in which the later interest holder will be held to have a “better equity” than the earlier is where the earlier interest holder is guilty of an act or omission which had or might have had the effect of inducing the later interest holder to act to his or her prejudice: Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 at 91 per Griffith CJ. In the case of Torrens Title land, one omission which has been held to be of particular relevance is the failure to lodge a caveat. Where that failure has led a subsequent interest holder to assume that there are no interests in the land besides those recorded on the Register, the prior interest may be postponed by the failure of the interest holder to lodge a caveat promptly to protect his or her interest: Butler v Fairclough at 91-92. Similarly, a person may be guilty of postponing conduct if the person withdraws a caveat in circumstances where the withdrawal has led a subsequent interest holder to believe that the person no longer seeks to protect his or her interest or no longer has an interest to protect: Perpetual Trustee Company Ltd (original plaintiff), Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd [2010] NSWSC 429 at [35] per Windeyer AJ, referring to Elderly Citizens Home of SA Inc v Balnaves (1998) 72 SASR 210. However, the mere failure to lodge a caveat is not itself enough to postpone an earlier interest if some other action has been taken to protect the unregistered interest, such as retention of the certificate of title: J & H Just (Holdings) Pty Ltd v Bank of NSW [1971] HCA 57; (1971) 125 CLR 546. 33 In the present case, Westpac took a first mortgage over lot 33 on the faith of the Register and in circumstances where it did not have any reason to believe that the property was subject to a mortgage other than to Capital Finance, which was to be discharged on settlement. Mr Chiha, who had acquired the property from Equipped Constructions, was in a position to grant that mortgage. Barlin had lodged a caveat but had subsequently withdrawn it, with the result that anyone conducting a search of the Register would have been left with the clear impression that, whatever interest Barlin had, that interest did not exist at the time that Westpac advanced Mr Chiha the sum of $342,000 and took its mortgage. It is also relevant that Westpac was simply replacing Capital Finance as first mortgagee with the result that Barlin was not in any worse position as a result of Westpac ’s mortgage: see Taleb v National Australia Bank Ltd [2011] NSWSC 1562 at [39] per Bryson AJ. For those reasons, in my opinion, Westpac had the better equity when compared to that of Barlin’s. 34 In my opinion, Mr Chiha was in the same position as Westpac. Mr Chiha did not give evidence. However, there is no reason to believe that he was any more aware of Barlin’s equitable interest than Westpac. Like Westpac, he was entitled to rely on the Register; and the Register did not reveal the existence of Barlin’s interest because Barlin had chosen to withdraw its caveat. Mr Chiha took a transfer of the property and became liable to repay Westpac the amount he had borrowed from it. It is difficult to believe that he would have done so if he had been aware of the mortgage to Barlin. In those circumstances, in my opinion, Barlin’s interest was also postponed to his. 35 The position is different in the case of Mr and Mrs Mitchell. At the time they acquired their interest, Barlin had lodged a caveat in respect of its interest. If Mr and Mrs Mitchell were not aware of that caveat that could only be the result of their failure to search the Register. That failure cannot give them the better equity. 36 Mr Van Der Vlag, who appeared for Mr and Mrs Mitchell, submitted that they had the better equity because they took their interest from someone - that is, Mr Chiha - who had a better equity. I do not [6.210]

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Barlin Investments Pty Ltd v Westpac Banking Corporation cont. accept that submission. The question is whether Mr and Mrs Mitchell’s equitable interest was superior to that of Barlin’s. That involves a consideration of the circumstances surrounding the creation of the two competing equitable interests, not other equitable interests. One circumstance that is relevant to that examination is the fact that Mr and Mrs Mitchell acquired their interest from someone whose interest did have priority. However, that cannot outweigh the fact that the lodgment by Barlin of its caveat put Mr and Mrs Mitchell on notice of Barlin’s interest. The same, of course, is true of Westpac insofar as it claims an interest based on the mortgage it took from Mr and Mrs Mitchell. Does s 43A of the RPA give Westpac and Mr and Mrs Mitchell priority. 37 Section 43A(1) of the RPA provides: For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. It is now accepted that this section “confers upon a purchaser who has received a registrable instrument and paid the purchase money the same protection against notice as that achieved by a purchaser who acquires the legal estate at common law”: Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd [1976] HCA 30; (1976) 133 CLR 671 at 676 per Barwick CJ, Mason and Jacobs JJ, approving the decision of Taylor J in IAC (Finance) Pty Ltd v Courtenay [1963] HCA 64; (1963) 110 CLR 550 at 583-5. Consequently, the interest of a purchaser who receives a registrable instrument without notice of a prior unregistered interest takes priority over the earlier interest. However, the protection of s 43A(1) is not available to a purchaser who, at or before completion of the transaction, receives notice of a prior unregistered interest: United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) SR (NSW) 331. 38 The protection afforded by s 43A is also only available to a person who takes his or her interest from the registered proprietor. As Taylor J explained in IAC (Finance) Pty Ltd v Courtenay [1963] HCA 64; (1993) 110 CLR 550 at 591: [The] section clearly contemplates the position of a person dealing with a registered proprietor for it speaks of “the estate of interest in land under the provisions of this Act, taken by a person under an instrument registrable ... under this Act” and an instrument would only be so registrable if executed by the registered proprietor. 39 However, at common law, a person who claims an interest through a person who is a bona fide purchaser for value and without notice is entitled to the same protection as the protection afforded to the person through whom the interest is claimed, even if the person making the claim acquired his or her interest with notice: Wilkes v Spooner [1911] 2 KB 473. Section 43A operates in the same way. As the Court of Appeal said in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 at 477: ... s 43A operates not only to protect against notice the mortgagor who takes the discharge of mortgage, but also any person claiming under the mortgagor, i.e. the purchaser. It gives what has been described before us as a “successive” effect to s 43A, but such an effect seems to us to accord with the general law. If A has the benefit of a defence of purchaser for value without notice, all persons claiming under A have the same benefit, whether or not they had notice and whether or not they were purchasers for value, provided they did not participate in an original breach of trust (In Re Stapelford Colliery Co. (Barrow’s Case) [(1880) 14 Ch D 432 at 445]). The decision in Jonray has since been approved by the High Court in Meriton Apartments at 674-677. 40 In the present case, on the findings I have made, Mr Chiha was entitled to the protection of s 43A because he took his interest from the registered proprietor for value and without notice of Barlin’s 508 [6.210]

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CHAPTER 6

Barlin Investments Pty Ltd v Westpac Banking Corporation cont. interest. Westpac and Mr and Mrs Mitchell were entitled to the same protection because they took their interests from him. In any event, on registration of Mr Chiha’s interest, Barlin’s interest would be extinguished under ss 42 and 43 of the RPA. In those circumstances, there is nothing to prevent registration of the subsequent dealings: Weller v Williams [2010] NSWSC 716. 41 Mr Raphael sought to resist the conclusion of the previous paragraph on two grounds. First, he submitted that the successive effect of s 43A could not be stretched as far as Mr and Mrs Mitchell, who were clearly on notice of Barlin’s interest. Secondly, he submitted that there was no evidence that any of the relevant dealings were in registrable form. I do not accept either of those submissions. The first is inconsistent with Jonray. As to the second, the relevant dealing is the transfer from Equipped Constructions to Mr Chiha. On the face of it, that dealing appears to be in registrable form. Mr Raphael does not point to any aspect of it to suggest otherwise. Following examination of the Chiha Dealings, the only requisition raised in respect of them by LPI was Barlin’s caveat. In those circumstances, I am satisfied that the dealing is in registrable form. The result is that Westpac’s and Mr and Mrs Mitchell’s interests have priority over that of Barlin. Is Westpac subrogated to the rights of Capital Finance? 42 Having regard to the conclusions I have reached, it is not necessary to determine this question. However, had it be necessary for me to do so, I would have applied the approach taken by Bryson AJ in Taleb v National Australia Bank Ltd [2011] NSWSC 1562 at [69]- [70] and concluded that Westpac was subrogated to the rights of Capital Finance up to the amount it paid to discharge the mortgage owed to Capital Finance - that is, up to the amount of $335,360. Orders 43 In my opinion, there is no reason to make any of the declarations sought by Mr and Mrs Mitchell. It is sufficient to order that Barlin withdraw its caveat over lot 33 so that the relevant dealings can be registered. Consequently, the orders of the court are: (1) Within 7 days of the date of this judgment the plaintiff withdraw caveat AF184665. (2) The parties have liberty to apply for further orders to give effect to order (1). (3) The proceedings, including the first cross-claim, otherwise be dismissed. (4) The plaintiff pay the defendants’ costs of the proceedings (including the cross-claim).

[6.215]

Notes and Questions

1. The view of Taylor J was adopted in Meriton Apartments Pty Ltd v McLaurin & Tait Developments Pty Ltd (1976) 133 CLR 671 and also in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) (Pt 1) 68. Cf the view of Kitto J at 571-572 in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. See also Weller v Williams [2010] NSWSC 716 where the view of Taylor J. was accepted as correct. Aitken, “Protection before registration: operation of s 43A, Real Property Act”, (2010) 48(8) Law Society Journal 68. 2. There are a variety of statutory provisions in other jurisdictions in which an attempt is made to provide some solution to the problems which may arise as a result of the time lag between settlement and registration and which may affect priorities. For example Pt 7A of the Land Title Act 1994 (Qld) provides for the deposit of settlement notices by persons who have an interest in a lot pursuant to a transfer or a mortgage. A settlement notice [6.215]

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prevents the registration of a dealing lodged after the notice and with some differences, is intended to operate in the same way as a caveat. It is a less expensive alternative. Apart from preventing registration of dealings affecting the lot, the settlement notice also operates to “preserve a place in the queue for registration”: by s 150 instruments which are lodged after a settlement notice are deemed to be lodged after the instrument set out in the settlement notice. Although settlement notices are not part of the register they do give notice of the interests within them as the information is available on an appropriate search. It has been suggested that the relevance of the settlement notice in a priority dispute between equitable interests will be the same as the relevance of the caveat in such a dispute. See also the system of priority notices in Tasmania, Land Titles Act 1980 (Tas), s 52, Victoria, Transfer of Land Act 1958 (Vic) ss 91C–91J and South Australia, Real Property Act 1886 (SA), Pt 13A. 3. The decision of Barlin Investments v Westpac Banking Corporation (2012) 16 BPR 30, 671 has also raised questions around the practice of bulk lodgement. This involves large volume users of the land titles office being required or encouraged to lodge multiple dealings at the one time and in a bundle to the office. The bulk is then given to an examining officer who, after inspection will give each dealing a distinctive reference number. This process can take up to 24 hours. For a discussion of this practice, and criticism, see Entwisle, “Bulk Lodgment and protection from later lodged caveats” (2013) 87 ALJ 210.

510 [6.215]

CHAPTER 7 Public Lands and Land Rights of Indigenous Peoples [7.05]

GRANTS OF PUBLIC LAND ................................................................................... 511 [7.05] [7.15]

[7.25]

RECOGNITION OF NATIVE TITLE ......................................................................... 518 [7.25]

[7.35]

Statutory recognition .......................................................................... 536 Definition of native title ...................................................................... 536 Validation of acts of the Commonwealth government ................... 537 Procedures for protecting native title ............................................... 537

EXTINGUISHMENT OF NATIVE TITLE .................................................................. 538 [7.55]

Permanence of inconsistent acts ....................................................... 538 [7.55]

[7.60]

Fejo v Commonwealth ........................................................... 538

Impact of limited Crown grants ........................................................ 541 [7.60] [7.70] [7.80]

[7.85]

Mabo v Queensland (No 2) ................................................... 518

THE NATURE OF NATIVE TITLE ............................................................................. 536 [7.35] [7.40] [7.45] [7.50]

[7.55]

Davies v Littlejohn ................................................................. 511 Bathurst City Council v PWC Properties Pty Ltd ........................ 514

Wik Peoples v Queensland ..................................................... 541 Western Australia v Ward ....................................................... 551 Wilson v Anderson ................................................................. 563

INDIGENOUS LAND CLAIMS ............................................................................... 569 [7.85]

Relationship to the land ..................................................................... 569 [7.85] [7.95]

[7.105]

The claimant group: the need for a cohesive local community or group .................................................................................................... 576 [7.105]

[7.115]

Yanner v Eaton ..................................................................... 569 Akiba v Commonwealth ........................................................ 572

De Rose v South Australia ...................................................... 576

Continued use ..................................................................................... 586 [7.115]

Members of the Yorta and Yorta Aboriginal Community v Victoria .............................................................................. 586

GRANTS OF PUBLIC LAND Davies v Littlejohn [7.05] Davies v Littlejohn (1923) 34 CLR 174; [1923] HCA 64 High Court of Australia KNOX CJ [footnotes deleted] John Henry Davies was at the date of his death the owner of certain station properties, which comprised (inter alia) a considerable area of land conditionally purchased under the Crown Lands Acts, on which balances of purchase-money amounting in all to a large sum were owing to the Crown. These balances were not due at the time of testator’s death, but were payable with interest by instalments extending over a number of years. By his will testator directed that his trustees should hold the whole of his residuary estate and the annual produce and income thereof upon trust, until the [7.05]

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Davies v Littlejohn cont. charges or encumbrances on his station properties should be entirely liquidated, to appropriate all the net annual produce and income arising from his residuary estate, over and above the sum of £1500 per annum, in or towards payment of such charges and encumbrances. The question raised on this appeal is whether the expression “charges and encumbrances” in this direction extends to and includes the instalments of purchase-money on the conditionally purchased lands. I agree with Harvey J. in thinking that there is nothing in the will which requires or permits the expression “charges and encumbrances” to be given any meaning other than that which it bears as an ordinary legal term, and in this view the sole question is whether instalments owing but not yet due on conditionally purchased lands are charges or encumbrances on such lands within the ordinary legal meaning of those words. The learned Judge held, following the decision of Simpson C.J. in Eq. in Brett v. Hamilton, that the Crown had a vendor’s lien on conditionally purchased land for the amount of the unpaid instalments, and that consequently the instalments constituted a charge on the land and were included in the charges and encumbrances directed to be paid out of the income of the residuary estate. I feel no doubt that, if the Crown has a vendor’s lien for the amount of these instalments, his conclusion is correct, and therefore proceed to consider whether such a lien exists. The rule to be applied seems to be that, where a vendor delivers possession of land to a purchaser without receiving the purchase-money, equity gives the vendor a lien on the land for the money unless there is something in the transaction itself, or in the circumstances, leading to a clear and manifest inference that the intention of the parties is otherwise (Dixon v. Gayfere; Winter v. Lord Anson). In the present case the rights and liabilities of the Crown and the purchaser are regulated by the Crown Lands Consolidation Act 1913. That Act provides by sec. 6 that Crown lands shall not be sold, leased or dealt with except under and subject to its provisions. It contains elaborate provisions regulating the acquisition, holding, disposition, and forfeiture of (inter alia) conditional purchases, which may be outlined as follows:–With certain specified exceptions all Crown lands are open for conditional purchase at a fixed price of 20s. per acre and, subject to certain restrictions and disqualifications prescribed by the Act, any person may apply for an original conditional purchase. The application is referred to the Local Land Board, which confirms it if satisfied that it is made in good faith, but may for sufficient reasons disallow it. The applicant must reside on the land for a period of ten years from the date of the application, and must also comply with certain conditions as to fencing or improvements. The purchase-money with interest at 2 1/3 per cent on the unpaid balance is payable by annual instalments of 5 per cent of the price of the land, the first instalment being payable at the end of the third year after the date of application, and the holder has the right to pay off the whole or any number of the instalments at any time after the issue of the final certificate that he has complied with the conditions other than payment of purchase-money. The land, together with any moneys paid in respect of it, is liable to forfeiture on default being made in performance of the conditions of residence, &c., or in payment of any instalment of purchase-money within three months of due date. Forfeiture is declared by notification published in the Government Gazette and takes effect thirty days after such notification, and sec. 206 provides that thereupon the land “shall become Crown lands … and be reserved from every form of sale or lease, until otherwise notified in the Gazette.” The forfeiture may be waived or reversed by the Minister in accordance with the provisions of the Act. By sec. 181 it is provided that the conditions attaching to a conditional purchase shall bind, not only the original applicant, but also all persons deriving title through or under him. The title to a conditional purchase is to commence from the date of the application, if valid (sec. 150); and, when all conditions have been complied with and the balance of purchase-money and certain fees have been paid, “a Crown grant in fee simple of the land shall be issued upon application.” By sec. 261 it is provided that a transfer of conditionally purchased land made, executed and lodged in accordance with the regulations shall be as effective to pass the estate and interest of the transferor as if a conveyance under seal had been executed, subject to the conditions that the equities of all persons claiming any estate or interest in the 512 [7.05]

Public Lands and Land Rights of Indigenous Peoples

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Davies v Littlejohn cont. land by matter prior to the execution of the transfer shall not be affected thereby. By reg. 329 no transfer may be registered or recognized if any payment to the Crown is in arrear. By sec. 270 it is provided that a sale of the estate of a conditional purchaser under the decree or order of any Court shall pass to a purchaser only such right, title and interest as the conditional purchaser was entitled to at the date of the decree or order, and subject to all conditions remaining to be performed at that date. It is abundantly clear, from the provisions of the Act and of the Regulations, that the object of the Legislature was, not to provide for the making of ordinary contracts for the sale of land by the Crown to its subjects, but to make Crown lands available for purposes of settlement in limited areas; not primarily to provide for raising revenue by sales of land, but to promote settlement on the land. This is illustrated by the restrictions imposed on auction sales and special sales, and by the limitation of the areas of holdings and of the rights of existing holders of lands to acquire by transfer or otherwise further holdings. Reference may be made to the schedule of questions which the applicant for a conditional purchase is required to answer (see form 9, sched. B). The mutual rights and obligations of the Crown and the applicant for, or holder of, a conditional purchase are to be ascertained by reference to the provisions of the Act and Regulations, for the Crown has no power to dispose of the land except in strict accordance therewith. The rights and obligations of the purchaser are statutory–not contractual. He does not, at any rate expressly, agree to perform the conditions or pay the purchase-money, though the statute imposes an obligation upon him to do so. There is no agreement on the part of the Crown to issue a Crown grant, though, no doubt, the purchaser could by appropriate proceedings compel the performance of the statutory obligation to issue a grant when the conditions have been complied with. These considerations lead me to think that it is unsafe to treat the rules governing ordinary sales of land by one person to another as necessarily applicable in determining the relations of the Crown to a conditional purchaser under the statute. But, whether such rules are or are not generally applicable, I am of opinion that the provisions of the Act lead to a clear and manifest inference that it was not the intention of the Legislature that the Crown should have a vendor’s lien for the unpaid balance of purchase-money in respect of lands conditionally purchased under the Act. A vendor’s lien can only be enforced when it has been established by judicial decree, and the method of enforcing it is by the sale of the land over which the lien exists. The adoption of this method in the case of conditionally purchased land is rendered impracticable by the provisions of sec. 270 of the Act. By force of that section the only estate or interest in the land which can be sold under the decree of a Court is the estate, right, title or interest to which the conditional purchaser was entitled at the date of the decree. On the hypothesis of default in payment having been made, that estate would be liable to immediate forfeiture and consequently of no value, and it seems to me that this provision is inconsistent with the existence of an intention that the Crown should have a vendor’s lien. And the provision for forfeiture on default obviates the necessity for any such lien. As Harvey J. pointed out, the only decision in point is that in Brett v. Hamilton. It does not appear from the report that the question of a vendor’s lien was argued, and the learned Judge seems to have assumed, rather than decided, that such a lien existed. If there be no vendor’s lien on the land for the unpaid instalments, if they be not charged on or recoverable out of the land, I see no other ground on which they can be held to be “charges or encumbrances” on the station property. The right of the Crown to forfeit does not appear to me to amount to a charge or encumbrance, any more than a right to re-enter and determine a lease on default in payment of future rent could properly be said to be a charge or encumbrance on the leasehold estate. The true position seems to me to be that the continued possession and ultimate acquisition of the land is dependent on the payment in due course of future instalments of the price. For these reasons I am of opinion that the appeal should be allowed, and the order of Harvey J. varied by declaring that the charges and encumbrances to be paid out of the surplus income of the residuary estate of the testator do not include the instalments on conditionally [7.05]

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Davies v Littlejohn cont. purchased lands which were unpaid at the date of his death, and by omitting the orders consequential on the declaration of inclusion of such instalments in such order. Costs of all parties out of estate, those of trustees as between solicitor and client.

Notes

[7.10]

1. As well as the traditional freehold grants, Australian governments have granted land, particularly in rural areas on leasehold tenure. These grants have been authorised by legislation and a wide range of complex interests has evolved. The courts have emphasised the legislative base as the starting point for examination of the rights under such leases. See Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [6.150]–[6.160]. 2. The issue of the impact of leasehold interests on the continued existence of native title was the central issue in the controversial decision in Wik Peoples v Queensland (1996) 187 CLR 1 (see [7.60]). In that case the capacity for a later Crown grant to extinguish a native title was not questioned, but the lack of any clear or general principle as to the rights conferred by a leasehold interest created uncertainty. The High Court decision rests on the conclusion that the lease in question did not confer exclusive possession and thus allowed the continued existence of native title.

Bathurst City Council v PWC Properties Pty Ltd [7.15] Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 157 ALR 414; 72 ALJR 1470; [1998] HCA 59 High Court of Australia GAUDRON, McHUGH, GUMMOW, HAYNE AND CALLINAN JJ: [footnotes omitted] The essential issue in this appeal is whether certain land which at the commencement of the Local Government Act 1993 (NSW) (“the Act”) was vested in the appellant, Bathurst City Council (“the Council”), and which was used for a car park was “land subject to a trust for a public purpose” within the meaning of cl 6(2)(b) of Sched 7 of the Act. If the land answered this description, then the Council dealt with it in a fashion beyond its powers. Clause 6(3) of Sched 7 empowered a council by resolution, within one year after the commencement of the Act on 1 July 1993, to classify as community land or operational land any public land vested in it or under its control which was not classified by cl 6(2). By resolution dated 18 May 1994, the Council classified land which included the car park as operational land. However, if the subject land comprised “land subject to a trust for a public purpose” under cl 6(2), it was not open to the Council to reclassify it in exercise of the power conferred by cl 6(3). Reclassification of community land as operational land could be achieved only by a local environmental plan, pursuant to s 27(1) of the Act. The litigation was commenced by the respondent, PWC Properties Pty Ltd (“PWC”), in the Land and Environment Court which is constituted by the Land and Environment Court Act 1979 (NSW) (“the LEC Act”). It is convenient first to indicate the source of the jurisdiction exercised by that Court in the present case. The legislation Section 16 of the LEC Act divides the jurisdiction of the Court into six classes, one of which is Class 4. This is detailed in s 20, which is headed “environmental planning and protection and development 514 [7.10]

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Bathurst City Council v PWC Properties Pty Ltd cont. contract civil enforcement”. Paragraph (d) of s 20(1) provides that the Court has jurisdiction to hear and dispose of proceedings under s 674 of the Act. Section 674(1) of the Act states: Any person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of this Act. The expression “a breach of this Act” means a contravention of or failure to comply with that statute and a threatened or apprehended contravention of or a threatened or apprehended failure to comply with it (s 672). In order to appreciate the issues which are before this Court, it is necessary to consider other provisions of the Act. “Public land” is defined in the Dictionary to the Act as meaning any land, including a public reserve, which is vested in or under the control of a council. Part 2 (ss 25–54) of Ch 6 of the Act requires all public land to be classified as either “community” or “operational” (ss 25, 26). With presently immaterial exceptions, a council has no power to sell, exchange or otherwise dispose of community land. Community land must not be leased or licensed for more than 21 years. It may only be leased or licensed for more than five years if public notice of the proposal is given and, if objection is made, the Minister’s consent is obtained (ss 45–47). These restrictions do not apply to operational land. Hence the distinction, vital to this litigation, between the two classifications. Schedule 7 to the Act makes savings, transitional and other provisions consequent on the enactment of the legislation. Clause 6 of Sched 7 applies to all public land within a council’s area at the commencement of Pt 2 of Ch 6 on 1 July 1993. On that date, land vested in or under the control of a council being “land subject to a trust for a public purpose” is taken to have been classified as community land (cl 6(2)(b)). Reclassification of public land may be made by a local environmental plan (s 27(1)). However, in respect of a proposal in such a draft local environmental plan to reclassify community land as operational land, a council must arrange a public hearing under s 68 of the Environmental Planning and Assessment Act 1979 (NSW) (“the EPA Act”) (s 29). Upon the commencement of such a local environmental plan with respect to the reclassification of community land, that land, with certain presently immaterial exceptions, is “discharged from any trusts, estates, interests, dedications, conditions, restrictions and covenants affecting the land or any part of the land” (s 30(1)). In the Land and Environment Court, PWC obtained declaratory and injunctive relief against the Council. On appeal, the New South Wales Court of Appeal replaced that relief with a declaration that on the commencement of the Act the land in question was classified as community land, being “land subject to a trust for a public purpose” within the meaning of cl 6(2)(b) of Sched 7 of the Act. The Court of Appeal also restrained the Council from dealing with the land, unless reclassified, otherwise than in accordance with the restrictions imposed by the Act upon the use and management of community land. The Council seeks in this Court orders setting aside the orders of the Court of Appeal and dismissing the application by PWC. The land was vested in the Council at a time when the Local Government Act 1919 (NSW) (“the 1919 Act”) was in force. Accordingly, it will be necessary to have regard to the provisions of that legislation in determining whether on 1 July 1993 the land was “subject to a trust for a public purpose”. The facts PWC was formerly named Permewan Wright Consolidated Pty Ltd. The change of name occurred on 18 July 1986. PWC is the owner of a shopping centre at 208-218 Howick Street, Bathurst, which is known as the Payless Plaza Shopping Centre. A 200 space car park (“the car parking site”) is provided on an adjacent bitumen surfaced area of land comprising approximately 8,600 square metres. The land is owned or controlled by the Council. The car parking site is in the centre of the block bounded [7.15]

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Bathurst City Council v PWC Properties Pty Ltd cont. by William, Howick, Bentinck and Russell Streets, Bathurst. It has a vehicular ingress and egress available to the car parking site and a loading dock in the Shopping Centre from Bentinck and Russell Streets. The land the subject of the relief which has been granted in these proceedings comprises Lot 21 in Deposited Plan No 258221 and Lot 12 in Deposited Plan No 609772. Lot 12 was transferred by PWC to the Council by a transfer dated 15 June 1987. The only consideration stated in the transfer is $1. It appears to have been preceded by a contract for sale but this is not in evidence. The land in Lot 21 was transferred by Gurdon Motors Pty Ltd (“Gurdon”) to the Council by transfer dated 5 November 1981. This states a consideration of $800. The transfer was preceded by a contract for sale dated 29 February 1980 between Gurdon and the Council. Special condition 2 thereof stated: The purchaser agrees that it will give the benefit of 41 car spaces to the land owned by the vendor adjacent to the subject land comprising premises 210-218 Howick Street Bathurst. The said benefit of car spaces shall accrue to any development application lodged by the vendor or any purchaser from the vendor or any owner for the time being of 210-218 Howick Street Bathurst who wishes to develop 210-218 Howick Street Bathurst. It is agreed that this condition will not merge on completion of this contract. Whilst special condition 2 was expressed so as not to merge on completion of the contract, it fell short of expressing an intention that the land in Lot 21 was to be held by the Council not as owner but solely as trustee. Formal words were not required, provided there was made clear an intention to constitute the Council trustee of the land. However, the intention manifested in special condition 2 was directed to another objective. This was the attachment of a car park space “benefit” to a development application which might be made by a party which, for the time being, owned 208-218 Howick Street. The text of special condition 2 may be compared with that of a letter which was held by the Privy Council in Brisbane City Council v Attorney-General for Queensland to constitute that Council trustee of a charitable trust. In the present case, the Court of Appeal was not persuaded that any of the material before it “demonstrated any express trust”. This phrase reflects the text of s 23C(1)(b) of the Conveyancing Act 1919 (NSW) (“the Conveyancing Act”). This requires that a declaration of trust inter vivos respecting any land be “manifested and proved” by some writing which is signed by some person who is able to declare such a trust. In this Court there is no notice of contention or cross-appeal re-agitating any question of the existence of an express trust. That there was a distinction between public purposes and charitable purposes had been settled by the House of Lords in 1901. In Blair v Duncan, a gift of one-half of the residuary estate of the testatrix to be applied for “such charitable or public purposes as my trustee thinks proper” failed. Lord Davey had said: If, therefore, the words in the present case were merely “charitable purposes,” or were “charitable and public purposes,” I think effect might be given to them, the words in the latter case being construed to mean charitable purposes of a public character. But, my Lords, the words we have here are “charitable or public purposes,” and I think these words must be read disjunctively. It would, therefore, be in the power of the trustee to apply the whole of the fund for purposes which are not charitable though they might be of a public character. As is suggested by the reference by Roper CJ in Eq in the City of Parramatta Case to “public trusts” created by Crown grant, in the law of New South Wales, the terms “public use” and “public purpose” have a lengthy and significant history. First, Imperial legislation, the Australian Colonies Waste Lands Act 1842 (Imp) (“the 1842 Act”), which regulated the management and control of colonial “waste lands of the crown”, defined that term (in s 23) so as to exclude lands previously granted from the Crown in fee simple, or for an estate in freehold, or for a term of years, and not “dedicated and set apart for 516 [7.15]

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Bathurst City Council v PWC Properties Pty Ltd cont. some public use”. Further, s 3 of the 1842 Act provided that the restrictions imposed by the legislation did not curtail the exercise of the prerogative with respect to lands required: for public roads or other internal communications, whether by land or water, or for the use or benefit of the aboriginal inhabitants of the country, or for purposes of military defence, or as the sites of places of public worship, schools, or other public buildings, or as places for the interment of the dead, or places for the recreation and amusement of the inhabitants of any town or village, or as the sites of public quays or landing places on the sea coast or shores of navigable streams, or for any other purpose of public safety, convenience, health, or enjoyment. In Williams v Attorney-General for New South Wales, Higgins J described s 3 of the 1842 Act 1880 as saving the rights of the Crown “to except from sale and either to reserve or dispose of the lands for roads and certain other public purposes”. Of the phrase “which have not been dedicated and set apart for some public use” which appeared in the definition in s 23, Higgins J said that one might conjecture that the draftsman: felt a difficulty in applying the word “dedication” to the appropriation of lands for purposes other than the purpose of highways; that he meant the words “set apart” to refer to the appropriation of lands for recreation or for hospitals or for public purposes other than the purpose of highways. But, whatever may have been the motive for the change of language, there is no doubt, to my mind, that both expressions, “dedicate” and “set apart” - “for some public use” - connote the giving to the public of some rights in the land which subtract from the Crown’s full ownership; the appropriation of the land for some definite public purpose, not for public purposes generally; and for some estate or interest better than at mere will. Conclusion At the commencement of the Act on 1 July 1993, the nominated lots were held by the Council for a public purpose within the meaning of s 526 of the 1919 Act. Land so held was then, with the repeal of the 1919 Act, to be considered as vested in or under the control of the Council and as subject to a trust for a public purpose, within the meaning of cl 6(2)(b) of Sched 7 of the Act. The term “trust” in cl 6(2)(b) of Sched 7 is apt to include those governmental responsibilities which, whilst not imposing a trust obligation as understood in private law, may fairly be described as a “statutory trust” which bound the land and controlled what otherwise would have been the freedom of disposition enjoyed by the registered proprietor of an estate in fee simple. The trust was “not a trust for persons but for statutory purposes”. It would be no answer to the existence of such a constraint that there was lacking a beneficial owner of the nominated lots with standing in a court of equity to enforce observance by the Council of the dedication of the nominated lots to the provision of parking spaces. It had been within the competence of the Attorney-General to seek to restrain action incompatible with “the due exercise of the powers of the [C]ouncil or the due discharge of its duties”. It follows that it was not open to the Council to resolve to reclassify land including the nominated lots in purported exercise of the power conferred by cl 6(3) of Sched 7 of the Act. The appeal should be dismissed with costs.

[7.20]

Notes

1. The basic principle has been that members of the public have no proprietary interest in land held by public authorities other than rights of user; Stow v Mineral Holdings (Australia) Pty Ltd (1977) 180 CLR 295; 14 ALR 397 (see [1.40]). [7.20]

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2. Rights may be conferred upon members of the public by legislation or because a charitable trust has been imposed (normally when land has been transferred by an individual to a public authority for a particular purpose. (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [6.205]).

RECOGNITION OF NATIVE TITLE Mabo v Queensland (No 2) [7.25] Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia BRENNAN J: The basis of the theory of universal and absolute Crown ownership It is one thing for our contemporary law to accept that the laws of England, so far as applicable, became the laws of New South Wales and of the other Australian colonies. It is another thing for our contemporary law to accept that, when the common law of England became the common law of the several colonies, the theory which was advanced to support the introduction of the common law of England accords with our present knowledge and appreciation of the facts. When it was sought to apply Lord Watson’s assumption in Cooper v Stuart that the colony of New South Wales was “without settled inhabitants or settled law” to Aboriginal society in the Northern Territory, the assumption proved false. In Milirrpum v Nabalco Pty Ltd Blackburn J said (1971) 17 FLR 141 at 267: The evidence shows a subtle and elaborate system highly adapted to the country in which the people led their lives, which provided a stable order of society and was remarkably free from the vagaries of personal whim or influence. If ever a system could be called “a government of laws, and not of men”, it is that shown in the evidence before me. Faced with a contradiction between the authority of the Privy Council and the evidence, his Honour held that the class to which a colony belonged was a question of law, not of fact (ibid, at p 244; McNeil, Common Law Aboriginal Title (1989), p 292, fn 207; Lester, The Territorial Rights of the Inuit of the Canadian Northwest Territories: A Legal Argument (unpublished doctoral thesis (1981)), pp 100-107, 155-157: Whether or not the Australian aboriginals living in any part of New South Wales had in 1788 a system of law which was beyond the powers of the settlers at that time to perceive or comprehend, it is beyond the power of this Court to decide otherwise than that New South Wales came into the category of a settled or occupied colony. The facts as we know them today do not fit the “absence of law” or “barbarian” theory underpinning the colonial reception of the common law of England. That being so, there is no warrant for applying in these times rules of the English common law which were the product of that theory. It would be a curious doctrine to propound today that, when the benefit of the common law was first extended to Her Majesty’s indigenous subjects in the Antipodes, its first fruits were to strip them of their right to occupy their ancestral lands. Yet the supposedly barbarian nature of indigenous people provided the common law of England with the justification for denying them their traditional rights and interests in land, as Lord Sumner speaking for the Privy Council said in In re Southern Rhodesia [1919] AC 211 at 233-234: The estimation of the rights of aboriginal tribes is always inherently difficult. Some tribes are so low in the scale of social organisation that their usages and conceptions of rights and duties are not to be reconciled with the institutions or the legal ideas of civilised society. Such a gulf cannot be bridged. It would be idle to impute to such people some shadow of the rights known to our law and then to transmute it into the substance of transferable rights of property as we know them. 518 [7.25]

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Mabo v Queensland (No 2) cont. As the indigenous inhabitants of a settled colony were regarded as “low in the scale of social organisation”, they and their occupancy of colonial land were ignored in considering the title to land in a settled colony. Ignoring those rights and interests, the Crown’s sovereignty over a territory which had been acquired under the enlarged notion of terra nullius was equated with Crown ownership of the lands therein, because, as Stephen CJ said, there was “no other proprietor of such lands”. Thus, a Select Committee on Aborigines reported in 1837 to the House of Commons that the state of Australian Aborigines was “barbarous” and “so entirely destitute … of the rudest forms of civil polity, that their claims, whether as sovereigns or proprietors of the soil, have been utterly disregarded”. (Cited by Lindley, op cit, at p 41.) The theory that the indigenous inhabitants of a “settled” colony had no proprietary interest in the land thus depended on a discriminatory denigration of indigenous inhabitants, their social organisation and customs. As the basis of the theory is false in fact and unacceptable in our society, there is a choice of legal principle to be made in the present case. This Court can either apply the existing authorities and proceed to inquire whether the Meriam people are higher “in the scale of social organisation” than the Australian Aborigines whose claims were “utterly disregarded” by the existing authorities or the Court can overrule the existing authorities, discarding the distinction between inhabited colonies that were terra nullius and those which were not. The theory of terra nullius has been critically examined in recent times by the Inter/-national Court of Justice in its Advisory Opinion on Western Sahara (1975) ICJR, at p 39. There the majority judgment read: “Occupation” being legally an original means of peaceably acquiring sovereignty over territory otherwise than by cession or succession, it was a cardinal condition of a valid “occupation” that the territory should be terra nullius – a territory belonging to no-one – at the time of the act alleged to constitute the “occupation” (cf Legal Status of Eastern Greenland, PCIJ, Series A/B, No 53, pp 44 f and 63 f). In the view of the Court, therefore, a determination that Western Sahara was a “terra nullius” at the time of colonisation by Spain would be possible only if it were established that at that time the territory belonged to no-one in the sense that it was then open to acquisition through the legal process of “occupation”. Whatever differences of opinion there may have been among jurists, the State practice of the relevant period indicates that territories inhabited by tribes or peoples having a social and political organisation were not regarded as terrae nullius. It shows that in the case of such territories the acquisition of sovereignty was not generally considered as effected unilaterally through “occupation” of terra nullius by original title but through agreements concluded with local rulers. On occasion, it is true, the word “occupation” was used in a non-technical sense denoting simply acquisition of sovereignty; but that did not signify that the acquisition of sovereignty through such agreements with authorities of the country was regarded as an “occupation” of a “terra nullius” in the proper sense of these terms. On the contrary, such agreements with local rulers, whether or not considered as an actual “cession” of the territory, were regarded as derivative roots of title, and not original titles obtained by occupation of terrae nullius. If the international law notion that inhabited land may be classified as terra nullius no longer commands general support, the doctrines of the common law which depend on the notion that native peoples may be “so low in the scale of social organisation” that it is “idle to impute to such people some shadow of the rights known to our law” (In re Southern Rhodesia [1919] AC, at 233-234) can hardly be retained. If it were permissible in past centuries to keep the common law in step with international law, it is imperative in today’s world that the common law should neither be nor be seen to be frozen in an age of racial discrimination. The fiction by which the rights and interests of indigenous inhabitants in land were treated as non-existent was justified by a policy which has no place in the contemporary law of this country. The policy appears explicitly in the judgment of the Privy Council in In re Southern Rhodesia in rejecting an argument (ibid, at p 232) that the native people “were the owners of the unalienated lands long [7.25]

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Mabo v Queensland (No 2) cont. before either the Company or the Crown became concerned with them and from time immemorial … and that the unalienated lands belonged to them still”. Their Lordships replied (ibid, at 234): the maintenance of their rights was fatally inconsistent with white settlement of the country, and yet white settlement was the object of the whole forward movement, pioneered by the Company and controlled by the Crown, and that object was success-fully accomplished, with the result that the aboriginal system gave place to another prescribed by the Order in Council. Whatever the justification advanced in earlier days for refusing to recognise the rights and interests in land of the indigenous inhabitants of settled colonies, an unjust and discriminatory doctrine of that kind can no longer be accepted. The expectations of the international community accord in this respect with the contemporary values of the Australian people. The opening up of international remedies to individuals pursuant to Australia’s accession to the Optional Protocol to the International Covenant on Civil and Political Rights (see Communication 78/1980 in Selected Decisions of the Human Rights Committee under the Optional Protocol, vol 2, p 23) brings to bear on the common law the powerful influence of the Covenant and the international standards it imports. The common law does not necessarily conform with inter-national law, but international law is a legitimate and important influence on the development of the common law, especially when international law declares the existence of universal human rights. A common law doctrine founded on unjust discrimination in the enjoyment of civil and political rights demands reconsideration. It is contrary both to international standards and to the fundamental values of our common law to entrench a discriminatory rule which, because of the supposed position on the scale of social organisation of the indigenous inhabitants of a settled colony, denies them a right to occupy their traditional lands. It was such a rule which evoked from Deane J (Gerhardy v Brown (1985) 159 CLR 70 at 149) the criticism that: the common law of this land has still not reached the stage of retreat from injustice which the law of Illinois and Virginia had reached in 1823 when Marshall CJ, in Johnson v McIntosh ((1823) 8 Wheat, at p 574 (21 US, at 253)), accepted that, subject to the assertion of ultimate dominion (including the power to convey title by grant) by the State, the “original inhabitants” should be recognised as having “a legal as well as just claim” to retain the occupancy of their traditional lands. Once it is accepted that indigenous inhabitants in occupation of a territory when sovereignty is acquired by the Crown are capable of enjoying – whether in community, as a group or as individuals – proprietary interests in land, the rights and interests in the land which they had theretofore enjoyed under the customs of their community are seen to be a burden on the radical title which the Crown acquires. The notion that feudal principle dictates that the land in a settled colony be taken to be a royal demesne upon the Crown’s acquisition of sovereignty is mistaken. However, that was not the only basis advanced to establish the proposition of absolute Crown ownership and the alternative bases must next be considered. If native title survives the Crown’s acquisition of sovereignty as, in my view, it does, it is unnecessary to examine the alternative arguments advanced to support the rights and interests of the Meriam people to their traditional land. One argument raised the presumption of a Crown grant arising from the Meriam people’s possession of the Murray Islands from a time before annexation; another was the existence of a title arising after annexation in accordance with a supposed local legal custom under the common law whereby the Meriam people were said to be entitled to possess the Murray Islands. There are substantial difficulties in the way of accepting either of these arguments, but it is unnecessary to pursue them. It is sufficient to state that, in my opinion, the common law of Australia rejects the notion that, when the Crown acquired sovereignty over territory which is now part of Australia it thereby acquired the absolute beneficial ownership of the land therein, and accepts that the antecedent rights 520 [7.25]

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Mabo v Queensland (No 2) cont. and interests in land possessed by the indigenous inhabitants of the territory survived the change in sovereignty. Those antecedent rights and interests thus constitute a burden on the radical title of the Crown. It must be acknowledged that, to state the common law in this way involves the overruling of cases which have held the contrary. To maintain the authority of those cases would destroy the equality of all Australian citizens before the law. The common law of this country would perpetuate injustice if it were to continue to embrace the enlarged notion of terra nullius and to persist in characterising the indigenous inhabitants of the Australian colonies as people too low in the scale of social organisation to be acknowledged as possessing rights and interests in land. Moreover, to reject the theory that the Crown acquired absolute beneficial ownership of land is to bring the law into conformity with Australian history. The dispossession of the indigenous inhabitants of Australia was not worked by a transfer of beneficial ownership when sovereignty was acquired by the Crown, but by the recurrent exercise of a paramount power to exclude the indigenous inhabitants from their traditional lands as colonial settlement expanded and land was granted to the colonists. Dispossession is attributable not to a failure of native title to survive the acquisition of sovereignty, but to its subsequent extinction by a paramount power. Before examining the power to extinguish native title, it is necessary to say something about the nature and incidents of the native title which, surviving the Crown’s acquisition of sovereignty, burdens the Crown’s radical title. The nature and incidents of native title Native title has its origin in and is given its content by the traditional laws acknowledged by and the traditional customs observed by the indigenous inhabitants of a territory. The nature and incidents of native title must be ascertained as a matter of fact by reference to those laws and customs. The ascertainment may present a problem of considerable difficulty, as Moynihan J perceived in the present case. It is a problem that did not arise in the case of a settled colony so long as the fictions were maintained that customary rights could not be reconciled “with the institutions or the legal ideas of civilised society” (In re Southern Rhodesia [1919] AC, at 233), that there was no law before the arrival of the British colonists in a settled colony and that there was no sovereign law-maker in the territory of a settled colony before sovereignty was acquired by the Crown. These fictions denied the possibility of a native title recognised by our laws. But once it is acknowledged that an inhabited territory which became a settled colony was no more a legal desert than it was “desert uninhabited” in fact, it is necessary to ascertain by evidence the nature and incidents of native title. Though these are matters of fact, some general propositions about native title can be stated without reference to evidence. First, unless there are pre-existing laws of a territory over which the Crown acquires sovereignty which provide for the alienation of interests in land to strangers, the rights and interests which constitute a native title can be possessed only by the indigenous inhabitants and their descendants. Native title, though recognised by the common law, is not an institution of the common law and is not alienable by the common law. Its alienability is dependent on the laws from which it is derived. If alienation of a right or interest in land is a mere matter of the custom observed by the indigenous inhabitants, not provided for by law enforced by a sovereign power, there is no machinery which can enforce the rights of the alienee. The common law cannot enforce as a proprietary interest the rights of a putative alienee whose title is not created either under a law which was enforceable against the putative alienor at the time of the alienation and thereafter until the change of sovereignty or under the common law. And, subject to an important qualification, the only title dependent on custom which the common law will recognise is one which is consistent with the common law. Thus, in The Case of Tanistry, the Irish custom of tanistry was held to be void because it was founded in violence and because the vesting of title under the custom was uncertain ((1608) Davis [80 ER]; 4th ed Dublin (1762) English translation, at pp 94-99). The inconsistency that the court perceived between the custom of tanistry known to the Brehon law of Ireland and the common law precluded the recognition of the custom by the common [7.25]

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Mabo v Queensland (No 2) cont. law. At that stage in its development, the common law was too rigid to admit recognition of a native title based on other laws or customs, but that rigidity has been relaxed, at least since the decision of the Privy Council in Amodu Tijani. The general principle that the common law will recognise a customary title only if it be consistent with the common law is subject to an exception in favour of traditional native title. Of course, since European settlement of Australia, many clans or groups of indigenous people have been physically separated from their traditional land and have lost their connection with it. But that is not the universal position. It is clearly not the position of the Meriam people. Where a clan or group has continued to acknowledge the laws and (so far as practicable) to observe the customs based on the traditions of that clan or group, whereby their traditional connection with the land has been substantially maintained, the traditional community title of that clan or group can be said to remain in existence. The common law can, by reference to the traditional laws and customs of an indigenous people, identify and protect the native rights and interests to which they give rise. However, when the tide of history has washed away any real acknowledgment of traditional law and any real observance of traditional customs, the foundation of native title has disappeared. A native title which has ceased with the abandoning of laws and customs based on tradition cannot be revived for contemporary recognition. Australian law can protect the interests of members of an indigenous clan or group, whether communally or individually, only in conformity with the traditional laws and customs of the people to whom the clan or group belongs and only where members of the clan or group acknowledge those laws and observe those customs (so far as it is practicable to do so). Once traditional native title expires, the Crown’s radical title expands to a full beneficial title, for then there is no other proprietor than the Crown. It follows that a right or interest possessed as a native title cannot be acquired from an indigenous people by one who, not being a member of the indigenous people, does not acknowledge their laws and observe their customs; nor can such a right or interest be acquired by a clan, group or member of the indigenous people unless the acquisition is consistent with the laws and customs of that people. Such a right or interest can be acquired outside those laws and customs only by the Crown. (This result has been reached in other jurisdictions, though for different reasons: see Reg v Symonds (1847) NZPCC, at p 390; Johnson v McIntosh (1823) 8 Wheat, at 586 (21 US, at 259); St Catherine’s Milling and Lumber Co v The Queen (1887) 13 SCR 577, at 599.) Once the Crown acquires sovereignty and the common law becomes the law of the territory, the Crown’s sovereignty over all land in the territory carries the capacity to accept a surrender of native title. The native title may be surrendered on purchase or surrendered voluntarily, whereupon the Crown’s radical title is expanded to absolute ownership, a plenum dominium, for there is then no other owner (St Catherine’s Milling and Lumber Co v The Queen (1888) 14 App Cas, at 55). If native title were surrendered to the Crown in expectation of a grant of a tenure to the indigenous title holders, there may be a fiduciary duty on the Crown to exercise its discretionary power to grant a tenure in land so as to satisfy the expectation (see Guerin v The Queen (1984) 13 DLR (4th) 321, at 334, 339, 342-343, 356-357, 360-361), but it is unnecessary to consider the existence or extent of such a fiduciary duty in this case. Here, the fact is that strangers were not allowed to settle on the Murray Islands and, even after annexation in 1879, strangers who were living on the Islands were deported. The Meriam people asserted an exclusive right to occupy the Murray Islands and, as a community, held a proprietary interest in the Islands. They have maintained their identity as a people and they observe customs which are traditionally based. There was a possible alienation of some kind of interest in two acres to the London Missionary Society prior to annexation but it is unnecessary to consider whether that land was alienated by Meriam law or whether the alienation was sanctioned by custom alone. As we shall see, native title to that land was lost to the Meriam people in any event on the grant of a lease by the Crown in 1882 or by its subsequent renewal. 522 [7.25]

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Mabo v Queensland (No 2) cont. Secondly, native title, being recognised by the common law (though not as a common law tenure), may be protected by such legal or equitable remedies as are appropriate to the particular rights and interests established by the evidence, whether proprietary or personal and usufructuary in nature and whether possessed by a community, a group or an individual. The incidents of a particular native title relating to inheritance, the transmission or acquisition of rights and interests on death or marriage, the transfer of rights and interests in land and the grouping of persons to possess rights and interests in land are matters to be determined by the laws and customs of the indigenous inhabitants, provided those laws and customs are not so repugnant to natural justice, equity and good conscience that judicial sanctions under the new regime must be withheld (Idewu Inasa v Oshodi [1934] AC 99 at 105). Of course in time the laws and customs of any people will change and the rights and interests of the members of the people among themselves will change too. But so long as the people remain as an identifiable community, the members of whom are identified by one another as members of that community living under its laws and customs, the communal native title survives to be enjoyed by the members according to the rights and interests to which they are respectively entitled under the traditionally based laws and customs, as currently acknowledged and observed. Here, the Meriam people have maintained their own identity and their own customs. The Murray Islands clearly remain their home country. Their land disputes have been dealt with over the years by the Island Court in accordance with the customs of the Meriam people. Thirdly, where an indigenous people (including a clan or group), as a community, are in possession or are entitled to possession of land under a proprietary native title, their possession may be protected or their entitlement to possession may be enforced by a representative action brought on behalf of the people or by a sub-group or individual who sues to protect or enforce rights or interests which are dependent on the communal native title. Those rights and interests are, so to speak, carved out of the communal native title. A sub-group or individual asserting a native title dependent on a communal native title has a sufficient interest to sue to enforce or protect the communal title (Australian Conservation Foundation v The Commonwealth (1980) 146 CLR 493 at 530-531, 537-539, 547-548; Onus v Alcoa of Australia Ltd (1981) 149 CLR 27 at 35-36, 41-42, 46, 51, 62, 74-75). A communal native title enures for the benefit of the community as a whole and for the sub-groups and individuals within it who have particular rights and interests in the community’s lands. The recognition of the rights and interests of a sub-group or individual dependent on a communal native title is not precluded by an absence of a communal law to determine a point in contest between rival claimants. Whatever be the precision of Meriam laws and customs with respect to land, there is abundant evidence that land was traditionally occupied by individuals or family groups and that contemporary rights and interests are capable of being established with sufficient precision to attract declaratory or other relief. The extinguishing of native title Sovereignty carries the power to create and to extinguish private rights and interests in land within the Sovereign’s territory (Joint Tribal Council of the Passamaquoddy Tribe v Morton (1975) 528 Fed 2d 370, at 376 n 6). It follows that, on a change of sovereignty, rights and interests in land that may have been indefeasible under the old regime become liable to extinction by exercise of the new sovereign power. The sovereign power may or may not be exercised with solicitude for the welfare of indigenous inhabitants but, in the case of common law countries, the courts cannot review the merits, as distinct from the legality, of the exercise of sovereign power (United States v Santa Fe Pacific Railroad Company (1941) 314 US 339, at 347; Tee-Hit-Ton Indians v United States (1954) 348 US 272 at 281-285). However, under the constitutional law of this country, the legality (and hence the validity) of an exercise of a sovereign power depends on the authority vested in the organ of government purporting [7.25]

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Mabo v Queensland (No 2) cont. to exercise it: municipal constitutional law determines the scope of authority to exercise a sovereign power over matters governed by municipal law, including rights and interests in land. In Queensland, the Crown’s power to grant an interest in land is, by force of ss 30 and 40 of the Constitution Act 1867 (Q), an exclusively statutory power and the validity of a particular grant depends upon conformity with the relevant statute (Cudgen Rutile (No 2) Ltd v Chalk [1975] AC 520 at 533-534). When validly made, a grant of an interest in land binds the Crown and the Sovereign’s successors (Halsbury, op cit, 4th ed, vol 8, par 1047). The courts cannot refuse to give effect to a Crown grant “except perhaps in a proceeding by scire facias or otherwise, on the prosecution of the Crown itself” (Wi Parata v Bishop of Wellington (1877) 3 NZ (Jur) NS 72 at 77). Therefore an interest validly granted by the Crown, or a right or interest dependent on an interest validly granted by the Crown cannot be extinguished by the Crown without statutory authority. As the Crown is not competent to derogate from a grant once made (Stead v Carey (1845) 1 CB 496 at 523 [135 ER 634 at 645]), a statute which confers a power on the Crown will be presumed (so far as consistent with the purpose for which the power is conferred) to stop short of authorising any impairment of an interest in land granted by the Crown or dependent on a Crown grant. But, as native title is not granted by the Crown, there is no comparable presumption affecting the conferring of any executive power on the Crown the exercise of which is apt to extinguish native title. However, the exercise of a power to extinguish native title must reveal a clear and plain intention to do so, whether the action be taken by the Legislature or by the Executive. This requirement, which flows from the seriousness of the consequences to indigenous inhabitants of extinguishing their traditional rights and interests in land, has been repeatedly emphasised by courts dealing with the extinguishing of the native title of Indian bands in North America. It is unnecessary for our purposes to consider the several juristic foundations – proclamation, policy, treaty or occupation – on which native title has been rested in Canada and the United States but reference to the leading cases in each jurisdiction reveals that, whatever the juristic foundation assigned by those courts might be, native title is not extinguished unless there be a clear and plain intention to do so (Calder v Attorney-General of British Columbia (1973) SCR, at 404; (1973) 34 DLR (3d), at 210; Hamlet of Baker Lake v Minister of Indian Affairs (1979) 107 DLR (3d) 513, at 552; Reg v Sparrow (1990) 1 SCR 1075, at 1094; (1990) 70 DLR (4th) 385, at 401; United States v Santa Fe Pacific Railroad Co (1941) 314 US, at 353, 354; Lipan Apache Tribe v United States (1967) 180 Ct Cl 487, at 492). That approach has been followed in New Zealand (Te Weehi v Regional Fisheries Officer [1986] 1 NZLR 680, at pp 691-692). It is patently the right rule. A clear and plain intention to extinguish native title is not revealed by a law which merely regulates the enjoyment of native title (Reg v Sparrow (1990) 1 SCR, at 1097; (1990) 70 DLR (4th), at 400) or which creates a regime of control that is consistent with the continued enjoyment of native title (United States v Santa Fe Pacific Railroad Co (1941) 314 US, at 353-354). A fortiori, a law which reserves or authorises the reservation of land from sale for the purpose of permitting indigenous inhabitants and their descendants to enjoy their native title works no extinguishment. [Brennan J then considered some of the actions which were argued to constitute extinguishment.] The power to reserve and dedicate land to a public purpose and the power to grant interests in land are conferred by statute on the Governor in Council of Queensland and an exercise of these powers is, subject to the Racial Discrimination Act, apt to extinguish native title. The Queensland Parliament retains, subject to the Constitution and to restrictions imposed by valid laws of the Commonwealth (Mabo v Queensland (1988) 166 CLR 186), a legislative power to extinguish native title. This being so, it is necessary to consider the effect which the granting of leases over parts of the Murray Islands has had on native title before the Racial Discrimination Act came into force. A Crown grant which vests in the grantee an interest in land which is inconsistent with the continued right to enjoy a native title in respect of the same land necessarily extinguishes the native title. The 524 [7.25]

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Mabo v Queensland (No 2) cont. extinguishing of native title does not depend on the actual intention of the Governor in Council (who may not have adverted to the rights and interests of the indigenous inhabitants or their descendants), but on the effect which the grant has on the right to enjoy the native title. If a lease be granted, the lessee acquires possession and the Crown acquires the reversion expectant on the expiry of the term. The Crown’s title is thus expanded from the mere radical title and, on the expiry of the term, becomes a plenum dominium. Where the Crown grants land in trust or reserves and dedicates land for a public purpose, the question whether the Crown has revealed a clear and plain intention to extinguish native title will sometimes be a question of fact, sometimes a question of law and sometimes a mixed question of fact and law. Thus, if a reservation is made for a public purpose other than for the benefit of the indigenous inhabitants, a right to continued enjoyment of native title may be consistent with the specified purpose – at least for a time – and native title will not be extinguished. But if the land is used and occupied for the public purpose and the manner of occupation is inconsistent with the continued enjoyment of native title, native title will be extinguished. A reservation of land for future use as a school, a courthouse or a public office will not by itself extinguish native title: construction of the building, however, would be inconsistent with the continued enjoyment of native title which would thereby be extinguished. But where the Crown has not granted interests in land or reserved and dedicated land inconsistently with the right to continued enjoyment of native title by the indigenous inhabitants, native title survives and is legally enforceable. As the Governments of the Australian Colonies and, latterly, the Governments of the Commonwealth, States and Territories have alienated or appropriated to their own purposes most of the land in this country during the last 200 years, the Australian Aboriginal peoples have been substantially dispossessed of their traditional lands. They were dispossessed by the Crown’s exercise of its sovereign powers to grant land to whom it chose and to appropriate to itself the beneficial ownership of parcels of land for the Crown’s purposes. Aboriginal rights and interests were not stripped away by operation of the common law on first settlement by British colonists, but by the exercise of a sovereign authority over land exercised recurrently by Governments. To treat the dispossession of the Australian Aborigines as the working out of the Crown’s acquisition of ownership of all land on first settlement is contrary to history. Aborigines were dispossessed of their land parcel by parcel, to make way for expanding colonial settlement. Their dispossession underwrote the development of the nation. But, if this be the consequence in law of colonial settlement, is there any occasion now to overturn the cases which held the Crown to have become the absolute beneficial owner of land when British colonists first settled here? Does it make any difference whether native title failed to survive British colonisation or was subsequently extinguished by government action? In this case, the difference is critical: except for certain transactions next to be mentioned, nothing has been done to extinguish native title in the Murray Islands. There, the Crown has alienated only part of the land and has not acquired for itself the beneficial ownership of any substantial area. And there may be other areas of Australia where native title has not been extinguished and where an Aboriginal people, maintaining their identity and their customs, are entitled to enjoy their native title. Even if there be no such areas, it is appropriate to identify the events which resulted in the dispossession of the indigenous inhabitants of Australia, in order to dispel the misconception that it is the common law rather than the action of governments which made many of the indigenous people of this country trespassers on their own land. After this lengthy examination of the problem, it is desirable to state in summary form what I hold to be the common law of Australia with reference to land titles: 1

The Crown’s acquisition of sovereignty over the several parts of Australia cannot be challenged in an Australian municipal court.

2

On acquisition of sovereignty over a particular part of Australia, the Crown acquired a radical title to the land in that part. [7.25]

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Mabo v Queensland (No 2) cont. 3

Native title to land survived the Crown’s acquisition of sovereignty and radical title. The rights and privileges conferred by native title were unaffected by the Crown’s acquisition of radical title but the acquisition of sovereignty exposed native title to extinguishment by a valid exercise of sovereign power inconsistent with the continued right to enjoy native title.

4

Where the Crown has validly alienated land by granting an interest that is wholly or partially inconsistent with a continuing right to enjoy native title, native title is extinguished to the extent of the inconsistency. Thus native title has been extinguished by grants of estates of freehold or of leases but not necessarily by the grant of lesser interests (for example, authorities to prospect for minerals).

5

Where the Crown has validly and effectively appropriated land to itself and the appropriation is wholly or partially inconsistent with a continuing right to enjoy native title, native title is extinguished to the extent of the inconsistency. Thus native title has been extinguished to parcels of the waste lands of the Crown that have been validly appropriated for use (whether by dedication, setting aside, reservation or other valid means) and used for roads, railways, post offices and other permanent public works which preclude the continuing concurrent enjoyment of native title. Native title continues where the waste lands of the Crown have not been so appropriated or used or where the appropriation and use is consistent with the continuing concurrent enjoyment of native title over the land (eg, land set aside as a national park).

6

Native title to particular land (whether classified by the common law as proprietary, usufructuary or otherwise), its incidents and the persons entitled thereto are ascertained according to the laws and customs of the indigenous people who, by those laws and customs, have a connection with the land. It is immaterial that the laws and customs have undergone some change since the Crown acquired sovereignty provided the general nature of the connection between the indigenous people and the land remains. Membership of the indigenous people depends on biological descent from the indigenous people and on mutual recognition of a particular person’s membership by that person and by the elders or other persons enjoying traditional authority among those people.

7

Native title to an area of land which a clan or group is entitled to enjoy under the laws and customs of an indigenous people is extinguished if the clan or group, by ceasing to acknowledge those laws, and (so far as practicable) observe those customs, loses its connection with the land or on the death of the last of the members of the group or clan.

8

Native title over any parcel of land can be surrendered to the Crown voluntarily by all those clans or groups who, by the traditional laws and customs of the indigenous people, have a relevant connection with the land but the rights and privileges conferred by native title are otherwise inalienable to persons who are not members of the indigenous people to whom alienation is permitted by the traditional laws and customs.

9

If native title to any parcel of the waste lands of the Crown is extinguished, the Crown becomes the absolute beneficial owner.

These propositions leave for resolution by the general law the question of the validity of any purported exercise by the Crown of the power to alienate or to appropriate to itself waste lands of the Crown. In Queensland, these powers are and at all material times have been exercisable by the Executive Government subject, in the case of the power of alienation, to the statutes of the State in force from time to time. The power of alienation and the power of appropriation vested in the Crown in right of a State are also subject to the valid laws of the Commonwealth, including the Racial Discrimination Act. 526 [7.25]

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Mabo v Queensland (No 2) cont. Where a power has purportedly been exercised as a prerogative power, the validity of the exercise depends on the scope of the prerogative and the authority of the purported repository in the particular case. It remains to apply these principles to the Murray Islands and the Meriam people. The plaintiffs seek declarations that the Meriam people are entitled to the Murray Islands – “(a) as owners (b) as possessors (c) as occupiers, or (d) as persons entitled to use and enjoy the said islands”; that – “the Murray Islands are not and never have been ‘Crown Lands’ within the meaning of the Lands Act 1962 (Qld) (as amended) and prior Crown lands legislation” and that the State of Queensland is not entitled to extinguish the title of the Meriam people. As the Crown holds the radical title to the Murray Islands and as native title is not a title created by grant nor is it a common law tenure, it may be confusing to describe the title of the Meriam people as conferring “ownership”, a term which connotes an estate in fee simple or at least an estate of freehold. Nevertheless, it is right to say that their native title is effective as against the State of Queensland and as against the whole world unless the State, in valid exercise of its legislative or executive power, extinguishes the title. It is also right to say that the Murray Islands are not Crown land because the land has been either “reserved for or dedicated to public purposes” or is “subject to … lease”. However, that does not deny that the Governor in Council may, by appropriate exercise of his statutory powers, extinguish native title. The native title has already been extinguished over land which has been leased pursuant to powers conferred by the Land Act in force at the time of the granting or renewal of the lease. Accordingly, title to the land leased to the Trustees of the Australian Board of Missions has been extinguished and title to Dauar and Waier may have been extinguished. It may be that areas on Mer have been validly appropriated for use for administrative purposes the use of which is inconsistent with the continued enjoyment of the rights and interests of Meriam people in those areas pursuant to Meriam law or custom and, in that event, native title has been extinguished over those areas. None of these areas can be included in the declaration. I would therefore make a declaration in the following terms: Declare – 1

that the land in the Murray Islands is not Crown land within the meaning of that term in s 5 of the Land Act 1962-1988 (Q);

2

that the Meriam people are entitled as against the whole world to possession, occupation, use and enjoyment of the island of Mer except for that parcel of land leased to the Trustees of the Australian Board of Missions and those parcels of land (if any) which have been validly appropriated for use for administrative purposes the use of which is inconsistent with the continued enjoyment of the rights and privileges of Meriam people under native title;

3

that the title of the Meriam people is subject to the power of the Parliament of Queensland and the power of the Governor in Council of Queensland to extinguish that title by valid exercise of their respective powers, provided any exercise of those powers is not inconsistent with the laws of the Commonwealth.

DEANE and GAUDRON JJ: Ordinarily, common law native title is a communal native title and the rights under it are communal rights enjoyed by a tribe or other group. It is so with Aboriginal title in the Australian States and internal Territories. Since the title preserves entitlement to use or enjoyment under the traditional law or custom of the relevant territory or locality, the contents of the rights and the identity of those entitled to enjoy them must be ascertained by reference to that traditional law or custom. The traditional law or custom is not, however, frozen as at the moment of establishment of a Colony. Provided any changes do not diminish or extinguish the relationship between a particular tribe or other group and particular land, subsequent developments or variations do not extinguish the title in relation to that land. [7.25]

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Mabo v Queensland (No 2) cont. The rights of an Aboriginal tribe or clan entitled to the benefit of a common law native title are personal only. The enjoyment of the rights can be varied and dealt with under the traditional law or custom. The rights are not, however, assignable outside the overall native system. They can be voluntarily extinguished by surrender to the Crown. They can also be lost by the abandonment of the connection with the land or by the extinction of the relevant tribe or group. It is unnecessary, for the purposes of this case, to consider the question whether they will be lost by the abandonment of traditional customs and ways. Our present view is that, at least where the relevant tribe or group continues to occupy or use the land, they will not. The personal rights conferred by common law native title do not constitute an estate or interest in the land itself. They are extinguished by an unqualified grant of an inconsistent estate in the land by the Crown, such as a grant in fee or a lease conferring the right to exclusive possession. They can also be terminated by other inconsistent dealings with the land by the Crown, such as appropriation, dedication or reservation for an inconsistent public purpose or use, in circumstances giving rise to third party rights or assumed acquiescence. The personal rights of use and occupation conferred by common law native title are not, however, illusory. They are legal rights which are infringed if they are extinguished, against the wishes of the native title-holders, by inconsistent grant, dedication or reservation and which, subject only to their susceptibility to being wrongfully so extinguished, are binding on the Crown and a burden on its title. As has been seen, common law native title-holders in an eighteenth century British Colony were in an essentially helpless position if their rights under their native title were disregarded or wrongly extinguished by the Crown. Quite apart from the inherent unlikelihood of such title-holders being in a position to institute proceedings against the British Crown in a British court, the vulnerability of the rights under native title resulted in part from the fact that they were personal rights susceptible to extinguishment by inconsistent grant by the Crown and in part from the immunity of the Crown from court proceedings. The vulnerability persists to the extent that it flows from the nature of the rights as personal. On the other hand, as legislative reforms increasingly subjected the Crown or a nominal defendant on its behalf to the jurisdiction of the courts and to liability for compensatory damages for a wrong done to a subject, the ability of native title-holders to protect and vindicate the personal rights under common law native title significantly increased. If common law native title is wrongfully extinguished by the Crown, the effect of those legislative reforms is that compensatory damages can be recovered provided the proceedings for recovery are instituted within the period allowed by applicable limitations provisions. If the common law native title has not been extinguished, the fact that the rights under it are true legal rights means that they can be vindicated, protected and enforced by proceedings in the ordinary courts. In a case where the Crown or a trustee appointed by the Crown wrongly denies the existence or the extent of an existing common law native title or threatens to infringe the rights thereunder (for example, by an inconsistent grant), the appropriate relief in proceedings brought by (or by a representative party or parties on behalf of) the native title-holders will ordinarily be declaratory only since it will be apparent that the Crown or the trustee, being bound by any declaration, will faithfully observe its terms. Further relief is, however, available where it is necessary to protect the rights of the title-holders. One example of such further relief is relief by way of injunction. (See, for example, Nireaha Tamaki v Baker [1901] AC, at 578.) Notwithstanding their personal nature and their special vulnerability to wrongful extinguishment by the Crown, the rights of occupation or use under common law native title can themselves constitute valuable property. Actual or threatened interference with their enjoyment can, in appropriate circumstances, attract the protection of equitable remedies. Indeed, the circumstances of a case may be such that, in a modern context, the appropriate form of relief is the imposition of a remedial constructive trust framed to reflect the incidents and limitations of the rights under the common law native title. The principle of the common law that pre-existing 528 [7.25]

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Mabo v Queensland (No 2) cont. native rights are respected and protected will, in a case where the imposition of such a constructive trust is warranted, prevail over other equitable principles or rules to the extent that they would preclude the appropriate protection of the native title in the same way as that principle prevailed over legal rules which would otherwise have prevented the preservation of the title under the common law. In particular, rules relating to requirements of certainty and present entitlement or precluding remoteness of vesting may need to be adapted or excluded to the extent necessary to enable the protection of the rights under the native title. TOOHEY J: The plaintiffs seek a declaration that: the Defendant is under a fiduciary duty, or alternatively bound as a trustee, to the Meriam People, including the Plaintiffs, to recognise and protect their rights and interests in the Murray Islands. They argued that such a duty arises by reason of annexation, over which the Meriam people had no choice; the relative positions of power of the Meriam people and the Crown in right of Queensland with respect to their interests in the Islands; and the course of dealings by the Crown with the Meriam people and the Islands since annexation. However, while the plaintiffs claim the declaration just mentioned, the statement of claim does not seek any specific relief for a breach of fiduciary duty. (i) Existence of the obligation The factors giving rise to a fiduciary duty are nowhere exhaustively defined (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 68, 96-97, 141-142; Finn, Fiduciary Obligations (1977), p 1). There are certain kinds of relationships which necessarily entail fiduciary obligations, for example, trustee and beneficiary, company director and shareholder, principal and agent. But a fiduciary obligation may arise in a variety of circumstances as a result of a particular relationship. The kinds of relationships which can give rise to a fiduciary obligation are not closed (Hospital Products Ltd ibid, at 68, 96, 102; Tufton v Sperni (1952) 2 TLR 516 at 522; English v Dedham Vale Properties Ltd [1978] 1 WLR 93 at 110; [1978] 1 All ER 382 at 398). In Hospital Products Ltd Mason J said ((1984) 156 CLR, at 96-97): The critical feature of (fiduciary) relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. Underlying such relationships is the scope for one party to exercise a discretion which is capable of affecting the legal position of the other. One party has a special opportunity to abuse the interests of the other. The discretion will be an incident of the first party’s office or position (Weinrib, “The Fiduciary Obligation”, (1975) 25 University of Toronto Law Journal 1, at pp 4-8); Guerin [1984] 2 SCR, at 384; (1984) 13 DLR (4th), at 340-341). The undertaking to act on behalf of, and the power detrimentally to affect, another may arise by way of an agreement between the parties, for example in the form of a contract, or from an outside source, for example a statute or a trust instrument. The powers and duties may be gratuitous and “may be officiously assumed without request” (Finn, op cit, 201; Guerin ibid, at 384; 341 of DLR). The defendant argued that there is no source for any obligation on the Crown to act in the interests of traditional titleholders and that, given the power of the Crown to destroy the title, there is no basis for a fiduciary obligation. This can be answered in two ways. First, the argument ignores the fact that it is, in part at least, precisely the power to affect the interests of a person adversely which gives rise to a duty to act in the interests of that person (Hospital Products Ltd (1984) 156 CLR, at 97; Weinrib (1975) [7.25]

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Mabo v Queensland (No 2) cont. 25 University of Toronto Law Journal 1, at 4-8); the very vulnerability gives rise to the need for the application of equitable principles. The second answer is that the argument is not supported by the legislative and executive history of Queensland in particular and of Australia in general. In the present case, a policy of “protection” by government emerges from the legislation, examples of which are quoted above, as well as by executive actions such as the creation of reserves, the removal of non-Islanders from the Islands in the 1880s and the appointment of a school teacher and an “adviser” in 1892. More general indications include the stated policy of protection underlying the condemnation of purported purchases of land by settlers from Aborigines as, for example, the John Batman incident referred to earlier. And even the general presumption that the British Crown will respect the rights of indigenous peoples occupying colonised territory, as discussed above, itself indicates that a government will take care when making decisions which are potentially detrimental to aboriginal rights. [The defendant raised further arguments against the imposition of a fiduciary duty and these were also rejected by Toohey J.] Be that as it may, if the Crown in right of Queensland has the power to alienate land the subject of the Meriam people’s traditional rights and interests and the result of that alienation is the loss of traditional title, and if the Meriam people’s power to deal with their title is restricted in so far as it is inalienable, except to the Crown, then this power and corresponding vulnerability give rise to a fiduciary obligation on the part of the Crown. The power to destroy or impair a people’s interests in this way is extraordinary and is sufficient to attract regulation by Equity to ensure that the position is not abused. The fiduciary relationship arises, therefore, out of the power of the Crown to extinguish traditional title by alienating the land or otherwise; it does not depend on an exercise of that power. Moreover if, contrary to the view I have expressed, the relationship between the Crown and the Meriam people with respect to traditional title alone were insufficient to give rise to a fiduciary obligation, both the course of dealings by the Queensland Government with respect to the Islands since annexation – for example the creation of reserves in 1882 and 1912 and the appointment of trustees in 1939 – and the exercise of control over or regulation of the Islanders themselves by welfare legislation – such as the Native Labourers’ Protection Act of 1884 (Q), The Torres Strait Islanders Act of 1939 (Q) under which an Island Court was established and a form of “local government” instituted, and the Community Services (Aborigines) Act 1984 (Q) – would certainly create such an obligation. (ii) Nature of the obligation To say that, where traditional title exists, it can be dealt with and effectively alienated or extinguished only by the Crown, but that it can be enjoyed only by traditional owners, may be tantamount to saying that the legal interest in the traditional rights is in the Crown whereas the beneficial interest in the rights is in the indigenous owners. In that case the kind of fiduciary obligation imposed on the Crown is that of a constructive trustee. In any event, the Crown’s obligation as a fiduciary is in the nature of, and should be performed by reference to, that of a trustee. In Guerin Dickson J said (ibid, at 376; 334 of DLR), referring to the Crown’s duty towards the Musqueam Indians: This obligation does not amount to a trust in the private law sense. It is rather a fiduciary duty. If, however, the Crown breaches this fiduciary duty it will be liable to the Indians in the same way and to the same extent as if such a trust were in effect. Thus, the fiduciary obligation on the Crown, rooted in the extinguishability of traditional title, is in the nature of the obligation of a constructive trustee. The situation where a particular traditional title is dealt with by the Crown is distinguishable. This may occur where a parcel of land is alienated to a third party by the Crown with the consent of the traditional titleholders, as in Guerin. In such a case the 530 [7.25]

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Mabo v Queensland (No 2) cont. Crown is clearly a trustee with respect to the particular traditional titleholders: see Guerin (1984) 2 SCR, per Wilson J at 355; (1984) 13 DLR (4th), at 361. (iii) Content of the obligation The content of a fiduciary obligation or constructive trust will be tailored by the circum-stances of the specific relationship from which it arises. But, generally, to the extent that a person is a fiduciary he or she must act for the benefit of the beneficiaries (Hospital Products Ltd; Finn, op cit, 15). Moreover, this general mandate comprises more particular duties with respect to, first, the procedure by which a fiduciary makes a decision or exercises a discretion and secondly, the content of that decision. On the one hand, a fiduciary must not delegate a discretion and is under a duty to consider whether a discretion should be exercised. And on the other hand, a fiduciary is under a duty not to act for his or her own benefit or for the benefit of any third person (Finn, ibid, 15-16). The obligation on the Crown in the present case is to ensure that traditional title is not impaired or destroyed without the consent of or otherwise contrary to the interests of the titleholders. For example, the Crown could not degazette the Islands, thereby terminating the reserve, or simply alienate the Islands contrary to the interests of the Islanders; nor could it take these or any other decisions affecting the traditional title without taking account of that effect. If it did, it would be in breach of its duty and liable therefor … In the present case, extinguishment or impairment of traditional title would not be a source of the Crown’s obligation, but a breach of it. A fiduciary has an obligation not to put himself or herself in a position of conflict of interests. But there are numerous examples of the Crown exercising different powers in different capacities. A fiduciary obligation on the Crown does not limit the legislative power of the Queensland Parliament, but legislation will be a breach of that obligation if its effect is adverse to the interests of the titleholders, or if the process it establishes does not take account of those interests. [Mason CJ and McHugh J agreed with the reasons for judgment of Brennan J. Dawson J dissented. Mason CJ and McHugh J provided a summary of the findings of the court:] In the result, six members of the Court (Dawson J dissenting) are in agreement that the common law of this country recognises a form of native title which, in the cases where it has not been extinguished, reflects the entitlement of the indigenous inhabitants, in accordance with their laws or customs, to their traditional lands and that, subject to the effect of some particular Crown leases, the land entitlement of the Murray Islanders in accordance with their laws or customs is preserved, as native title, under the law of Queensland. The main difference between those members of the Court who constitute the majority is that, subject to the operation of the Racial Discrimination Act 1975 (Cth), neither of us nor Brennan J agrees with the conclusion to be drawn from the judgments of Deane, Toohey and Gaudron JJ that, at least in the absence of clear and unambiguous statutory provision to the contrary, extinguishment of native title by the Crown by inconsistent grant is wrongful and gives rise to a claim for compensatory damages. We note that the judgment of Dawson J supports the conclusion of Brennan J and ourselves on that aspect of the case since his Honour considers that native title, where it exists, is a form of permissive occupancy at the will of the Crown. We are authorised to say that the other members of the Court agree with what is said in the preceding paragraph about the outcome of the case.

[7.30]

Notes and Questions

1. The decision in Mabo v Queensland (No 2) (1992) 175 CLR 1 reversed what had been considered to be the legal position in Australia over a long period. The major decision [7.30]

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prior to Mabo had been that of Blackburn J in the Northern Territory Supreme Court in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141. In that case Aboriginal clans at Yirrkala on the Gove peninsula in the Northern Territory brought an action seeking to restrain the mining of bauxite on their traditional lands and challenged the validity of the mining leases granted over their lands by the Commonwealth government to Nabalco Pty Ltd. Blackburn J considered that he was bound by existing authority, in particular the decision of the Privy Council in Cooper v Stuart (1884) 14 AC 286, to the conclusion that Australia was a settled colony and that no previously existing legal rights survived the assertion of British sovereignty. That legal conclusion had in part been based in early decisions on a factual assertion that the indigenous peoples at the time of British settlement did not have in place any system of laws and in particular any laws relating to land ownership. Blackburn J rejected much of this factual basis although he characterised the relationship between the indigenous peoples and the land as something other than proprietary. 2. As to the existence of a system of law Blackburn J stated: … The Solicitor-General contended that before any system can be recognised by our law as a system of law, there must be not only a definable community to which it applies, but also some recognised sovereignty giving the law a capacity to be enforced. This argument, or something like it, appeared at a number of points in the case for the defendants. I have already referred to the contention that there was no recognisable community to which the rights claimed related, so as to make reputation evidence admissible under the relevant rules of the law of evidence. Elsewhere it was put to me that the claims of the Rirratjingu and the Gumatj to areas of land could not be regarded as in the category of law at all, because there was no authority shown which was capable of enforcing them. Counsel used the analogy of international law, the nature of which as law has often been challenged on the ground that there is no authority capable of enforcing its rules. Implicit in much of the Solicitor-General’s argument on this aspect of the case was, I think, an Austinian definition of law as the command of a sovereign. At any rate, he contended, there must be the outward forms of machinery for enforcement before a rule can be described as a law. He did not deny the deep religious sanctions which underlay the customs and practices of the aboriginals; indeed, he stressed them, and contended that such sanctions as there were were religious and not otherwise. I do not find myself much impressed by this line of argument. The inadequacy of the Austinian analysis of the nature of law is well known. I do not believe that there is utility in attempting to provide a definition of law which will be valid for all purposes and answer all questions. If a definition of law must be produced, I prefer “a system of rules of conduct which is felt as obligatory upon the members of a definable group of people” to “the command of a sovereign”, but I do not think that the solution to this problem is to be found in postulating a meaning for the word “law”. I prefer a more pragmatic approach. I cannot complain of any lack of evidence, and I am very clearly of opinion, upon the evidence, that the social rules and customs of the plaintiffs cannot possibly be dismissed as lying on the other side of an unbridgeable gulf. The evidence shows a subtle and elaborate system highly adapted to the country in which the people led their lives, which provided a stable order of society and was remarkably free from the vagaries of personal whim or influence. If ever a system could be called “a government of laws, and not of men”, it is that shown in the evidence before me. But granted that comparison is categorically possible, does it, when made, lead to the conclusion that the plaintiffs’ system was a system of law from which conclusions can be drawn about particular rules of law? One argument much stressed by counsel for the defendants was that the system was not shown to apply to any definable community. The statement of claim uses the phrase: “Pursuant to the laws and customs of the aboriginal inhabitants of the Northern Territory, each clan holds certain communal lands” (par 4). 532 [7.30]

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Paragraph 23 similarly refers to “the aboriginal laws and customs of the Northern Territory”. This choice of words was perhaps not beyond criticism, but I do not read it as requiring the plaintiffs to establish a system of laws applicable to all aboriginals in the Northern Territory. What is now in question is the recognition of the plaintiffs’ system of law, and for that purpose the question is asked – To what definable community does the system apply? The statement of claim is capable of being understood, and in my opinion should reasonably be understood, as meaning that the system provided by the plaintiffs is, at least, a part of the totality of the laws and customs of aboriginals in the Northern Territory. After all, it is the plaintiffs’ case that the doctrine of communal native title is part of the law of the Northern Territory. What is shown by the evidence is, in my opinion, that the system of law was recognised as obligatory upon them by the members of a community which, in principle, is definable, in that it is the community of aboriginals which made ritual and economic use of the subject land. In my opinion it does not matter that the precise edges, as it were, of this community were left in a penumbra of partial obscurity. Upon the evidence, the community could possibly be described as the community of the people of those clans which now have members living in the neighbourhood of the Yirrkala Mission, with the qualification that there might now be some clans represented only at Elcho Island or Milingimbi. But the exact definition of the community is inessential. What matters, in my opinion, is the fact that the existence of a community was proved and that it was shown to be in principle definable. I hold that I must recognise the system revealed by the evidence as a system of law.

3. As to the relationship between the indigenous persons and the land Blackburn J further stated: The next question is whether the proved relationship of the plaintiffs to their defined areas of land is a relationship which ought to be described as proprietary, either in a general sense or in any special sense which may be required by the Lands Acquisition Act. Mr Woodward’s contentions were these. First, he put it that the evidence showed that the aboriginals “think and speak of the land as being theirs, as belonging to them”. It seems to me that to ask what they “think” begs the question: the problem at present before the Court is to characterise what the aboriginal relationship is as manifested by what they say and do, to the land. What they “speak” is in the first place a matter of their own language. About this I had nothing which could strictly speaking be called evidence, except for the fact that much of what the aboriginals said in evidence, both in their own languages as interpreted and sometimes in English, was expressed in language which is consistent with ownership – the phrases “my country”, “our country”, “land of the Rirratjingu”, “land belonging to Gumatj”, and phrases of that nature. For myself, I do not think that this language is of itself of very much weight. In the English language, the possessive pronouns, and the word “of”, are used with the widest variety of meanings, some of which do, and some of which do not, imply interests of a proprietary nature. For example, a great variety of relationships is indicated by the following phrases – “my house”, “my son”, “my father”, “my occupation”, “my club”, “my journey”, “my birthday”, “my incompetence in mathematics”. There was before the Court in this case only the slightest material upon which any opinion could be formed about the linguistic usages of the aboriginals. The lady who did most of the interpretation of such of the aboriginal evidence as was given in native languages, spoke and understood Gumatj but not Rirratjingu or any other language, and anything spoken to her or by her, not in English, was in Gumatj. At one stage she explained (and I accepted it without reservation) that a certain suffix was used in the Gumatj language to indicate property as distinct from loan or temporary possession. This suffix was being used by the witness in relation to the land. But upon such meagre material it would not be safe to base any generalisations, for there was no investigation of the matter in any depth – for example, what other implication has the same suffix and how are other English uses of possessive pronouns or the preposition “of” rendered into Gumatj? Moreover there could be no justification, without any evidence, for generalising about [7.30]

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linguistic usages in the other languages from what the Court was told about Gumatj (which was not evidence). Mr Woodward’s proposition that the aboriginals “think and speak of the land as being theirs” may be properly paraphrased as “they think and speak of the land as being in a very close relationship to them” and in this form there would be no dispute about it. I think this problem has to be solved by considering the substance of proprietary interests rather than their outward indicia. I think that property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate. I do not say that all these rights must co-exist before there can be a proprietary interest, or deny that each of them may be subject to qualifications. By this standard I do not think that I can characterise the relationship of the clan to the land as proprietary. It makes little sense to say that the clan has the right to use or enjoy the land. Its members have a right, and so do members of other clans, to use and enjoy the land of their own clan and other land also. The greatest extent to which it is true that the clan as such has the right to use and enjoy the clan territory is that the clan may, in a sense in which other clans may not (save with permission or under special rules), perform ritual ceremonies on the land. That the clan has a duty to the land – to care for it – is another matter. This is not without parallels in our law, which sometimes imposes duties of such a kind of a proprietor. But this resemblance is not, or at any rate is only in a very slight degree, an indication of a proprietary interest. The clan’s right to exclude others is not apparent: indeed it is denied by the existence of the claims of the plaintiffs represented by Daymbalipu. Again, the greatest extent to which this right can be said to exist is in the realm of ritual. But it was never suggested that ritual rules ever excluded members of other clans completely from clan territory; the exclusion was only from sites. The right to alienate is expressly repudiated by the plaintiffs in their statement of claim. In my opinion, therefore, there is so little resemblance between property, as our law, or what I know of any other law, understands that term, and the claims of the plaintiffs for their clans, that I must hold that these claims are not in the nature of proprietary interests. … Upon the whole of this aspect of the matter, my conclusion is that the evidence shows a recognisable system of law which did not provide for any proprietary interest in the plaintiffs in any part of the subject land.

4. The decision of Blackburn J in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 was widely criticised. See, for example, Reynolds, The Law of the Land (Penguin, Ringwood, 1987); Blumm and Malbon, “Aboriginal Title, the Common Law and Federalism: A Different Perspective” in Ellinghaus, Bradbrook and Duggan, The Emergence of Australian Law (1989); Hookey, “The Gove Land Rights Case: A Judicial Dispensation for the Taking of Aboriginal Lands in Australia?” (1972) 5 FLR 85; Hocking, “Does Aboriginal Law Now Run in Australia” (1979) 10 FLR 16; Bartlett R, “Aboriginal Land Claims at Common Law” (1983) UWALR 16. 5. Once land rights of indigenous persons are held to exist, those rights are given protection in part by the Racial Discrimination Act 1975 (Cth); legislative provisions cannot apply to such interests differently to non indigenous land rights, for example in the form of compensation. In the Mabo dispute itself, the applicant had succeeded in having the Queensland Coast Islands Declaration Act 1985 (Qld) struck down (Mabo v Queensland (No 1) (1988) 166 CLR 186). The 1985 Act had purported to vest native land rights but not other land rights in the Crown in right of the State of Queensland. Unless the 1985 legislation was invalidated, the existence of native title could not arise as an issue. Similarly an attempt by Western Australia to restrict native title was invalidated in Western Australia v Commonwealth (1995) 128 ALR 1. 534 [7.30]

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6. The decision in Mabo has been the subject of intense and sometimes heated public debate. Recently judicial reservations have re-emerged. Callinan J in Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1 stated: I add this. The first non-indigenous people who occupied this country brought with them their common and statutory law which had long included a doctrine of adverse possession and settled notions about the use and occupation of land. These were closely connected ideas: land was to be used and enjoyed, and those who possessed, used and enjoyed the land should own it, albeit at first, transiently. As Blackstone put it: For, by the law of nature and reason, he, who first began to use it acquired therein a kind of transient property, that lasted so long as he was using it, and no longer: or, to speak with greater precision, the right of possession continued for the same time only that the act of possession lasted. Those early non-indigenous settlers also brought with them a knowledge of agriculture and husbandry, and of domestic, commercial and official construction of a kind completely different from that of the indigenous peoples. To the undiscriminating, and perhaps insensitive and unimaginative eyes of the former it must have appeared that much of this large continent was not in fact being used or enjoyed, or certainly not so in a way that was familiar. After discussing the use and occupation of Crown lands by reference to the Old Testament, Blackstone says of this migration: Upon the same principle was founded the right of migration, or sending colonies to find out new habitations, when the mother-country was over-charged with inhabitants; which was practised as well by the Phoenicians and Greeks, as the Germans, Scythians, and other northern people. And, so long as it was confined to the stocking and cultivation of desert uninhabited countries, it kept strictly within the limits of the law of nature. But how far the seising on countries already peopled, and driving out or massacring the innocent and defenceless natives, merely because they differed from their invaders in language, in religion, in customs, government, or in colour; how far such a conduct was consonant to nature, to reason, or to Christianity, deserved well to be considered by those, who have rendered their names immortal by thus civilizing mankind. Activities of this kind undoubtedly occurred in Australia. Some were utterly indefensible. It is possible to understand, again without condoning, that others of them might have occurred, in part because of different conceptions about land and how it might be possessed, used or owned. The different conceptions held by the new settlers, much the stronger of the peoples, were bound to prevail. This was inevitable when those who were more powerful had a well settled, longstanding body of property law in written texts, statutes and cases, and those whom they dispossessed depended for the assertions of their rights to occupy and use the land upon traditional oral customs and practices. Perhaps it was equally significant that the new settlers brought with them a transparent system of legal enforcement and courts to give effect to the resolution of disputes over property. To these new settlers, it might also have appeared, whether it was true or not, that the country was so sparsely populated that disputes did not arise between competing indigenous people over land. The problems for the indigenous people were compounded by the difficulty of finding any conceptual common ground between the common and statutory law of real property and Aboriginal law with respect to land. It seems likely that the first settlers would have regarded the two as incompatible, that whatever the Aboriginal peoples possessed by way of title to land was too foreign, fragile and elusive to withstand and survive the common law. Mabo [No 2] was a brave judicial attempt to redress the wrongs of dispossession. But its “recognition” of native title has involved the courts in categorising and charting the bounds of something that, being sui generis, really has no parallel in the common law. The Court has endeavoured to find a way of recognising, and to a degree protecting, that [7.30]

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anomalous interest without unduly disturbing the law of Australian property. The results of this enterprise can hardly be described as satisfactory. The decisions of this Court and or lower courts have resulted in something that is not strictly property, as common lawyers would understand it, being regarded as a burden on the Crown’s radical title. Long settled understandings about land law relating to exclusive possession and leases have been questioned. Parliament has been compelled to intervene, repeatedly, to secure the validity of acts that were never before thought to be problematic. And we now have a body of law that is as complicated, shifting and abstruse that it continues to require the intervention of this Court to resolve even the most basic issues, such as the effect of freehold or leases on native title. Judging from the submissions to this Court and the native title legislation that we have had to consider, few people, if any, have been able to thread this labyrinth of Minos unscathed. To these drawbacks flowing from the recognition of native title may be added others: considerable uncertainty has been created; commercial activity and therefore national prosperity has been inhibited; much time and money have been expended on litigation; and, I fear, the expectations of the indigenous people have been raised and dashed. I do not disparage the importance to the Aboriginal people of their native title rights, including those that have symbolic significance. I fear, however, that in many cases because of the chasm between the common law and native title rights, the latter, when recognised, will amount to little more than symbols. It might have been better to redress the wrongs of dispossession by a true and unqualified settlement of lands or money than by an ultimately futile or unsatisfactory, in my respectful opinion, to attempt to fold native title rights into the common law. I remain bound by Mabo [No 2] and Wik to the extent that they are reflected in the Native Title Act. Until such time as parties wish to question their correctness, I must apply them. In the meantime, however, this Court should do what it can to provide indigenous people, governments, lawyers, academics and members of the general community with clear, logical and final rules for determinations of native title. It is for this reason that I have attempted to deal with all interests and, where possible, to avoid remitter to the Federal Court.

THE NATURE OF NATIVE TITLE Statutory recognition [7.35] Native title is now a creature of statute. The Native Title Act 1993 follows the reasoning of the High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1 but today it is the Act which confers the entitlement to native title. The Act also provides procedures to ascertain the existence of native title in any instance, the validation of Crown acts in relation to native title and the extinguishment of native title. In turn, this legislation is supplemented by legislation in the States and Territories; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [6.340]–[6.385].

Definition of native title [7.40] The Native Title Act 1993 (Cth), s 223 defines native title as (1) The expression native title or native title rights and interests means the communal, group or individual rights and interests of Aboriginal peoples or Torres Strait Islanders in relation to land or waters, where: (a) the rights and interests are possessed under the traditional laws acknowledged, and the traditional customs observed, by the Aboriginal peoples or Torres Strait Islanders; and (b) the Aboriginal peoples or Torres Strait Islanders, by those laws and customs, have a connection with the land or waters; and 536 [7.35]

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(c) the rights and interests are recognised by the common law of Australia. (2) Without limiting subsection (1), rights and interests in that subsection includes hunting, gathering, or fishing, rights and interests.

Validation of acts of the Commonwealth government [7.45] Validation of acts of the Commonwealth government is provided by ss 14 and 15 of the

Native Title Act 1993 (Cth) as follows: 14. Effect of validation of law (1) If a past act is an act attributable to the Commonwealth, the act is valid, and is taken always to have been valid. (2) To avoid any doubt, if a past act validated by subsection (1) is the making, amendment or repeal of legislation, subsection (1) does not validate: (a) the grant or issue of any lease, licence, permit or authority; or (b) the creation of any interest in relation to land or waters; under any legislation concerned, unless the grant, issue or creation is itself a past act attributable to the Commonwealth. 15. Effect of validation on native title (1) If a past act is an act attributable to the Commonwealth: (a) if it is a category A past act other than one to which subsection 229(4) (which deals with public works) applies–the act extinguishes the native title concerned; and (b) if it is a category A past act to which subsection 229(4) applies: (i) in any case–the act extinguishes the native title in relation to the land or waters on which the public work concerned (on completion of its construction or establishment) was or is situated; and (ii) if paragraph 229(4)(a) applies–the extinguishment is taken to have happened on 1 January 1994; and (c) if it is a category B past act that is wholly or partly inconsistent with the continued existence, enjoyment or exercise of the native title rights and interests concerned–the act extinguishes the native title to the extent of the inconsistency; and (d) if it is a category C past act or a category D past act–the non-extinguishment principle applies to the act. Note: This subsection does not apply to the act if section 23C or 23G applies to the act. (2) The extinguishment effected by this section does not by itself confer any right to eject or remove any Aboriginal persons who reside on or who exercise access over land or waters covered by a pastoral lease the grant, re-grant or extension of which is validated by section 14.

Procedures for protecting native title [7.50] Although native title is defined by the laws and customs of the native peoples, those

interests have to be established within the Australian legal system and in particular according to the rules and procedures of Australian courts: Harrington-Smith on behalf of the Wongatha People v Western Australia (No 8).[2004] FCA 338.

[7.50]

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EXTINGUISHMENT OF NATIVE TITLE Permanence of inconsistent acts

Fejo v Commonwealth [7.55] Fejo v Commonwealth (1999) 195 CLR 96 High Court of Australia GLEESON CJ, GAUDRON, McHUGH, GUMMOW, HAYNE AND CALLINAN JJ: On 6 December 1996, the Larrakia people, a community or group of Aboriginal Australians whose traditional lands are said to encompass lands and waters around Darwin and the Cox Peninsula in the Northern Territory, lodged an application for determination of native title (“the application”) with the Native Title Registrar (“the Registrar”). The application covers extensive portions of land in the area of Darwin, Palmerston and Litchfield. On 1 April 1997 the application was accepted by the Registrar pursuant to s 63 of the Native Title Act 1993 (Cth) (“the Act”). The land the subject of the application includes land to the south of what is now the city of Darwin and its suburbs. In 1996, before the application was lodged, that land was subdivided by the Northern Territory into 15 parcels. Between July 1996 and the time at which the application was lodged, the Northern Territory granted Crown leases in respect of 8 of the 15 parcels. Each of those leases contained a condition that permitted the lessee, on completion of development in accordance with the terms of the lease, and payment of any sum owing to the Territory, to surrender the lease in exchange for a freehold title at no further cost. Between March and November 1997, Crown leases were issued in similar terms with respect to five of the remaining seven parcels in the subdivision. Two of those leases were issued to Oilnet (NT) Pty Ltd (“Oilnet”). In December 1997, the appellants commenced (on their own behalf and on behalf of the Larrakia people) two proceedings in the Federal Court of Australia: in one proceeding, the respondents were the Northern Territory and Oilnet; in the other, only the Northern Territory was respondent. Although the primary judge directed that the two proceedings be heard together, the matter now before this Court arises in the first proceeding (to which the Northern Territory and Oilnet were respondents). It is therefore not necessary to deal separately with the second proceeding which, in any event, appears not to have raised any different question. The Federal Court proceeding The application in the Federal Court sought a number of declarations including declarations that “native title exists” in relation to the area the subject of the Crown leases to Oilnet, that “the Larrakia people are the holders of that native title” and that, before it could grant a valid lease to Oilnet, the Northern Territory was obliged by the Act either to negotiate with the Larrakia people or to compulsorily acquire their native title. It also sought injunctions, both interlocutory and permanent, restraining Oilnet from undertaking or continuing to “undertake any development of, or the erection of improvements on or affecting”, the land the subject of those leases, and restraining the Northern Territory from accepting a surrender of the Crown leases that it had granted to Oilnet or exchanging those leases for a freehold title. Various other forms of relief were sought but their details are not important. The effect of the grant of a fee simple The appellants contended that the 1882 grant to Benham did not necessarily extinguish native title. It was said that if it affected native title at all, it did no more than suspend the right of the traditional owners to exercise their native title (the enjoyment of which, it was submitted, may well have continued in fact). If the grant had this effect on the right to exercise native title, it was submitted that that effect ceased when the land came once again to be held by the Crown. 538 [7.55]

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Fejo v Commonwealth cont. These contentions must be rejected. Native title is extinguished by a grant in fee simple. And it is extinguished because the rights that are given by a grant in fee simple are rights that are inconsistent with the native title holders continuing to hold any of the rights or interests which together make up native title. An estate in fee simple is, “for almost all practical purposes, the equivalent of full ownership of the land” and confers “the lawful right to exercise over, upon, and in respect to, the land, every act of ownership which can enter into the imagination”. It simply does not permit of the enjoyment by anyone else of any right or interest in respect of the land unless conferred by statute, by the owner of the fee simple or by a predecessor in title. As the appellants acknowledged, it has been said more than once in previous decisions of the Court that native title is extinguished by a grant of an estate in fee simple. Thus, as Brennan J said in Mabo v Queensland [No 2] (1992) 175 CLR 1 at 69: Where the Crown has validly alienated land by granting an interest that is wholly or partially inconsistent with a continuing right to enjoy native title, native title is extinguished to the extent of the inconsistency. Thus native title has been extinguished by grants of estates of freehold or of leases but not necessarily by the grant of lesser interests (for example, authorities to prospect for minerals). Similar references to extinguishment are to be found elsewhere in Mabo [No 2] (1992) 175 CLR 1 at 89 per Deane and Gaudron JJ: … common law native title, being merely a personal right unsupported by any prior actual or presumed Crown grant of any estate or interest in the land, was susceptible of being extinguished by an unqualified grant by the Crown of an estate in fee or of some lesser estate which was inconsistent with the rights under the common law native title and at 110 per Deane and Gaudron JJ: The personal rights conferred by common law native title do not constitute an estate or interest in the land itself. They are extinguished by an unqualified grant of an inconsistent estate in the land by the Crown, such as a grant in fee or a lease conferring the right to exclusive possession. To like effect are statements in the Native Title Act Case [(1995) 183 CLR 373 at 439, per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ]: … a grant cannot be superseded by a subsequent inconsistent grant made to another person … At common law, however, native title can be extinguished or impaired by a valid exercise of sovereign power inconsistent with the continued enjoyment or unimpaired enjoyment of native title … and in Wik Peoples v Queensland (1996) 187 CLR 1 at 84, per Brennan CJ: The strength of native title is that it is enforceable by the ordinary courts. Its weakness is that it is not an estate held from the Crown nor is it protected by the common law as Crown tenures are protected against impairment by subsequent Crown grant. Native title is liable to be extinguished by laws enacted by, or with the authority of, the legislature or by the act of the executive in exercise of powers conferred upon it. The references to extinguishment rather than suspension of native title rights are not to be understood as being some incautious or inaccurate use of language to describe the effect of a grant of freehold title. A grant in fee simple does not have only some temporary effect on native title rights or some effect that is conditioned upon the land not coming to be held by the Crown in the future. Native title has its origin in the traditional laws acknowledged and the customs observed by the indigenous people who possess the native title. Native title is neither an institution of the common law nor a form of common law tenure but it is recognised by the common law. There is, therefore, an intersection of traditional laws and customs with the common law. The underlying existence of the [7.55]

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Fejo v Commonwealth cont. traditional laws and customs is a necessary pre-requisite for native title but their existence is not a sufficient basis for recognising native title. And yet the argument that a grant in fee simple does not extinguish, but merely suspends, native title is an argument that seeks to convert the fact of continued connection with the land into a right to maintain that connection. As Brennan J (at 68) pointed out in Mabo [No 2], the conclusion that native title has been extinguished by a later grant of freehold to the land is a result that follows not from identifying some intention in the party making the later grant but because of the effect that that later grant has on the rights which together constitute native title. The rights of native title are rights and interests that relate to the use of the land by the holders of the native title. For present purposes let it be assumed that those rights may encompass a right to hunt, to gather or to fish, a right to conduct ceremonies on the land, a right to maintain the land in a particular state or other like rights and interests. They are rights that are inconsistent with the rights of a holder of an estate in fee simple. Subject to whatever qualifications may be imposed by statute or the common law, or by reservation or grant, the holder of an estate in fee simple may use the land as he or she sees fit and may exclude any and everyone from access to the land. It follows that, as there was no reservation or qualification on the grant that was made to Benham in 1882, that grant was wholly inconsistent with the existence thereafter of any right of native title. As Brennan J (at 63) also said in Mabo [No 2], “on a change of sovereignty, rights and interests in land that may have been indefeasible under the old regime become liable to extinction by exercise of the new sovereign power”. How was that new sovereign power exercised in this case? The 1882 grant to Benham was made pursuant to statute. It was not made pursuant to prerogative powers. The power given by the statute was not restricted in any relevant way. Section 8 of that Act (the 1872 Act) provided that: Subject to the provisions of this Act, the Governor, in the name and on behalf of Her Majesty, may grant in fee simple, or for any less estate or interest, to the purchaser thereof, any waste lands, which grants shall be in such forms as shall from time to time be deemed expedient by the Governor in Council, and shall be signed by the Governor, and sealed with the public seal of the said Province, and being so signed and sealed, shall be valid and effectual in law to transfer to and vest in any such purchaser any such lands as aforesaid so purchased by him. Reference was made in argument to a number of statements found in instructions to the Governor of the Colony of South Australia and in correspondence that passed between the Imperial authorities and the colonial authorities – particularly the Colonisation Commissioners for the Colony of South Australia. Those statements reveal a concern on the part of the Imperial authorities that the rights of the Aboriginal people be respected in the course of colonising South Australia. The statements of concern are many and often expressed in powerful terms. It may well be that some of these matters must be put to one side simply because at the time the instructions were given, or the correspondence passed, the area that is now the Northern Territory formed part of the Colony of New South Wales, not the Colony of South Australia. But whether or not that is so, there is no basis for concluding that these materials can be read as confining the statutory power given by the 1872 Act to make grants. The power is given in general terms that do not admit of reading down. The statutory command contained in s 6 of that Act was that: From and after the coming into operation of this Act, all waste lands in the Northern Territory shall be sold, demised, or otherwise disposed of and dealt with in the manner and subject to the provisions of this Act, and not otherwise. The power to deal with waste lands in the Northern Territory (which included the land granted to Benham) was to be found wholly within the 1872 Act. Following the enactment of the Colonial Laws Validity Act 1865 (Imp) (28 & 29 Vict c 63) there can be no question of invalidity of the 1872 Act on the 540 [7.55]

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Fejo v Commonwealth cont. ground of some alleged discordance between the instructions that may have been given to the Governor and the terms of the 1872 Act. That Act permitted the making of an unqualified grant of an estate in fee simple. It was suggested that the grant should, nevertheless, be understood as having been made subject to native title rights. The contention was put in several ways. First, it was said that a grant of fee simple can be made on terms that reserve rights to others. No doubt that is true. Easements and profits à prendre are obvious examples. But this grant was not confined in any way and not made subject to any reservation. There was no conferring of rights of access to, or rights to regulate the use of, the land – whether by the Crown or some other party. Next, it was sought to draw some analogy with rights recognised in English land law like rights of common or customary rights. But reference to those rights in the present context is misplaced. They are creatures of the common law finding their origins in grant or presumed grant. And the rights that are now in issue – native title rights – are not creatures of the common law. That a right owing its existence to one system of law (a right of freehold tenure) may be subject to other rights created by that same legal system (such as customary rights or rights of common) is not surprising. But very different considerations arise when there is an intersection between rights created by statute and rights that owe their origin to a different body of law and traditions. Although reference was made to a number of decisions in other common law jurisdictions about the effect of later grants of title to land on pre-existing native title rights, we doubt that much direct assistance is to be had from these sources. It is clear that it is recognised in other common law countries that there can be grants of interests in land that are inconsistent with the continued existence of native title; the question in each case is whether the later grant has had that effect. In some cases the answer that has been given in other jurisdictions may have been affected by the existence of treaty or other like obligations. Those considerations do not arise here. In this case, the answer depends only upon the effect of a grant of unqualified freehold title to the land. Similarly, although reference was made in argument to questions of plenum dominium they are not questions that arise in this case. The question in this case concerns the 1882 grant, not any later lease of the land. The Crown having granted no lease of the land in 1882, there is no question of the Crown becoming entitled to both ownership and possession of the land upon the lease coming to an end. The rights granted here were inconsistent with native title. The questions about leasehold interests that were considered in Wik Peoples v Queensland (1996) 187 CLR 1 do not arise. Revival of native title? Native title to the land was not, and could not be, revived when the land came to be held again (as it was) by the Crown.

Impact of limited Crown grants

Wik Peoples v Queensland [7.60] Wik Peoples v Queensland (1996) 187 CLR 1 High Court of Australia GAUDRON J: [Footnotes omitted] In June 1993, the Wik Peoples commenced proceedings in the Federal Court of Australia against the State of Queensland, the Commonwealth of Australia and other respondents, including Comalco Aluminium Limited (Comalco) and Aluminium Pechiney Holdings Pty Ltd (Pechiney). They, the Wik Peoples, claimed native title and possessory title rights over an area of land, including tidal land, in far [7.60]

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Wik Peoples v Queensland cont. north Queensland and over the adjoining sea. In the alternative, they claimed damages and sought various forms of equitable relief. Other persons and bodies, including pastoralists, the Aboriginal and Torres Strait Islander Commission and the Thayorre People, were later joined as additional respondents. The Thayorre People claim native title over part of the land the subject of the Wik claim. When joined to the proceedings instituted by the Wik Peoples, the Thayorre People cross-claimed against the State of Queensland and others, including the Pormpuraaw Aboriginal Council which, as trustee, holds part of the land which they, the Thayorre, claim. The Native Title Act 1993 (Cth) came into force on 1 January 1994. The Wik Peoples then made a claim under that Act but procedural rulings were made by Drummond J for the hearing and determination of certain issues in the Federal Court proceedings which, it was thought, might resolve the major, if not all, issues in the Federal Court proceedings as well as those in the claim under the Native Title Act. In the result, five questions were raised for determination as preliminary questions of law, the first question containing three sub-questions, 1A, 1B and 1C. It will later be necessary to refer in some detail to some of the questions raised for determination as preliminary issues. For the moment it is sufficient to note that, at first instance, Drummond J declined to answer one of those questions, Q 2, but answered the others in a manner adverse to the interests of the Wik and the Thayorre Peoples. The Wik and Thayorre Peoples (together referred to as “the appellants”) were each granted leave to appeal to the Full Federal Court and, in due course, their appeals were removed into this Court pursuant to s 40 of the Judiciary Act 1903 (Cth). The issues in the appeal The notice of appeal filed on behalf of the Wik Peoples was amended in various respects and, as a result, there is no longer any challenge to the answers given by Drummond J to questions 1A and 3. Question 1A was designed to determine whether, as a matter of State constitutional law, the legislative power of the Queensland Parliament is limited in such a way that it does not extend to laws extinguishing or impairing native title rights. Question 3 was designed to determine whether, assuming their previous existence, native title rights to minerals and petroleum were extinguished by the enactment of general legislation reserving or vesting minerals and petroleum in the Crown. The result of the amendments to the notice of appeal filed on behalf of the Wik Peoples is that they challenge the correctness of the answers given by Drummond J to parts of questions 1B and 1C and, also, to questions 4 and 5. The Thayorre People only challenge the answer to question 1C; and they alone challenge the answer to question 1C(a). That sub-question is directed to ascertaining whether native title rights are constitutionally protected by reason of undertakings given by colonial authorities in the mid-nineteenth century. No argument was addressed to that question in this Court. The major issue in the appeal arises by reference to questions 1B(b), (c) and (d) and 1C(b), (c) and (d). Those sub-questions are directed to ascertaining whether, as contended by the State of Queensland and the other respondents who adopted the same position in this Court (together referred to as “the respondents”), the grant of pastoral leases pursuant to the Land Act 1910 (Qld) (the 1910 Act) and the Land Act 1962 (Qld) (the 1962 Act) automatically extinguished native title rights. The sub-questions proceed by reference to two leases granted under the 1910 Act (the Mitchellton Pastoral Leases) and one granted under the 1962 Act (the Holroyd Pastoral Lease). Questions 4 and 5 give rise to a separate and distinct issue, namely, whether, as contended by the Wik Peoples, native title survived separate agreements between the State of Queensland and Comalco and Pechiney and the grant of bauxite mining leases to those companies in accordance with those agreements. 542

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Wik Peoples v Queensland cont. Early Queensland land law It is convenient, before turning to the provisions of the 1910 Act, to note some aspects of the early development of Queensland land law. That account must begin with the early law of the Colony of New South Wales which, at first, included the area that is now Queensland. On settlement, there was introduced to the Colony of New South Wales, “by the silent operation of constitutional principles”, that English law “applicable to the condition of an infant Colony”, but not “artificial requirements and distinctions … [which were] neither necessary nor convenient”. And perhaps, “as the population, wealth, and commerce of the Colony increase[d], many rules and principles of English law, which were unsuitable in its infancy, [were] gradually … attracted”. It was held by the Privy Council, in Cooper v Stuart, in application of the principles to which reference has just been made, that “[t]here was no land law or tenure existing in the Colony [of New South Wales] at the time of its annexation to the Crown; and, in that condition of matters … as colonial land became the subject of settlement and commerce, all transactions in relation to it were governed by English law, in so far as that law could be justly and conveniently applied to them.” As pointed out by Drummond J at first instance, land in the Colony of New South Wales was initially disposed of by the Governor in the exercise of prerogative power. Thus, for example, the commission of 2 April 1787 issued to Governor Phillip conferred “full power and authority to agree for such lands tenements and hereditaments as shall be in Our power to dispose of and grant to any person or persons upon such terms and under such moderate quit rents services and acknowledgments to be thereupon reserved unto Us according to such instructions as shall be given to you under Our Sign Manual”. The prerogative power to dispose of land gave way to a power conferred by statute with the passage of the Sale of Waste Lands Act 1842 (Imp). Section 2 of that Act provided that the waste lands of the Crown in the Australian colonies were not to be alienated by the Crown either in fee simple or for any less estate or interest otherwise than by sale conducted in accordance with the regulations made under the Act. That Act was amended by the Sale of Waste Lands Act Amendment Act 1846 (Imp) which provided, amongst other things, for the making of rules and regulations by Orders-in-Council. Prior to 1847, most land was alienated by the grant of an estate in fee simple. Following the enactment of the Sale of Waste Lands Act Amendment Act 1846 (Imp), there issued an Order-in-Council of 9 March 1847 making distinct provision with respect to pastoral leases. The Order-in-Council classified lands in the Colony as “Settled Districts”, “Intermediate Districts” or “Unsettled Districts” and, within those areas, pastoral leases might be granted for one year, eight years or fourteen years respectively. Apart from the use of the word “lease”, there was nothing in the Order-in-Council of 9 March 1847 to indicate the estate or interest intended to be conferred by the grant of a pastoral lease. However, some indication appears from correspondence between the Secretary of State, Earl Grey and the Governor of New South Wales, Sir Charles A FitzRoy, discussing the concern that pastoral lessees might abuse their position with respect to Aborigines who had traditionally used the land. That correspondence culminated in a despatch accompanying an Order-in-Council of 18 July 1849 permitting the insertion in pastoral leases of conditions appropriate for “securing the peaceable and effectual occupation of the lands comprised in such leases, and for preventing the abuses and inconveniences incident thereto”. In that despatch Earl Grey wrote: Comparing the terms of the [Sale of Waste Lands Act Amendment Act 1846 (Imp)] Sections 1 and 6, with those of the Order in Council of 9th March 1847, there can, I apprehend, be little doubt that the intention of Government was, as I pointed out in my Despatch of 11th February last, to give only the exclusive right of pasturage in the runs, not the exclusive occup[a]tion of the Land, as against Natives using it for the ordinary purposes: nor was it [7.60]

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Wik Peoples v Queensland cont. meant that the Public should be prevented from the exercise, in those Lands, of such rights as it is important for the general welfare to preserve, and which can be exercised without interference with the substantial enjoyment by the lessee of that which his lease was really intended to convey. There is also a minute to the same effect on an earlier despatch of 11 October 1848 in which it is recorded: But it must also be considered what ought to be done in order to secure what is due to the natives as regards lands already leased for 14 years [under the Sale of Waste Lands Act Amendment Act 1846 (Imp)]. The introduct[io]n of a condit[io]n into these leases is now impracticable, but I apprehend that it may fairly be assumed that HM did not intend and [gave] no power by these leases to exclude the natives from the [use] they had been accustomed to make of these unimproved [lan]ds and the quest[io]n arises whether some declarat[io]n to that [effect] sh[oul]d not be introduced into the [O in C]? No declaration of that kind found its way into the Order-in-Council which eventually issued. The position with respect to the sale and disposal of land changed significantly with the conferral of self government on the Colony of New South Wales, it being provided in s 2 of the New South Wales Constitution Act 1855 (Imp) that “the entire Management and Control of the Waste Lands belonging to the Crown in the said Colony … shall be vested in the legislature of the said Colony”. That constitutional provision was subject to a number of provisoes, only the second of which is presently relevant. By that proviso, “nothing [t]herein contained [was to] affect or be construed to affect any Contract or to prevent the Fulfilment of any Promise or Engagement made by or on behalf of Her Majesty, with respect to any Lands situate in the … Colony”. It is that proviso which lies at the heart of question 1C(a). The New South Wales Constitution Act 1855 (Imp) also provided, in s 7, for the establishment of a separate colony or colonies by the alteration of the Colony’s northern border. Letters Patent were issued pursuant to that section establishing Queensland as a separate colony in 1859. The Letters Patent conferred on the Governor of Queensland, in cl 5, “full power and authority, by and with the advice of the … Executive Council, to grant … any waste or unsettled lands in … [the] colony … provided … that in granting and disposing of such lands [he] … conform[ed] to and observe[d] the provisions in that behalf contained in any law… in force within … [the] colony”. There were various statutes, including the Pastoral Leases Act 1863 (Qld) which, from time to time, governed the exercise of that power. Again, apart from the use of the word “lease”, neither that latter Act nor any other Acts making provision with respect to pastoral leases indicated the estate or interest intended to be granted by a lease of that kind. With the enactment of the Queensland Constitution Act 1867 (Imp), the position with respect to waste lands in that Colony was brought into line with that provided for in New South Wales by the New South Wales Constitution Act 1855 (Imp). Thus, it was provided by s 40 of the Queensland Constitution Act 1867 (Imp) that, subject to certain provisoes, “[t]he entire management and control of the waste lands belonging to the Crown … [should] be vested in the Legislature of the … colony”. Again, it is necessary to mention only one proviso, namely, a proviso in the same terms as that in the New South Wales Constitution Act 1855 (Imp) relating to previous contracts, promises and engagements. That proviso supplanted the proviso to the same effect in the New South Wales Constitution Act 1855 (Imp) which, until then, had been part of the law of Queensland. The power conferred by s 40 of the Queensland Constitution Act 1867 (Imp) was exercised with the enactment of the Crown Lands Alienation Act 1868 (Qld) which provided, amongst other things, for the selection of first and second class pastoral lands and the grant of pastoral leases. Shortly afterwards there was enacted the Pastoral Leases Act 1869 (Qld) which was concerned with land in unsettled districts. There followed a number of other legislative measures prior to the enactment of the 1910 544 [7.60]

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Wik Peoples v Queensland cont. Act. Again, apart from the use of the word “lease”, none of these measures provides any indication as to the nature of the estate or interest created by the grant of a pastoral lease. The interest conferred by the Mitchellton Pastoral Leases It is clear that pastoral leases are not the creations of the common law. Rather, they derive from specific provision in the Order-in-Council of 9 March 1847 issued pursuant to the Sale of Waste Lands Act Amendment Act 1846 (Imp) and, so far as is presently relevant, later became the subject of legislation in New South Wales and Queensland. That they are now and have for very many years been entirely anchored in statute law appears from the cases which have considered the legal character of holdings under legislation of the Australian States and, earlier, the Australian Colonies authorising the alienation of Crown Lands. Thus, for example, it was said of such holdings in O’Keefe v Williams that “[t]he mutual rights and obligations of the Crown and the subject depend, of course, upon the terms of the Statute under which they arise”. O’Keefe v Williams is of particular interest because it was argued in that case that occupation licenses under the Crown Lands Act 1884 (NSW) and the Crown Lands Act 1895 (NSW) conferred “an absolute right to possession as against all the world” with the consequence that there was no necessity to imply a right of quiet enjoyment. The argument was disposed of on the basis that, “if sound”, it would negative an implied covenant for quiet enjoyment in leases between subject and subject. However, that case does contain statements suggesting that the occupation licenses in question conferred an exclusive right of occupation, a suggestion also made in O’Keefe v Malone, an earlier case involving the same licenses, and in Macdonald v Tully, a case arising under the Tenders for Crown Lands Act 1860 (Qld). It may be that in O’Keefe v Williams Griffiths CJ and Isaacs J both used the expression, “exclusive right to occupy” as synonymous with the expression “exclusive right of possession”. However, that is of little or no significance not only because the case was concerned with different legislation but because their Honours proceeded on the view that the Privy Council had held in O’Keefe v Malone that the occupation licenses in question were leases. In truth, their Lordships held only that a power to relieve against “the lapse or voidance of [a] contract … for the purchase or leasing of Crown lands” extended to relieve against forfeiture of the occupation licenses. And, perhaps, of some relevance to this case, their Lordships reached that conclusion because “the words ‘leased,’ ‘lease,’ and ‘lessee,’ [were] frequently used [in the relevant legislation] as words of a generic import, including lands held under occupation licence, or the licence or the holder thereof”. Whatever may have been said in the decided cases as to holdings under other legislation, it is clear that the Mitchellton Pastoral Leases derive entirely from the 1910 Act and that they conferred, and only conferred, the estate or interest which that Act authorised. As there has been no case which decides what that estate or interest was and as the Act, itself, contained no express provision in that regard, the estate or interest must be ascertained by application of those principles of statutory construction which have been devised to determine what it was that the legislature intended but failed to say in plain words. There are two features which point in favour of the view that the Mitchellton Pastoral Leases were true leases in the traditional common law sense and, thus, conferred rights of exclusive possession. The first is the language of the Act and of the Leases. In this regard, the use of the words “demise”, “lease” and derivatives of the word “lease” in the statutory provisions concerned with pastoral leases and in the Leases themselves, are to be noted. Similarly, it is to be observed that s 6(1) of the Act speaks of a “demise for a term of years”, “demise” being a word traditionally used to create a leasehold estate. Moreover, the word “lease” and the expression “demise for a terms of years” are used not only in relation to pastoral leases, but also in connection with agricultural holdings. However, it will later [7.60]

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Wik Peoples v Queensland cont. appear that there is no sound basis for assuming that they necessarily have the same meaning when used in relation to the various different holdings permitted by the Act. The second feature which points in favour of the view that pastoral leases under the 1910 Act were true leases is that the 1910 Act clearly distinguished between leases and licenses, thereby suggesting that it was maintaining the traditional common law distinction between a lease, which confers a right of exclusive possession, and a license, which does not. Ordinarily, words which have an established meaning at common law are construed as having the same meaning in a statute unless there is something in the words or the subject-matter of the statute to indicate otherwise. This is but an instance of the general rule that statutes are not to be construed as altering common law principles unless that is clearly intended. Thus, in American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd, where the question arose whether the 1962 Act precluded the right of a sub-lessee to transfer or mortgage its interest in a lease of an area reserved under Pt XI of that Act, Mason J observed: The general rule is that the courts will construe a statute in conformity with the common law and will not attribute to it an intention to alter common law principles unless such an intention is manifested according to the true construction of the statute … This rule certainly applies to the principles of the common law governing the creation and disposition of rights of property. Indeed, there is some ground for thinking that the general rule has added force in its application to common law principles respecting property rights. However, there are difficulties in applying that principle to the word “lease” and the expression “demise for a term of years” in the 1910 Act, even in a context where a distinction is drawn between a lease and a license. It is well settled that the question whether an instrument creates a lease or a license is a question of substance not one of language. It is also well settled that it is a question to be answered, at least in the first instance, by asking whether the instrument in question confers a right of exclusive possession. These principles of interpretation are equally applicable in the construction of a statute concerned with a particular type of holding not known, as such, to the common law, but devised to suit the peculiar conditions of the Australian colonies. Thus, the word “lease” and the expression “demise for a term of years” cannot, of themselves, provide a basis for holding that a pastoral lease under the 1910 Act conferred a leasehold estate, as understood by the common law and, thus, conferred a right of exclusive possession. Rather, the search must be for indications within the Act that it was intended that pastoral leases should confer that right. Because it is necessary to look for indications within the Act to ascertain the estate or interest intended to be conferred by a pastoral lease and, indeed, by a lease of any of the holdings permitted by the 1910 Act, there is no basis for assuming that “lease” and “demise for a term of years” bear precisely the same meaning when used in relation to each of those different holdings. And for that reason, also, it would be wrong to place over-much reliance on the 1910 Act’s apparent distinction between a lease and a license. Particularly is that so in a statutory context in which an occupation license with respect to pastoral land may be readily distinguishable from a pastoral lease by reason of the short term nature of the license. Another difficulty with approaching the word “lease” and the expression “demise for a term of years” in the 1910 Act as if they bore their common law meaning is that, whatever may be the position in other areas of the law, there is no very secure basis for thinking that pastoral leases owe anything to common law concepts. As already indicated, pastoral leases are statutory devices designed to suit the peculiar conditions of the Australian colonies, deriving from the Order-in-Council of 9 March 1847. And as has been seen, the common law was only applicable in the early days of the Colonies to the extent that that was necessary or convenient. 546 [7.60]

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Wik Peoples v Queensland cont. In 1847, when pastoral leases were devised, the Colony of New South Wales had been established for nearly sixty years. However, there were vast areas which had not then been opened up for settlement, including the land in issue in this case. Even if pastoral leases were devised with common law concepts in mind, they were a novel concept and there is nothing to suggest that it was necessary or convenient for them to conform precisely to the common law. More to the point, perhaps, there is nothing to suggest that a right of exclusive possession was either a necessary or convenient feature of pastoral leases in the conditions of the Colony of New South Wales in 1847. And there is nothing to suggest that subsequent statutory measures culminating in the 1910 Act effected any significant change with respect to the estate or interest which they conferred. A third difficulty with attributing the features of common law leases to the holdings described as “pastoral leases” in the 1910 Act is that, at least in one significant respect, the Act prescribes a quite different feature. As the common law stood in Queensland until 1975, a leasehold estate vested only on entry into possession. In contrast, s 6(2) of the Act provided that it was the making of a grant in the prescribed form which operated to convey and vest the interest thereby granted. Finally, there is the difficulty of construing “lease” in the 1910 Act as the equivalent of a lease at common law in a context in which the Act clearly used the word “lease” to refer to something quite foreign to the common law conception of a lease. At common law, a lease is normally a demise for a term of years. However the 1910 Act authorised the grant of perpetual leases which, as already indicated, were expressed to be “leases in perpetuity”, an expression which is unknown to the common law and which cannot possibly take its meaning from it. Quite apart from the difficulties involved in approaching the provisions of the 1910 Act on the basis that the word “lease” and the expression “demise for a term of years”, of themselves, indicate that pastoral leases were true leases in the traditional common law sense, there were provisions in the Act indicating that they were not. Certainly, there were indications that they did not confer a right of exclusive possession which, as already mentioned, is an essential feature of a lease at common law. The strongest indication that a pastoral lease granted under the 1910 Act did not confer a right of exclusive possession is to be found in those provisions of the Act conferring rights on persons authorised in that behalf to enter upon land the subject of a pastoral lease to remove timber, stone, gravel, clay, guano or other material, denying the lessee the right to ringbark, cut or destroy trees and also denying the lessee power to restrict authorised persons from cutting or removing timber or material within the holding. There is a similar indication in the provision permitting others to depasture stock if a stock route or road passed through the holding. And, of course, there were the reservations in the Leases as required by the prescribed form of lease. In particular, there were the identical reservations in both Leases of “the right of any person duly authorised in that behalf … at all times to go upon the said Land, or any part thereof, for any purpose whatsoever, or to make any survey, inspection, or examination of the same”. There is another indication that a pastoral lease granted under the 1910 Act did not confer a right of exclusive possession. In contradistinction to the express provision contained in s 76(1) of the 1910 Act with respect to persons whose applications for agricultural holdings had been approved, there was no provision in the Act authorising a pastoral lessee to take possession of the land the subject of a lease. Rather, the only right expressly conferred on pastoral lessees in that regard was that conferred by s 204 of the Act, namely, to take action for the removal of persons in “unlawful occupation”. And, as already explained, that provision did not, of itself, confer a right of exclusive possession. Moreover, the vastness of the areas which might be made the subject of pastoral leases and the fact that, inevitably, some of them would be remote from settled areas militate against any intention that they should confer a right of exclusive possession entitling pastoralists to drive native title holders from their traditional lands. Particularly is that so in a context where, in conformity with the prescribed form, the grants were expressed to be made “for pastoral purposes only”. [7.60]

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Wik Peoples v Queensland cont. Given that the words “lease” and the expression “demise for a term of years” do not, of themselves, indicate that pastoral leases granted pursuant to the 1910 Act conferred a right of exclusive possession and given, also, the indications in the Act to the contrary, the question whether they conferred such a right is concluded in favour of the continued existence of native title rights by application of the rule of construction identified in Mabo [No 2] to which some reference has already been made. That rule is that general legislation with respect to waste lands or Crown land “is not to be construed, in the absence of clear and unambiguous words, as intended to apply in a way which will extinguish or diminish rights under common law native title”. As Deane J and I explained in Mabo [No 2] the rule to which reference has just been made is not a special rule with respect to native title; it is simply a manifestation of the general and well settled rule of statutory construction which requires that “clear and unambiguous words be used before there will be imputed to the legislature an intent to expropriate or extinguish valuable rights relating to property without fair compensation”. Whether the rule be stated generally or by reference to native title rights, it dictates the conclusion that, whilst the grant of a pastoral lease under the 1910 Act certainly conferred the right to occupy land for pastoral purposes and s 204 conferred the right to bring action for the removal of persons in unlawful occupation, a pastoral lease did not operate to extinguish or expropriate native title rights, as would have been the case, had it conferred a right of exclusive possession. The Mitchellton Pastoral Leases: the Crown’s “reversionary interest” It follows from the conclusion that the grant of a pastoral lease under the 1910 Act did not confer a right to exclude native title holders and, thus, did not confer a right of exclusive possession that the Mitchellton Leases were not true leases in the traditional common law sense, and, thus, did not operate to vest a leasehold estate. As a reversionary interest only arises on the vesting of a leasehold estate, there is no basis for the contention that, on the grant of the Mitchellton Leases, or, more accurately, on the grant of the first Mitchellton Lease, the Crown acquired a reversionary interest, as that notion is understood by the common law, and its radical title was thereby expanded to full beneficial ownership. Moreover, the provisions of the 1910 Act run counter to the notion that the Crown acquired a reversionary interest of the kind for which the respondents contended. As already indicated, a reversionary interest arises on the vesting of a leasehold estate, which, prior to 1975 in Queensland, occurred on entry into possession. However, s 6(2) of the 1910 Act operated to vest the estate or interest conferred by a grant under the Act, not on entry into possession, but on the making of a grant in the prescribed form. Furthermore, s 135 made provision for what may be called a statutory reversion in the event of “determinat[ion] by forfeiture or other cause before the expiration of the period or term for which it was granted”, specifying that in that event it should “revert to His Majesty and become Crown land”, able to be “dealt with under [the] Act accordingly”. In the event of forfeiture or early determination, the clear effect of s 135 was to assimilate the land involved to land which had not been alienated, reserved or dedicated for public purposes and which, therefore, was “Crown land” as defined in s 4 of the Act. In other words, the effect of s 135 was, in that event, to assimilate the previously alienated land to land in respect of which the Crown had radical title, and not to land in respect of which it had beneficial ownership. The fact that in these two respects the 1910 Act proceeded on a basis which was at odds with the common law principles with respect to reversionary interests tends to confirm the conclusion otherwise reached in the application of ordinary principles of statutory construction, namely, that the grant of a pastoral lease under the 1910 Act did not confer a right of exclusive possession. 548 [7.60]

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Wik Peoples v Queensland cont. Conclusion with respect to the Mitchellton Pastoral Leases: answer to question 1C The conclusion I have reached by application of ordinary principles of statutory construction renders it unnecessary for me to consider the appellants’ alternative arguments with respect to fiduciary duties. And it follows from that conclusion that Drummond J was in error in answering question 1C(b) as he did. Instead it should have been answered “No”. So answered, sub-questions 1C(c) and (d) do not arise. However, in the light of these reasons, I would answer sub-question 1C(d) “No”. In the light of the principle of construction identified and explained in Mabo [No 2] and in light of the long statutory history of pastoral leases, clear words are plainly required before the provisions of the 1962 Act dealing with pastoral tenures can be construed as changing the essential nature of pastoral leases by the introduction, under the same name, of a different tenure conferring a right of exclusive possession. The matters to which reference has been made fall short of a clear indication of an intention to that effect. Rather, s 4(2) of the 1962 Act makes it plain that the pastoral tenures permitted by that Act were, and were intended to be, “analogous” with those permitted by earlier Acts, including the 1910 Act. Given these considerations, the provisions of the 1962 Act concerned with leases of pastoral holdings are not to be construed as creating leases which conferred a right of exclusive possession and, thus, a right to exclude native title holders from their traditional lands. It follows that the Holroyd Pastoral Lease did not confer a right of exclusive possession. The questions whether performance of the conditions attached to the Holroyd Pastoral Lease effected any impairment or extinguishment of native title rights and, if so, to what extent are questions of fact and are to be determined in the light of the evidence led on the further hearing of this matter in the Federal Court. Conclusion with respect to the Holroyd Pastoral Lease: answer to question 1B Again, the conclusion that, as a matter of statutory construction, a pastoral lease under the 1962 Act did not confer a right of exclusive possession makes it unnecessary to consider the arguments with respect to fiduciary duties. And that conclusion also has the consequence that Drummond J was in error in answering question 1B(b) as he did. Instead, it should have been answered “No”. As with questions 1C(c) and (d), questions 1B(c) and (d) do not arise. However, in the light of these reasons, I would answer sub-question 1B(d) “No”. [Toohey, Gummow and Kirby JJ agreed. Brennan CJ, Dawson and McHugh JJ dissented.]

[7.65]

Notes

1. The alleged extinguishment of the interests of the indigenous peoples flowed from the effect of the grant of the pastoral lease. The validity of the pastoral interest is not in question, the issue is whether its grant has extinguished the native title interest. To resolve this issue the Court is considering whether the interests are inconsistent. Reference has already been made to the fact that content of native title varies according to the different customs of the different native groups. Similarly there is no single pastoral lease; indeed even within one State a wide range of Crown leasehold interests was established from the early 19th century. Holders of leasehold interests have attempted to simplify their task in court by arguing that the grant of the leasehold interest has extinguished the native title whatever the content of the native title. Consequently argument has concentrated on the content of the pastoral interest and, in particular, whether the interest confers a right of exclusive possession. [7.65]

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2. The decision in Wik Peoples v Queensland (1996) 187 CLR 1 provoked further public outcry particularly because the result seemed to be contrary to the expectations of the drafters of the Native Title Act 1993 (Cth). The judicial reaction has included the following comments from McHugh J in Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1: Wik is one of the most controversial decisions given by this Court. It subjected the Court to unprecedented criticism and abuse, though the criticism and abuse were mild compared to that directed to the United States Supreme Court after its two decisions in Brown v Board of Education of Topeka. No doubt the decision in Wik was controversial because to most people it was unexpected. There were at least three matters that led people to believe that the grant of a pastoral lease extinguished any native title in respect of the land, the subject of the lease. First, statements by the majority Justices in Mabo v Queensland [No 2] had indicated that the grant of a lease extinguished native title. Second, the preamble to the Native Title Act 1993 (Cth) had declared that this Court had “held that native title is extinguished by valid government acts that are inconsistent with the continued existence of native title rights and interests, such as the grant of freehold or leasehold estates.” Third, the Land Act 1910 (Q) and the Land Act 1962 (Q) described pastoral leases as leases and were perceived as vesting in the lessee an estate or interest in the land. And, if that was not enough, for 126 years Queensland lawyers had taken the view that a pastoral lease gave a legal right of exclusive possession to the land. But to the surprise of most people who had thought about the matter, a narrow majority of Justices of this Court held in Wik that the claims of pastoral lessees and native-title holders could be reconciled. Despite the description of pastoral leases as leases in the Land Act 1910 (Q) and the Land Act 1962 (Q) and the long held professional opinion as to their legal effect and nature, the majority Justices held that pastoral leases were not in fact leases, as lawyers understood that term. The majority held that the rights given by the “leases” and the rights of native title were not necessarily inconsistent. Whether or not the grant of a pastoral lease extinguished native title rights depended upon the particular rights conferred by the lease and the incidents of the relevant native title. In Mabo [No 2], Brennan J had said that the Australian Aborigines had been “dispossessed of their land parcel by parcel, to make way for expanding colonial settlement”. Wik held that henceforth Aborigines could only be dispossessed of their land, the subject of a Queensland pastoral lease, metre by metre. They could be dispossessed only after a federal court had held that a native title right claimed in relation to a particular place was necessarily inconsistent with the rights of the pastoral lessee. The Federal Parliament responded to Wik by enacting Act No 97 of 1998 (Cth) which, among other things, ensured that the reasoning in the Wik decision would henceforth be confined to narrow areas. But as the reasons of the majority Justices in this case show, the ideas that generated that decision still haunt the corridors of native title law. In particular, they have survived its burial in relation to pastoral and mining leases. Wik is also probably the source of the self-contradictory term “non-exclusive possession” that appears prominently in Act No 97 of 1998 (Cth). The common law understands the concept of joint possession. But possession that is not exclusive is a contradiction in terms, for the right of general control and exclusion is central to the concept of legal possession.

3. This agitation was one of the factors leading to amendments to the legislation in 1998. However the legislation did not resolve the issue of extinguishment: the grant of a pastoral or similar lease is expressed to extinguish native title to the extent it would do so under the common law (Native Title Act 1993 (Cth), Pt II).

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Western Australia v Ward [7.70] Western Australia v Ward (2002) 213 CLR 1; 191 ALR 1 High Court of Australia GLEESON CJ, GAUDRON, GUMMOW AND HAYNE JJ: [Footnotes omitted] Paragraphs (a) and (b) of s 223(1) [of the Native Title Act 1993 (Cth)] indicate that it is from the traditional laws and customs that native title rights and interests derive, not the common law. The common law is not the source of the relevant rights and interests; the role accorded to the common law by the statutory definition is that stated in par (c) of s 223(1). This is the “recognition” of rights and interests. To date, the case law does not purport to provide a comprehensive understanding of what is involved in the notion of “recognition”. There may be some laws and customs which meet the criteria in pars (a) and (b) of s 223(1), but which clash with the general objective of the common law of the preservation and protection of society as a whole, but the case law does not provide examples. Secondly, the statement in Mabo [No 2] that native title “may be protected by such legal or equitable remedies as are appropriate to the particular rights and interests established by the evidence” is yet to be developed by decisions indicating what is involved in the notion of “appropriate” remedies. In Fejo, six members of the Court referred to the determination provisions of the NTA and continued: However, the [NTA] otherwise does not deal with the ascertainment or enforcement of native title rights by curial process. It provides for the establishment of native title and recognises and protects it in the manner we have outlined. But the protection which the [NTA] gives is protection “in accordance with [the NTA]” (s 10). If actual or claimed native title rights are sought to be enforced or protected by court order, the party seeking that protection must take proceedings in a court of competent jurisdiction. Thirdly, the recognition may cease where, as a matter of law, native title rights have been extinguished even though, but for that legal conclusion, on the facts native title would still subsist. Thus, for example, the circumstance that, perhaps by reason of the attitude adopted by the non-indigenous owner of land in fee simple, indigenous people retain connections to the land in question does not derogate from the conclusion that the grant of the fee simple extinguished the native title. That conclusion would follow from the reasoning and the decision in Fejo. The actual holding in Wik touched upon some of these matters but was constrained by the course which had been taken in the Federal Court. There had been no determination at trial as to the existence or otherwise of native title rights and interests. Rather, by the formulation of questions for decision in advance of trial, an attempt had been made, as Toohey J put it, to: reduce to straightforward propositions what are in truth complex issues of law and of fact. [The questions] look for a certainty in the answers which, in the circumstances of the present appeals, is a mirage. There have been no findings as to whether native title rights even exist in connection with the land, let alone the Content of any such rights. In the result, the Court determined that there was no necessary extinguishment of such native title rights as might otherwise exist by reason of the grant of pastoral leases under the Queensland statutes in question. However, with the concurrence of Gaudron, Gummow and Kirby JJ, Toohey J added: Whether there was extinguishment can only be determined by reference to such particular rights and interests as may be asserted and established. If inconsistency is held to exist between the rights and interests conferred by native title and the rights conferred under the statutory grants, those rights and interests must yield, to that extent, to the rights of the grantees. This passage was consistent with what by then had been provided in s 227 of the NTA. This states: An act affects native title if it extinguishes the native title rights and interests or if it is otherwise wholly or partly inconsistent with their continued existence, enjoyment or exercise. The term “act” is given a detailed definition in s 226. [7.70]

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Western Australia v Ward cont. The 1998 Act substituted a fresh s 4 to the NTA. This makes it plain that the amendments made by the 1998 Act were a legislative response to what was seen as the outcome in Wik. In particular, s 4(6) states: This Act also confirms that many acts done before the High Court’s judgment [in Wik], that were either valid, or have been validated under the past act or intermediate period act provisions, will have extinguished native title. If the acts are previous exclusive possession acts (see s 23B), the extinguishment is complete; if the acts are previous non-exclusive possession acts (see s 23F), the extinguishment is to the extent of any inconsistency. Sections 23B and 23F are in Div 2B which was added by the 1998 Act. Division 2B is of central importance for these appeals. Yet again it must be emphasised that it is to the terms of the NTA that primary regard must be had, and not the decisions in Mabo [No 2] or Wik. The only present relevance of those decisions is for whatever light they cast on the NTA. Extinguishment of native title Before the changes made by the 1998 Act, which came into effect after the institution of the present litigation, the NTA itself otherwise indicated little about what was involved in the notion of extinguishment of native title. Native title might be taken to have ceased to exist because, in a given case, those asserting title could not establish the present subsistence of the necessary connection required by para (b) of s 223(1), but it may be doubted that circumstances of this kind are at the core of the meaning to be given to the notion of extinguishment. The term “extinguishment” is most often used to describe the consequences in law of acts attributed to the legislative or executive branches of government. In addition, it was asserted that in some cases the native title claimed in these matters had been extinguished by acts of the executive branch of government, done pursuant to legislative authority, that were acts which did not constitute a grant of rights to any third party but were said to be the assertion, by the executive, of rights in respect of the land, or the exercise, again by the executive, of powers over the land, inconsistent with the continued existence of some or all native title rights and interests. It is important to recognise, however, that despite the grant of rights to others, or the assertion or exercise of rights or powers by the executive, to some extent the native title might survive or there might be no inconsistency in the relevant sense at all. Further, as Yanner v Eaton illustrates, statute may regulate the exercise of the native title right without abrogating it. The amendments made to the NTA by the 1998 Act continue the distinction between the extinguishment of native title rights and interests and partial inconsistency. Section 237A states: The word extinguish, in relation to native title, means permanently extinguish the native title. To avoid any doubt, this means that after the extinguishment the native title rights and interests cannot revive, even if the act that caused the extinguishment ceases to have effect. The NTA contains in s 242(1) a definition of “lease” which includes, as par (c), “anything that, at or before the time of its creation, is, for any purpose, by a law of the Commonwealth, a State or a Territory, declared to be or described as a lease”. The 1998 Act introduced a distinction, important for these appeals, between the exclusive pastoral lease and the non-exclusive pastoral lease. The latter is a pastoral lease that is not included in the former class (s 248B). A pastoral lease that confers a right of exclusive possession over the land or waters covered by the lease will be an exclusive pastoral lease (s 248A). At trial, findings of fact were made by Lee J to underpin the conclusion that the claimants had satisfied the requirements of paras (a) and (b) of the definition in s 223(1) of the NTA. The Full Court was not persuaded by the submissions of Western Australia that the trial judge had erred in these findings; the evidence had been open to an interpretation that supported his findings. The Northern Territory throughout has taken a position which differs from that of Western Australia. There has been no issue 552 [7.70]

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Western Australia v Ward cont. between the Territory and the Ningarmara claimants that the laws and customs of the three estate groups connected them to the area claimed in the Territory and that it was reasonable to find (by inference) that those laws and customs were rooted in the pre-sovereignty laws and customs. The arguments in this Court focused upon questions of extinguishment rather than upon the anterior questions of the existence of native title and the particular content of native title rights and interests. That, as will appear, gives rise to some difficulty. The more general the terms in which the findings are made as to the subsistence of native title, the more difficult the giving of specificity to findings of extinguishment, particularly where, as the NTA postulates, there may be partial extinguishment. It may be observed that the specific finding at trial in Yanner v Eaton as to the existence of the hunting and fishing rights and interests which the appellant claimed to have exercised facilitated the finding in this Court of regulation rather than extinguishment. Part 2 – Extinguishment D. The criterion for extinguishment Before turning to consider the various acts attributable to the State (and then those attributable to the Territory) which were said to extinguish native title, wholly or partly, it is convenient to turn to the criterion for extinguishment of native title which was adopted by the primary judge and rejected by the Full Court. The primary judge adopted the adverse dominion test or approach which had been suggested but not adopted in a dissenting judgment of Lambert JA of the British Columbia Court of Appeal in Delgamuukw v British Columbia. Lee J did not expressly endorse the adverse dominion test but, as Beaumont and von Doussa JJ later pointed out in the Full Court, it is apparent from his Honour’s treatment of pastoral leases and other grants to third parties that he had adopted the adverse dominion test. That test or approach was described by Lee J in the following terms: First, that there be a clear and plain expression of intention by parliament to bring about extinguishment in that manner; secondly, that there be an act authorised by the legislation which demonstrates the exercise of permanent adverse dominion as contemplated by the legislation; and thirdly, unless the legislation provides the extinguishment arises on the creation of the tenure inconsistent with an aboriginal right, there must be actual use made of the land by the holder of the tenure which is permanently inconsistent with the continued existence of aboriginal title or right and not merely a temporary suspension thereof. His Honour applied the adverse dominion test to conclude that the claimants had native title rights and interests in respect of much of the area they claimed. He rejected the contention that some or all of those rights and interests had been extinguished. On appeal to the Full Court, the majority rejected the adverse dominion test and concluded that native title rights and interests had been wholly or partly extinguished in respect of much of the area claimed. There was much debate in the Full Court as to whether native title rights and interests are properly to be seen as a bundle of rights, the separate components of which may be extinguished separately. The NTA, particularly in the distinction now drawn in s 23A, referred to above, between complete extinguishment and extinguishment “to the extent of any inconsistency”, mandates the correctness of the approach taken by the Full Court. It is necessary to say something further about the adverse dominion test. Some of the parties in this Court contended that it is no more than the use of different language to express a test of extinguishment which has been, or should be, adopted in Australia as the criterion for the withdrawal by the common law of the recognition of native title spoken of in para (c) of the definition in s 223(1) of the NTA. The cases often refer to the need for those who contend that native title has been extinguished to demonstrate a “clear and plain intention” to do so. That expression, however, must not be [7.70]

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Western Australia v Ward cont. misunderstood. The subjective thought processes of those whose act is alleged to have extinguished native title are irrelevant. Nor is it relevant to consider whether, at the time of the act alleged to extinguish native title, the existence of, or the fact of exercise of, native title rights and interests were present to the minds of those whose act is alleged to have extinguished native title. It follows that referring to an “expression of intention” is apt to mislead in these respects. As Wik and Fejo reveal, where, pursuant to statute, be it Commonwealth, State or Territory, there has been a grant of rights to third parties, the question is whether the rights are inconsistent with the alleged native title rights and interests. That is an objective inquiry which requires identification of and comparison between the two sets of rights. Reference to activities on land or how land has been used is relevant only to the extent that it focuses attention upon the right pursuant to which the land is used. Any particular use of land is lawful or not lawful. If lawful, the question is what is the right which the user has. If it is not lawful, the use is not relevant to the issues with which we must deal in these matters. Beaumont and von Doussa JJ correctly observed: The inconsistency of incidents test requires a comparison between the legal nature and incidents of the statutory right which has been granted and the native title rights being asserted. The question is whether the statutory right is inconsistent with the continuance of native title rights and interests. It is to be noted that Lambert JA in Delgamuukw said that he did not think that there was any basis in principle for saying that inconsistency between the grant and native title necessarily means that it is the native title that must give way. This view is not consistent with the inconsistency of incidents test adopted in Australia. Further, to speak, as did the primary judge, of “permanent adverse dominion” raises a question about the meaning of “permanent” in this context. If it is intended to mean unlimited in time, it would follow that the grant of no interest in land less than a fee simple (such, for example, as a lease for a term of years) could extinguish native title. Yet it is plain that the rights held under at least some grants of interests in land less than a fee simple are inconsistent with the continued existence of native title rights. If, however, “permanent” is used to embrace not only transactions in which interests are created which are not limited in time but also other “long term” transactions, there are obvious difficulties in identifying a satisfactory criterion for distinguishing between long term and other transactions. The majority of the Full Court were right to conclude that the test proposed by Lambert JA in Delgamuukw should not be adopted. On no view did a pastoral lease granted under the provisions examined so far, give the holder a right to exclusive possession of the land. There were extensive reservations permitting entry not only on behalf of the Crown but also by others in many different circumstances and for many different purposes. It is enough to notice the widest of these, reserving a right to any person “to enter, pass over, through, and out of any [unenclosed or enclosed but otherwise unimproved part of the land] while passing from one part of the country to another, with or without horses, stock, teams, or other conveyances, on all necessary occasions”. Of most immediate relevance, for present purposes, is the reservation in each pastoral lease which was issued under the Land Act 1898 or previous Land Regulations and s 106(2) of the Land Act 1933 which applied to pastoral leases issued after 1934. The majority of the Full Court concluded that when that reservation ceased to apply (upon the land being, as the case required, enclosed, improved or both enclosed and improved) native title to that land was wholly extinguished. That conclusion depends upon the premise that, but for the reservation, the holder of a pastoral lease had the right to exclude Aboriginal people from the land. As was pointed out in Wik, the fact that both the instrument by which a pastoral lease was granted and the legislative instrument pursuant to which it was granted used language that might be used in or in relation to a lease between private individuals does not conclusively demonstrate that the holder of a 554

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Western Australia v Ward cont. pastoral lease was granted a right to exclusive possession of the land. Putting aside, for the moment, the provision about Aboriginal access, the following features may be noticed about the pastoral leases with which we are concerned in this matter: (a)

Pastoral leases are a creature of statute or regulation, not the common law.

(b)

Pastoral leases were but one of several forms of interest in land for which provision was made by the Acts and Land regulations, and not all of those interests find close analogy with interests that could be created at common law.

(c)

Although the Acts and Land Regulations provided for both leases and licences as different kinds of interest, various provisions of the Acts and Land Regulations treated leases and licences without distinction as, for example, in provisions dealing with their transfer, their forfeiture and the periodic payment to be made under each as “rent”.

(d)

The holder of a pastoral lease was entitled to use the land only for the limited purposes referred to as “pastoral purposes” and the holder obtained no right to the soil or the timber except to the extent required for certain limited purposes.

(e)

As has been noted earlier, the interest obtained under a pastoral lease was precarious.

Unlike the legislation considered in Wik, no provision was made for the holder of a pastoral lease to bring action for removal of persons in “unlawful occupation” of the land the subject of the pastoral lease. There were the successive Penal provisions prohibiting unlawful or unauthorised use or occupation of Crown lands. It was not, nor could it be, submitted that these penal provisions should be understood as working an extinguishment of native title. The provisions were generally applicable to all Crown land, that is, to all waste lands of the Crown, and are not to be understood “as intended to apply in a way which will extinguish or diminish rights under common law native title”. That is to say, the penal provisions which operated in respect of persons found in the “unlawful or unauthorised use or occupation” of Crown lands did not extend to persons exercising native title rights and interests. The exercise of native title rights and interests did not constitute an unlawful or unauthorised use or occupation of the land. Did the grant of a pastoral lease over Crown land prohibit the continued use or occupation of that land, in accordance with native title rights and interests, by the holders of those rights? Did it make use or occupation of the land by those persons for those purposes “unlawful or unauthorised”? That would be so only if a pastoral lease gave the holder the right, either absolutely, or contingently upon the taking of certain steps (enclosure, improvement or both), to exclude native title holders from the land. Pastoral leases granted under the statutes and Land Regulations in issue in these matters did not grant that right. In considering whether a lease confers the right of exclusive possession on the lessee the proper order of inquiry is first to examine what are the rights granted and only then to classify the grant. Here the rights granted were limited in the Respects that have been noted. Especially were they limited in respect of the grantor of the interest. Under the early forms of lease, the Crown reserved to itself very extensive rights of entry – “for any purposes of public defence, safety, utility, convenience, or enjoyment, or for otherwise facilitating the improvement and settlement of our Colony”. Under the Land Act 1933, it retained power to sell, lease or otherwise dispose of any part of the lease at any time as well as power to reserve or dispose of any part of it for any of a number of purposes, including those described in the reservation of right of entry just mentioned as reserved under the earlier forms of lease. Pastoral leases granted under the early Land Regulations, the Land Act 1898 or the Land Act 1933 conferred no right of exclusive possession on the grantee. The reservation or provision in favour of Aboriginal access cannot, then, be seen as qualifying an otherwise general right to exclude. It follows that upon the happening of the contingency of enclosure or improvement contemplated by the reservation or provision, those who would enter or use the land as native title holders could continue [7.70]

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Western Australia v Ward cont. to do so. Those who could no longer do so were those Aboriginal persons who, although within the terms of the reservation, were not native title holders. It is unnecessary to decide what constitutes enclosure or improvement. The conclusion that pastoral leases granted under the statutes and regulations of the State did not grant to the holder of a pastoral lease the right either absolutely or contingently upon the taking of certain steps to exclude native title holders from the land has significant consequences for the application of Div 2B of Pt 2 of the NTA and of Pt 2B of the State Validation Act. The pastoral leases were “non-exclusive pastoral leases” within the definition in s 248B of the NTA. This was because they did not confer “a right of exclusive possession over the land or waters covered by the lease” within the meaning of s 248A. P. Summary As is apparent from what has been said, the determination made by the Full Court should be set aside and the matters remitted to that Court for further consideration in accordance with the reasons of this Court. That being so, it is convenient to attempt to summarise some of the principal conclusions that we have reached. At the risk of stating the obvious, it is as well to say, however, that the summary is not intended to be any more than a general indication of what we have held. The summary is not to be read, let alone applied, as if it were a statute. The reasons must be considered as a whole. 1

Because what is claimed in the present matters are claims made under the NTA, for rights defined in the NTA, it is that statute which governs.

2

The NTA must be applied in the form in which it stands at the date of the determination by the Full Court. The State and Territory Validation Acts for which the NTA provides must, therefore, be considered.

3

The NTA provides that there can be partial extinguishment or suspension of native title rights.

4

Questions of extinguishment first require identification of the native title rights and interests that are alleged to exist.

5

Whether native title rights have been extinguished by a grant of rights to third parties or an assertion of rights by the executive requires comparison between the legal nature and incidents of the right granted or asserted and the native title right asserted. For that reason the term “operational inconsistency” is useful, if at all, only by way of analogy. The adverse dominion approach to extinguishment is wrong, not least because it obscures the objective nature of this comparison.

6

To apply Pt 2 of the NTA and the State and Territory Validation Acts to transactions taking place after 31 October 1975, it is necessary to consider the operation of the RDA. In some cases the RDA is inconsistent with State legislation to the extent that the State legislation permitted transactions with land that would otherwise extinguish native title rights and interests. The RDA invalidates the State legislation to that extent [458]. Notwithstanding the later introduction of self-government in the Northern Territory, the RDA continued to speak in respect of Territory laws thus requiring the disregarding of Territory laws imposing a discriminatory burden or prohibition. In some cases, then, the provisions of Pt 2 of the NTA may be engaged in respect of Territory land.

7

The native title rights and interests protected by the NTA are rights in relation to land or waters where, among other things, the peoples concerned, by traditional laws and customs, have a connection with the land or waters. In so far as claims to protection of cultural knowledge go beyond denial or control of access to land or waters, they are not rights protected by the NTA. The law respecting confidential information, copyright or fiduciary duties may afford some

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Western Australia v Ward cont. protection to such rights. The absence of evidence of some recent use of the land or waters does not, of itself, require the conclusion that there can be no relevant connection as required by s 223(1)(b) of the NTA. 8

Because questions of extinguishment require analysis of the legal effect of particular dealings with land, reference to the “Ord Project”, as a geographic or economic entity, is not of assistance.

9

Whether the whole or some parts of the geographical area of the Ord Project falls within the definition of “public work” in s 251D of the NTA cannot be resolved on the findings of fact made so far.

10

The grant of a pastoral lease in Western Australia extinguished the native title right to control access to, or the use to be made of, the land. The grant of a pastoral lease did not give a right of exclusive possession. Native title rights and interests, other than the right just mentioned, probably continued unaffected by the grant, but to what extent we cannot say from the present findings of fact. To the extent that rights and interests granted by a pastoral lease were not inconsistent with native title rights and interests, the rights and interests under the lease prevailed over, but did not extinguish, native title rights.

11

Resumption of land under s 109 of the Land Act 1933 did not extinguish native title.

12

Reserving land in Western Australia pursuant to the Land Acts was inconsistent with the right to be asked permission to use or have access to the land. Reserving land before 31 October 1975 therefore extinguished that right, but did not otherwise extinguish native title [466]. After 31 October 1975, account must be taken of the RDA and Pt 2 of the NTA and of the State Validation Act. Reservation after that date of land that had not been and was not the subject of a pastoral lease was inconsistent with the RDA. By operation of the provisions of Pt 2 of the NTA and the State Validation Act, reservation would, in effect, suspend the native title right to speak for country for so long as the land remained reserved.

13

In the case of some parts of some reserves in Western Australia, the “public work” provisions of the NTA and the State Validation Act may be engaged. We cannot say from the present findings of fact whether that is so.

14

Vesting land in a body or person under s 33 of the Land Act 1933, before 31 October 1975, passed the legal estate of the land and thereby extinguished all native title rights and interests in the land. The vesting of a reserve under s 33 after 31 October 1975 was valid, the relevant State legislation not being inconsistent with the RDA. Because vesting land under s 33 vested a right of exclusive possession to the land it extinguished native title and, in some but not all cases, it was a previous exclusive possession act. The extinguishing effect of previous exclusive possession acts is confirmed by Div 2B of Pt 2 of the NTA and Pt 2B of the State Validation Act. The vesting of land under s 33 which did not amount to a previous exclusive possession act (as, for example, vesting for the purposes of preserving the natural environment of an area) was, nonetheless, valid and effective to extinguish native title.

15

Land referred to as “buffer” or “expansion” areas in connection with the Ord Project must be considered by reference to particular transactions affecting the land, not as a general class of land. So, for example, Reserve 31165 having been vested under the Land Act 1933 in the Minister and having been vested before 31 October 1975, all native title rights and interests to the land were extinguished. All other land reserved for purposes so closely connected with what the Rights in Water and Irrigation Act defines as “Works” that they may be said to have been reserved “in connection with” Works will have vested in the Minister by operation of that Act and thereby Extinguished native title. Whether other buffer or expansion areas, such, for example, as vacant Crown land, can be said to fall within the definition of “Works” in the Rights [7.70]

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Western Australia v Ward cont. in Water and Irrigation Act, and were thus vested in the Minister, depends on the determination of whether those areas have been “used in connection with” Works at a greater level of specificity than the present findings of fact permit. 16

Resumption of land in Western Australia under the Public Works Act before 31 October 1975 extinguished all native title rights and interests because the resumption notice directed that the land shall vest in the Crown for an estate in fee simple. Resumption after 31 October 1975 was not inconsistent with the RDA and, in any event, was a previous exclusive possession act validated by the NTA and the State Validation Act.

17

The grant of mining leases in Western Australia would have extinguished the right to be asked permission to use or have access in relation to the whole of the area of the lease had it not been earlier extinguished by the grant of pastoral leases. Whether other native title rights and interests in relation to land were inconsistent with the rights granted under a mining lease is, for the reasons given in connection with pastoral leases, a question that cannot be answered on the findings of fact that have been made so far.

18

The same conclusions are reached about the Argyle mining lease and the general purpose lease as are reached in connection with other mining leases.

19

The grant of a permit to occupy land under the Land Act 1898 wholly extinguished native title rights and interests.

20

The grant of special leases under s 116 of the Land Act 1933 wholly extinguished native title rights and interests.

21

The grant before 31 October 1975 of leases of reserved land under s 32 of the Land Act 1933 wholly extinguished native title rights and interests. Grants after 31 October 1975, to persons other than the Crown or a “statutory authority”, were previous exclusive possession acts and, where still in force on 23 December 1996, were “relevant acts” within the definition in the State Validation Act and therefore wholly extinguished native title rights and interests.

22

The evidence established no native title right to or interest in any mineral or petroleum. No question of extinguishment arises.

23

The public right to fish is an “other interest” within s 225(c) of the NTA and is, therefore, to be recorded in the determination. Any exclusive right to fish in tidal waters has been extinguished.

24

The successive grants of pastoral leases over what is now the Territory claim area were inconsistent with the continued existence of the native title right to be asked permission to use or have access to the land. They were not, however, necessarily inconsistent with the continued existence of all native title rights and interests. They were non-exclusive pastoral leases and Pt 3C of the Territory Validation Act was engaged.

25

The Special Purposes Lease and Crown Lease Perpetual to the Conservation Land Corporation conferred exclusive possession on the lessee. Their grant was a grant by the Crown in its Territory capacity to a statutory authority of the Crown within the meaning of s 230(d)(i) of the NTA and a category D past act. They were not previous exclusive possession acts under the

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Western Australia v Ward cont. NTA and the Territory Validation Act. It is not possible to say, on the present findings of fact, what effect their grant had on native title rights and interests that remained unextinguished by the earlier grants of pastoral leases. Kirby J substantially agreed; McHugh and Callinan JJ dissented.

Note

[7.75]

Western Australia v Ward (2002) 213 CLR 1 is probably the major authority classifying native title as a bundle of rights. Consequently inconsistency involves a comparison of a particular bundle constituting native title with the rights under the subsequent grant claimed to have extinguished native title. Total extinction occurs where the whole of the bundle is faced with inconsistent rights. The difficulty in the application of this test can be seen in the High Court decision of State of Queensland v Congee [2015] HCA 17. War time powers had given certain areas of land to the control of the Commonwealth for the purposes of live firing manoeuvres. The issue before the Court was whether this utilisation by the Commonwealth for ultimately what was a limited time led to the extinguishment of the rights of Bar-Barrum people. The Court, with six judges sitting, delivering five different judgments with the Court splitting 3:3 (this mean that the appeal was dismissed). Contrast the views of French CJ, and Kiefel J, [31-39, dismissing the appeal], with those of Hayne J [60-65 (allowing the appeal)]. Extinguishment at common law

31 The recognition of native title rights and interests translates aspects of an indigenous society’s traditional relationship to land and waters into a set of rights and interests existing at common law. The metaphor of “recognition” reflects the proposition that the common law cannot transform traditional laws and customs, the relationships to country which they define, or the rights and interests to which, in their own terms, they give rise. Nor can it extinguish them. “Extinguishment” describes the result of applying principles by which common law recognition is withheld or withdrawn in the face of legislative or executive acts affecting the land or waters in which native title is said to subsist. 32 It was held in Mabo v Queensland [No 2] that a clear and plain intention is necessary to effect extinguishment whether directly by legislation or by executive act or grant pursuant to legislative authority. Where the alleged extinguishing act or grant is done by the executive pursuant to legislative authority, the necessary intention to authorise such an act must be attributable to the legislature. The high threshold of attributed legislative intention flows from the seriousness of the consequences of extinguishment for indigenous inhabitants. So a law which merely regulates the enjoyment of native title or creates a regime of control consistent with its continued enjoyment does not, on that account only, reveal an intention to extinguish or impair native title rights and interests. 33 Where legislation empowers the Crown to dedicate land for a public purpose the question whether the power reflects a clear and plain intention that native title affected by its exercise would be extinguished may sometimes be a question of fact, sometimes a question of law and sometimes a mixed question of fact and law. Where the exercise of the power does not involve the grant of an interest in land or the reservation or dedication of land inconsistently with the right to continued enjoyment of native title by the indigenous inhabitants, native title survives and is legally enforceable. [7.75]

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34 The clear and plain intention standard for extinguishment formulated inMabo v Queensland [No 2] is an important normative principle informing the selection of the criterion for determining whether a legislative or executive act should be taken by the common law to have extinguished native title. That standard has not been displaced by any subsequent decision of this Court. The settled criterion for its satisfaction, which has been established in the case of the grant of rights over land or waters pursuant to a statute, as explained in Western Australia v Ward, is inconsistency between the rights granted and the propounded native title rights and interests. Application of that criterion involves “an objective inquiry which requires identification of and comparison between the two sets of rights”. An analogous criterion is applicable where legislation or a legislative instrument affecting the use of land or waters is concerned. The question of extinguishment is able to be answered by determining whether or not the provisions of the legislation or legislative instrument were inconsistent with the continuing recognition by the common law of the particular native title holders’ rights and interests. Where a grant of an estate in fee simple or a lease in perpetuity conferring a right of exclusive possession is concerned, inconsistency is readily demonstrable. Where a right or power is conferred for a statutory purpose and is to be exercised for that purpose, inconsistency is not demonstrated by the fact that the repository of the right or the power may use it to prevent the native title holders from exercising or enjoying their rights. 35 The enquiry as to inconsistency begins with the construction of the statute, an exercise which is properly informed by its purpose. In this case the limiting negative purpose to which reference has been made earlier is important to the construction of the NSA, reg 54 and the military orders. The comparison between the statutory rights and powers created and exercisable over the Bar-Barrum People’s land, with their asserted native title rights and interests, follows upon the constructional exercise. That process is not to be confused with the normative question, answered by way of conclusion from the consideration of inconsistency, namely whether the statute discloses a clear and plain intention to extinguish native title. 36 The “clear and plain intention”, demonstrated by the inconsistency of statutory rights and powers and native title rights and interests, and necessary to a finding of extinguishment, is not the subjective intention of the relevant legislature, nor is it that of the executive authority making a grant. Nor is it an intention, the presence or absence of which is to be determined by reference to the awareness or otherwise of the existence of native title rights and interests when the statute was enacted or the grant made. That approach is consistent with the approach of this Court to the place of legislative intention in statutory interpretation in Project Blue Sky Inc v Australian Broadcasting Authority, Zheng v Cai and Lacey v Attorney-General (Qld). Attributed legislative intention is a conclusion arising from the application of accepted rules of construction, both common law and statutory. 37 In the case of the claimed extinguishment of native title, the settled approach to determining extinguishment by operation of legislation or a legislative instrument, reflected in earlier decisions of this Court, was restated in the joint judgment of Hayne, Kiefel and Bell JJ in Akiba v The Commonwealth: This Court held in Western Australia v The Commonwealth (Native Title Act Case) that, at common law, native title rights and interests can be extinguished by “a valid exercise of sovereign power inconsistent with the continued enjoyment or unimpaired enjoyment of native title”. (footnotes omitted). The normative force of the clear and plain intention standard is reflected in the inconsistency criterion. So much appears from Yanner v Eaton, in which the plurality said that the “extinguishment of such rights must, by conventional theory, be clearly established” (emphasis 560 [7.75]

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added). That criterion is not satisfied merely by the identification of restrictions or controls placed on the use of the land by statute or executive act done pursuant to statutory authority. Queensland submitted that the Commonwealth had a right of exclusive possession inconsistent with the continued existence of native title rights and interests. That approach lifts the statutory conferment of “possession” out of its context, disconnects it from its statutory purpose, and thereby misconceives its legal effect.

38 The possession granted to the Commonwealth, and the powers conferred as an incident of that possession, authorised the preclusion of native title holders for a time, or from time to time, from entering onto the land or waters. It may be taken to have impaired their enjoyment of their native title. However, where the law, as in this case, imposes a control regime which has a limiting purpose of not disturbing subsisting rights and interests, and where that purpose limits the scope of the rights granted and the powers conferred by the law, the impairment cannot be said to be inconsistent with the subsistence of native title rights and interests. It cannot support the conclusion that there was a “clear and plain legislative intention” to extinguish native title. 39 In this case the position is clear. The military orders authorised, although they did not mandate, the preclusion, for their duration, of the exercise of the native title rights and interests of the Bar-Barrum People. The powers which they conferred were not unconfined. They could not support a finding of inconsistency between the statutory scheme and the native title rights and interests of the Bar-Barrum People which would lead to the conclusion that their rights or interests were extinguished. Extinguishment of native title

57 In Western Australia v The Commonwealth (Native Title Act Case) the six members of this Court who had constituted the majority in Mabo v Queensland [No 2] said that “[a]t common law ... native title can be extinguished or impaired by a valid exercise of sovereign power inconsistent with the continued enjoyment or unimpaired enjoyment of native title”. That valid exercise of sovereign power may take the form of creating rights in third parties (for example, by the grant of an interest in land). But it may also take the form of the relevant sovereign authority itself asserting or taking rights in or over the land (for example, by some forms of dedication of land to public purposes). The determinative question in either kind of case is whether the rights granted or asserted are inconsistent with native title rights and interests over the land. 58 Hence, in Fejo v Northern Territory this Court held that native title is extinguished by a grant in fee simple and is not revived if the land is later held again by the Crown. As the plurality pointed out in Fejo, native title is extinguished by a grant in fee simple “because the rights that are given by a grant in fee simple are rights that are inconsistent with the native title holders continuing to hold any of the rights or interests which together make up native title”. That conclusion “follows not from identifying some intention in the party making the later grant but because of the effect that that later grant has on the rights which together constitute native title” (emphasis added). 59 It is against this background, then, that the decision in Western Australia v Ward must be understood. And despite the degree of attention given in argument in this case to only one paragraph of what was written in Ward, what was said by the plurality in that case cannot be read as altering or detracting from what was then, and remains, the established doctrine of this Court. 60 Common law extinguishment of native title rights and interests depends upon only one test: inconsistency of rights. As the plurality said in Ward, “[t]wo rights are inconsistent or [7.75]

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they are not. If they are inconsistent, there will be extinguishment to the extent of the inconsistency; if they are not, there will not be extinguishment.” And “[a]bsent particular statutory provision to the contrary, questions of suspension of one set of rights in favour of another do not arise” (emphasis added). Rather, questions of inconsistency require identification of, and comparison between, the two sets of rights, recognising always that one set of rights derives from traditional law and custom and the other set derives from the exercise of the new sovereign authority that came with European settlement. 61 No case decided after Ward holds to the contrary. It is enough, for present purposes, to refer only to Western Australia v Brown. All five members of the Court agreed that the principles to be applied are those that have been stated. Application of the principles

62 By taking exclusive possession of the land, the Commonwealth asserted rights which were inconsistent with the native title rights and interests in issue in this case. The Commonwealth’s acts extinguished the native title rights and interests claimed by the Bar-Barrum people. 63 Contrary to the submissions of the Bar-Barrum people and the Commonwealth, the effect of the reg 54 orders on native title rights and interests was more radical than working only some temporary suspension of their enjoyment, whether with or without some concomitant grant of a right to compensation for loss of enjoyment of the rights. Analysis in terms of suspension of either the native title rights and interests or their exercise (with or without the addition of a right to monetary compensation) fails to recognise the manner in which the common law and native title rights and interests intersect. In particular, analysis of the kind described does not take into account the facts that native title rights and interests are rooted in the laws and customs observed by the claimant people and that while native title is recognised by the common law it is neither an institution of the common law nor a form of common law tenure. 64 The failure to recognise the manner in which the common law and native title rights and interests intersect results in seeking to attach incidents of suspension and monetary compensation deriving from the common law of real property and trespass to native title rights and interests deriving from a different normative system. As was pointed out in Yorta Yorta Aboriginal Community v Victoria, native title rights and interests “may not, and often will not, correspond with rights and interests in land familiar to the Anglo-Australian property lawyer” and “[t]he rights and interests under traditional laws and customs will often reflect a different conception of ‘property’ or ‘belonging’”. The error of seeking to transfer common law ideas about real property and trespass to native title rights and interests is most starkly exemplified by the attempt to transform the spiritual attachment to land which underpins native title rights and interests into money damages for the tort of trespass. 65 It is convenient to assume that competent legislation could validly suspend the exercise of native title rights and interests and attach to those rights and interests, first, some statutory right to resume their exercise on the happening of some event and, second, some right to compensation for interruption in their exercise. In Ward, the plurality referred to the possibility of a “particular statutory provision” suspending native title rights and interests. It may greatly be doubted that legislation could achieve these results except by express and detailed provision to the desired effect. But assuming, for the purposes of argument, that legislation could inferentially or impliedly superimpose such incidents upon, or attach such incidents to, native title rights and interests, the legislation at issue in this case cannot be understood as having that effect. That legislation validly authorised the Commonwealth to 562 [7.75]

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take to itself rights over the land which were inconsistent with the native title rights and interests that have been described. The view that the legislation worked only a temporary suspension of the exercise of the native title rights and interests depends upon assuming or asserting either that the applicable statutory and regulatory provisions intended to preserve all other interests or that they should be construed as having that effect. There is no basis for making an assumption or assertion of that all-encompassing generality. None was identified in argument. Note: The importance that the spiritual connection that the indigenous people have with the land in terms of identifying the content of native title rights can be seen in Banjima People v State of Western Australia [2015] FCAFC 84, where the Full Federal Court in upholding the successful claim of the Banjima People before the primary judge stated, at: The State submitted that in Griffiths (2007) 165 FCR 391; [2007] FCAFC 178 is to be understood as saying that “[t]he question of exclusivity depends upon the ability of the [traditional owners] effectively to exclude from their country people not of their community”. The problem with this submission is that it fails to recognise the source or foundation of that ability in traditional law and custom. What Griffiths discloses is that the source or foundation of that ability is not necessarily (or even likely to be) an assertion by traditional owners that the country is “their country” but rather the control of access to the country by other indigenous people by reason of the spiritual sanctions suffered for unauthorised entry. In other words, control of access by traditional owners, who see themselves and act as “gatekeepers for the purpose of preventing ... harm and avoiding injury to the country”, was found in Griffiths to be recognised by the common law as a right of exclusive possession. By “ability to exclude others” in the context of traditional law and custom, the Full Court in Griffiths did not have in mind Western proprietary concepts of barring entry with signs, fences or physical opposition, nor concepts of trespass and eviction, but an ability or capacity embedded in and springing from the spiritual relationship of indigenous people with the land to which they are traditionally connected. In this context, as the primary judge’s conclusions properly recognised, the continuing need of other indigenous people for Banjima permission to enter Banjima country to provide protection from harm for people and country provided evidence of what the common law will recognise as a right of exclusive possession in the Banjima People.

Wilson v Anderson [7.80] Wilson v Anderson (2002) 213 CLR 401; 76 ALJR 1306 High Court of Australia GAUDRON, GUMMOW AND HAYNE JJ: [Footnotes omitted] This application for special leave to appeal arises from the determination by the Full Court of the Federal Court (Black CJ, Beaumont and Sackville JJ) of several questions reserved for separate decision by that Full Court. This Court heard full argument on the special leave application. The proceedings in the Federal Court Section 81 of the Native Title Act 1993 (Cth) (the NTA) confers jurisdiction, exclusive of other courts except the High Court, on the Federal Court to hear and determine applications relating to native title. The first respondent, Mr Anderson, instituted for and on behalf of the Euahlay-i Dixon Clan proceedings in the Federal Court pursuant to ss 13 and 61 of the NTA for a determination of native title. The native title rights and interests sought to be established by the determination were expressed in the application as an entitlement of the Euahlay-i Dixon Clan “as against the whole world to the use, possession and enjoyment of their country, including all waters and land within the area of the application, subject to and in accordance with the customs and laws of the Euahlay-i Dixon clans”. The application for determination was dated 18 July 1996. It covered certain land under the Western Lands Act 1901 (NSW) (the Western Lands Act) and within the Western Division of New South Wales [7.80]

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Wilson v Anderson cont. (the claim area). New South Wales was first divided into three Divisions by s 8 of the Crown Lands Act 1884 (NSW) (the 1884 Act) and the Western Division later fell under the distinct provisions of the Western Lands Act. The tripartite division was continued, after the repeal of the 1884 Act, by s 7 of the Crown Lands Consolidation Act 1913 (NSW) (the Consolidation Act). The total area of the Western Division is approximately 80 million acres. The claim area was stated to include: all Crown Land, Crown Roads, Crown Leases, waters, creeks, reserves, National Parks, State Forests, and land held by local Aboriginal Land Councils within the area of the application. Excluded from the ambit of the application was any “land subject to freehold grants, except such grants made for the benefit of Aboriginal people”. The applicant, Mr Wilson, is the current lessee of Western Lands Lease 7951 (the Lease). The Lease was granted to Ross Patrick Smith “in perpetuity” by the Minister for Lands on behalf of the Crown in right of New South Wales and under s 23 of the Western Lands Act. The instrument was recorded and enrolled on 16 March 1955 in the Register of Western Lands Leased at the Office of the Western Lands Commissioner (the Commissioner) at Sydney. Subsequent dealings were noted thereon, before computerisation some time after 1980. Mr Wilson acquired the Lease by transfer by way of sale in 1984. In the intervening period since the grant, there had been several transfers by way of sale and by way of mortgage to banks, with transfers by way of release by those mortgagees. The area of the land the subject of the Lease (the Leased Land) was reduced in 1965 from 11,118 acres to 11,099 acres. The Leased Land lies within the claim area. Section 18 of the Western Lands Act required the Lease to contain the covenants, reservations and exemptions set out in Sched A, “or such of the same as the Minister may deem applicable”. Schedule A contained 17 such covenants, reservations and exceptions, many of which were reflected in the terms of the Lease. Clauses 3 and 4 of the Lease obliged the lessee not to use or permit the use of the Leased Land for any purpose other than grazing and cl 2 required the lessee to make his bona fide residence there. The Leased Land had been located within the area of the pastoral lease granted under the 1884 Act to the Australian Mortgage Land and Finance Company Limited and known as “Angledool”. After the commencement of the Western Lands Act, the holding under the 1884 Act became Western Lands Lease No 33. Section 17 of the Western Lands Act the Governor to withdraw any lands held under lease whenever it might be deemed expedient to do so for the purpose of providing for settlement, such lands to be disposed of under the provisions of the statute and not to exceed one-eighth of the area of the lease. In pursuance of the provisions of s 17, one-eighth of the area that was Angledool, including what became the Leased Land, was withdrawn therefrom in 1911 for the purpose of providing small holdings in accordance with the provisions of the Western Lands Act. The scheme of Div 2B was explained in Ward. The Division provides for the characterisation of certain “acts” as either “previous exclusive possession acts” or “previous non-exclusive possession acts”. That characterisation then has consequences respecting extinguishment of native title. By force of s 23C, a “previous exclusive possession act” completely extinguishes all native title in relation to land (or waters) covered by that “act”. Section 23G, on the other hand, applies to “previous non-exclusive possession acts” and, in broad terms, provides for the partial extinguishment of native title. It should be emphasised that, whilst the expressions “previous exclusive possession act” and “previous non-exclusive possession act” are defined so as to apply to Commonwealth, State and Territory “acts”, ss 23C and 23G only have effect in respect of “acts” attributable to the Commonwealth. Provision is then made for States and Territories to legislate, subject to satisfaction of certain conditions, to the same effect as ss 23C and 23G in respect of all or any previous exclusive or non-exclusive possession acts attributable to the State or Territory in question (ss 23E and 23I). Part 4 (ss 19-25) of the State Act was enacted in accordance with the power conferred by ss 23E and 23I of the NTA. The objects of Pt 4, as set out in subs (1) of s 19, are: 564 [7.80]

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Wilson v Anderson cont. (a) to confirm the complete extinguishment of native title by previous exclusive possession acts attributable to the State, and (b) to confirm the partial extinguishment of native title by previous non-exclusive possession acts attributable to the State. Section 20 of the State Act picks up those acts characterised as “previous exclusive possession acts” under s 23B of the NTA that are attributable to the State. The section then provides, in terms that reflect s 23C of the NTA, that (subs (1)): (a) the act extinguishes any native title in relation to the land or waters covered by the freehold estate, Scheduled interest or lease concerned, and (b) the extinguishment is taken to have happened when the act was done. Section 23 of the State Act provides, in the same terms as s 23G of the NTA, for the partial extinguishment of native title as a result of a “previous non-exclusive possession act” attributable to the State. Provision for compensation in respect of extinguishment effected by a previous exclusive or non-exclusive possession act is made by s 23J of the NTA. No question of compensation arises at this stage of the litigation, but reference to s 23J demonstrates the point that questions of extinguishment and the degree thereof do not fall for consideration purely under the common law and divorced from statute. Section 23J provides: Entitlement (1) The native title holders are entitled to compensation in accordance with Division 5 for any extinguishment under this Division of their native title rights and interests by an act, but only to the extent (if any) that the native title rights and interests were not extinguished otherwise than under this Act. Commonwealth acts (2) If the act is attributable to the Commonwealth, the compensation is payable by the Commonwealth. State and Territory acts (3) If the act is attributable to a State or Territory, the compensation is payable by the State or Territory. Subsection (1) of s 23J has the effect of conferring upon native title holders an entitlement to compensation only where the statutory extinguishment exceeds the extinguishment that would have occurred at common law. The evident purpose of s 23J is to limit, so far as possible, the entitlement to compensation under s 23J, to cases where the “act” is invalid by reason of the Racial Discrimination Act 1975 (Cth) (the RDA) and is subsequently validated by s 14 of the NTA or s 8 of the State Act. However, s 23J also may be attracted in respect of a valid “act” which, although satisfying the definition of “previous exclusive possession act”, would not completely extinguish native title at common law. That a different result may be reached under Div 2B of Pt 2 of the NTA or Pt 4 of the State Act emphasises the point that it is the statutory criteria provided for by those provisions which are to be applied when determining issues of extinguishment. As s 23B is of central importance to these proceedings, it is appropriate to say something more respecting that provision. It contains certain criteria, the satisfaction of which, by an “act”, results in the characterisation of that “act” as a “previous exclusive possession act”. Three requirements must be satisfied. First, the “act” must be valid (s 23B(2)(a)). The “act” may be valid either because (as in this case) it was valid when done and it occurred before the commencement of the RDA or because it was a “past act” [7.80]

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Wilson v Anderson cont. under s 228 of the NTA and was validated by s 14 of the NTA or s 8 of the State Act. Given the date of the grant of the Lease, more than 20 years before the commencement of the RDA, the “past act” provisions have no role in this case. The “act” here was valid in any event. The second requirement of s 23B is that the “act” occurred on or prior to 23 December 1996 (s 23B(2)(b)). Thirdly, the “act” must have consisted of the grant or vesting of an interest which falls within any of eight specified categories. Those categories of “previous exclusive possession act” are (s 23B(2)(c)): any of the following: (i) a Scheduled interest (see section 249C); (ii) a freehold estate; (iii) a commercial lease that is neither an agricultural lease nor a pastoral lease; (iv) an exclusive agricultural lease (see section 247A) or an exclusive pastoral lease (see section 248A); (v) a residential lease; (vi) a community purposes lease (see section 249A); (vii) what is taken by subsection 245(3) (which deals with the dissection of mining leases into certain other leases) to be a separate lease in respect of land or waters mentioned in paragraph (a) of that subsection, assuming that the reference in subsection 245(2) to “1 January 1994” were instead a reference to “24 December 1996”; (viii) any lease (other than a mining lease) that confers a right of exclusive possession over particular land or waters. The opening phrase “any of the following” indicates that, whilst the existence of any one of the listed “acts” is sufficient, the circumstances in a given case may answer the description of more than one “act” in the listed categories. The term “pastoral lease” is defined as follows in s 248: A pastoral lease is a lease that: (a) permits the lessee to use the land or waters covered by the lease solely or primarily for: (i) maintaining or breeding sheep, cattle or other animals; or (ii) any other pastoral purpose; or (b) contains a statement to the effect that it is solely or primarily a pastoral lease or that it is granted solely or primarily for pastoral purposes. The expression “exclusive pastoral lease” upon which para (iv) of s 23B(2)(c) operates is defined in s 248A as follows: An exclusive pastoral lease is a pastoral lease that: (a) confers a right of exclusive possession over the land or waters covered by the lease; or (b) is a Scheduled interest. Section 249C and Sched 1 of the Act specify those interests that are referred to in par (i) of s 23B(2)(c) as Scheduled interests. Part 1 of Sched 1 lists various interests arising under certain New South Wales statutes. Some kinds of lease under s 23 of the Western Lands Act are listed – those leases which permit the lessee to use the land or waters covered by the lease solely or primarily for any of several identified purposes: “agriculture or any similar purpose; agriculture (or any similar purpose) and grazing combined; mixed farming or any similar purpose other than grazing”. As has been noted, covenants in the Lease with which this case is concerned required the Leased Land to be used only for grazing 566 [7.80]

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Wilson v Anderson cont. purposes. Accordingly, it was not submitted that the Lease was a lease for one of the purposes identified in the Schedule and it was, therefore, not submitted that the Lease was a “Scheduled interest”. A number of observations may also be made respecting the other categories of previous exclusive possession act specified in s 23B(2)(c). First, the grant or vesting of a freehold estate would, at common law (and any application of the RDA aside), completely extinguish native title. Thus, the effect provided for by Div 2B of Pt 2 in respect of the grant or vesting of a freehold estate (para (ii) of s 23B(2)(c)) coincides with the result reached by the common law. Paragraphs (iii)-(viii) of s 23B(2)(c) identify certain categories of “leases”. For the purposes of the NTA, the expression “lease” is defined in s 242(1) to include: (a) a lease enforceable in equity; or (b) a contract that contains a statement to the effect that it is a lease; or (c) anything that, at or before the time of its creation, is, for any purpose, by a law of the Commonwealth, a State or a Territory, declared to be or described as a lease. It will be apparent that the expression “lease” as defined in s 242 is wide enough to encompass for the purposes of the NTA statutory interests which may not necessarily amount to a lease as understood by the common law. The Lease at issue in this case satisfies the above definition. It was granted under s 23(1)(a) of the Western Lands Act. This section was substituted for the original s 23 by s 8 of the Western Lands (Amendment) Act 1934 (NSW) (the 1934 Act). The new s 23(1)(a) provided that it was lawful for the Minister to grant “leases” of Crown lands as “leases in perpetuity”. Paragraph (c) of s 242(1) of the NTA therefore is satisfied. The definition in s 242 of “lease” is of importance in the present proceedings because it demonstrates that the NTA postulates the existence of an interest which, although described as a “lease”, is not a lease at common law. Further, the scheme of Div 2B of Pt 2 is premised upon the fact that a “lease” under the NTA may or may not confer a right of exclusive possession. These considerations illustrate the flaw in reasoning that as an interest was described as a “lease” it is to be presumed that a right of exclusive possession was conferred. It is possible that, as an exclusive pastoral lease or as a lease conferring a right of exclusive possession over particular land, the Lease, being a “lease in perpetuity” under the Western Lands Act, satisfies either or both of paras (iv) and (viii) of s 23B(2)(c) of the NTA; par (iv) engages the definition of “exclusive pastoral lease” in s 248A. It is in this way that the issue for determination arises – whether on grant in 1955 the Lease conferred a right of exclusive possession upon the grantee thereof. That issue turns upon the meaning of the statutory expression “lease in perpetuity” and requires an examination of the nature of the perpetual holdings created under the Western Lands Act and the Consolidation Act. No doubt it is right to say that rights and interests are not to be held to have been abrogated by statute, except where the intention to do so is plainly expressed. But the relevant question in the present matter is what are the rights that were created by the grant of the Lease. In particular, did the holder of the Lease acquire a right to exclusive possession of the Leased Land? That question is not to be answered by presuming its answer any more than it is to be answered by noticing that later legislation has attributed certain legal consequences to the fact of the grant of such rights. It is to be answered by analysing the nature and extent of the rights that were conferred by the grant. Conclusions The interest conferred under s 23(1)(a) of the Western Lands Act and identified as a “lease in perpetuity” was a creature of statute forming part of the special regime governing Crown land. That regime included the various tenures provided for in the Consolidation Act, some of which also were [7.80]

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Wilson v Anderson cont. identified as a “lease in perpetuity”. Legislation establishing these perpetual tenures in New South Wales predated the introduction of the “lease in perpetuity” into the Western Lands Act by the 1932 Act and the 1934 Act. The evident purpose of the introduction to the Western Lands Act of the perpetual tenure already established in other respects in the Consolidation Act was to strengthen the position of settlers in the Western District, particularly by giving them an asset more likely to attract the provision and continuation of finance. The character of the lease in perpetuity derived from that of the tenures established by the earlier legislation in New South Wales. There had been a history in colonial New South Wales of Crown grants of freehold for which no purchase price was paid but with the reservation to the Crown of annual quit-rents. Conditions also were imposed, upon pain of cancellation or revocation of the grant and determination of the fee simple. These conditions included requirements of residence and improvement of the land. By the time of the development in New South Wales of the legislative system of Crown land tenures in the second half of the nineteenth century, there was developing the popular perception of freehold as a tenure without risk of forfeiture for breach of tenurial incidents, a perception of which legislators would have been conscious. Yet it was in the interests of the Crown to achieve the economic and social goals of land settlement with the assistance of the controls imposed by conditional grants. The legislative solution began with the “perpetual” obligations imposed upon the holders of homestead grants by the 1895 Act. As Sir Joseph Carruthers later was proud to declare, the inspiration for this legislation lay in the old common law notions of tenurial incidents. The legislative regime was developed with the appearance, in the 1912 Act, of the “lease in perpetuity”. By this means there was created a tenure which, like freehold tenure, was to last “for ever” but the term “lease” indicated that the continued retention of title by the grantee was dependent upon the performance of many tenurial incidents imposed to further the objectives of the legislature with respect to land development. The number and scope of those incidents developed as time passed. The Lease contains a number. Reference already has been made to the requirement of residence (cl 2) and the stipulations respecting use for the purpose of grazing stock (cll 3, 4). Further, the lessee was obliged by cl 14 not to transfer, convey, assign, sub-let or mortgage the Leased Land without the written consent of the Minister; cl 20 provided that the Lease was not to be transferable except by way of mortgage for 10 years following its commencement, save to certain members of the armed forces. The Lease stipulated an “unrestricted” right to proclaim travelling stock routes, camping places and other reserves (cl (l) of Sched A to the Western Lands Act) without payment of compensation and to withdraw land for the purposes of such reserves. The Lease was also expressed (cl 23(d)) to be subject to the withdrawal of land for any public purpose mentioned in the Consolidation Act. A lessee was placed under obligations with respect to fencing (cl 5), destruction of vermin (cl 7), improvements (cl 12) and stocking levels (cl 15). There was an obligation to allow authorised persons to enter the Leased Land to examine improvements (cl 12) and to search for and remove minerals (cl 16). The lessee also was obliged to permit authorised persons to enter for purposes connected with soil conservation and erosion mitigation (cl 22). The point of present importance is that these conditions and obligations, whether imposed directly by the Western Lands Act or permitted by the statute to be attached to the grant, were not inconsistent with the incidents of a grant of a determinable fee simple. The right of forfeiture for failure to pay rent or non-observance of conditions is equivalent to the right of re-entry on breach of a condition subsequent attached to a determinable fee simple. However, in other respects, the legislative creation of the lease in perpetuity was to have the attraction, both for leaseholders and those financing their operations upon mortgaged security, of a tenure with, as the Secretary put it in 1912, “all the advantages and essence of a freehold”. Save where statute 568 [7.80]

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Wilson v Anderson cont. otherwise provided, that essence denied to anyone else the enjoyment of any right or interest in respect of the land. For the purposes of the NTA, this included a right in the grantee of a lease in perpetuity of exclusive possession. The question in this litigation thus differs from that considered with respect to the legislation in cases such as Wik. The pastoral lease tenures there considered lack the historical and conveyancing background from which the lease in perpetuity was derived as a substitute for the old Crown grant of the determinable fee simple. The restraints upon alienation which applied to the Leased Land and the requirement to allow entry by certain persons For particular purposes and the other restrictions which we have described were consistent with the attachment of conditions to what in substance was a freehold. Their existence did not deny what otherwise was involved in the comprehensive statutory grant of a “lease in perpetuity”, including the right to exclusive possession. It has been pointed out earlier in these reasons that it is unnecessary to determine whether the “lease in perpetuity” under the Western Lands Act is a “freehold estate” for the purposes of the NTA. The grant here was of a “lease” within the meaning of s 242 of the NTA which, upon the true construction of the Western Lands Act, conferred upon the lessee “the essence of a freehold”, including a right of exclusive possession, within the meaning of pars (iv) (with s 248A) and (viii) of s 23B(2)(c) of the NTA. Section 20 of the State Act then mandates extinguishment of any native title, with effect from the grant of the Lease. [Gleeson CJ agreed; McHugh, Kirby and Callinan JJ differed in the result.]

INDIGENOUS LAND CLAIMS Relationship to the land

Yanner v Eaton [7.85] Yanner v Eaton (1999) 201 CLR 351 High Court of Australia [Parts of this case have been extracted in relation to the doctrine of tenure at [1.50].] GLEESON CJ, GAUDRON, KIRBY AND HAYNE JJ: Native title rights and interests The hunting and fishing rights and interests upon which the appellant relied (and which the Magistrate found to exist) were rights and interests “possessed under the traditional laws acknowledged, and the traditional customs observed”, by the clan and tribe of which the appellant was a member. The Magistrate found that by those laws and customs, the appellant’s clan and tribe had a connection with the land and waters where the crocodiles were taken. At least until the passing of the Fauna Act those rights and interests were recognised by the common law of Australia. The respondent’s contention was that the Fauna Act “extinguished” these rights and interests. This led to debate about what was referred to as the “partial extinguishment of native title” and what was meant by that term. It is unnecessary, however, to examine that debate in this case. It is clear that native title in land is extinguished by a grant in fee simple of that land. As was said in the joint judgment in Fejo v Northern Territory (1999) 195 CLR 96 “it is extinguished because the rights that are given by a grant in fee simple are rights that are inconsistent with the native title holders continuing to hold any of the rights or interests which together make up native title”. That is, native [7.85]

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Yanner v Eaton cont. title is extinguished by the creation of rights that are inconsistent with the native title holders continuing to hold their rights and interests. The extinguishment of such rights must, by conventional theory, be clearly established. The critical contention of the respondent was that the Fauna Act created a legal regime that was inconsistent with native title holders in Queensland (and, in particular, the group of which the appellant is a member) continuing to hold one of the rights and interests (the right and interest in hunting and fishing) that made up the native title the Magistrate found to exist. That inconsistency was said to lie in the creation of property rights in the Crown that were inconsistent with the continued existence of the native title rights and interests. It is unnecessary to decide whether the creation of property rights of the kind that the respondent contended had been created by the Fauna Act would be inconsistent with the continued existence of native title rights. It is sufficient to say that regulating the way in which rights and interests may be exercised is not inconsistent with their continued existence. Indeed, regulating the way in which a right may be exercised presupposes that the right exists. No doubt, of course, regulation may shade into prohibition and the line between the two may be difficult to discern. Similarly, it may not always be easy to say whether the creation of statutory rights or interests before the enactment of the Racial Discrimination Act (Cth) and the Native Title Act was consistent with the continued existence of native title rights and interests. (The Racial Discrimination Act 1974 and the Native Title Act will, of course, have to be considered where the question concerns the effect of steps taken after the enactment of those Acts.) But in deciding whether an alleged inconsistency is made out, it will usually be necessary to keep well in mind that native title rights and interests not only find their origin in Aboriginal law and custom, they reflect connection with the land. As Brennan J said in R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327, “Aboriginal ownership is primarily a spiritual affair rather than a bundle of rights” but “[t]raditional Aboriginal land is not used or enjoyed only by those who have primary spiritual responsibility for it. Other Aboriginals or Aboriginal groups may have a spiritual responsibility for the same land or may be entitled to exercise some usufructuary right with respect to it.” Native title rights and interests must be understood as what has been called “a perception of socially constituted fact” as well as “comprising various assortments of artificially defined jural right”. And an important aspect of the socially constituted fact of native title rights and interests that is recognised by the common law is the spiritual, cultural and social connection with the land. Regulating particular aspects of the usufructuary relationship with traditional land does not sever the connection of the Aboriginal peoples concerned with the land (whether or not prohibiting the exercise of that relationship altogether might, or might to some extent). That is, saying to a group of Aboriginal peoples, “You may not hunt or fish without a permit”, does not sever their connection with the land concerned and does not deny the continued exercise of the rights and interests that Aboriginal law and custom recognises them as possessing. Not only did the respondent not contend that such a law severed that connection, s 211 of the Native Title Act assumes that it does not. Section 211 provides that a law which “prohibits or restricts persons” from hunting or fishing “other than in accordance with a licence, permit or other instrument granted or issued to them under the law”, does not prohibit or restrict the pursuit of that activity in certain circumstances where native title exists. By doing so, the section necessarily assumes that a conditional prohibition of the kind described does not affect the existence of the native title rights and interests in relation to which the activity is pursued. 570

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Yanner v Eaton cont.

The Fauna Act did not extinguish the rights and interests upon which the appellant relied. Accordingly, by operation of s 211(2) of the Native Title Act and s 109 of the Constitution, the Fauna Act did not prohibit or restrict the appellant, as a native title holder, from hunting or fishing for the crocodiles he took for the purpose of satisfying personal, domestic or non-commercial communal needs. The Magistrate was right to dismiss the case.

[7.90]

Notes and Questions

1. The essence of the definition of native title is reference to the custom of the particular group whose relationship with the land is in question. Native title is defined by native customs and does not correspond to any form of interest known to the common law. Furthermore, because there are many native groups with different customs, there is a corresponding number of forms of native title. The reference to native custom is clear in the decision in Mabo v Queensland (No 2) (1992) 175 CLR 1 and is maintained in s 223 of the Native Title Act 1993 (Cth) where the title is defined as the rights and interests native peoples have according to their traditional laws and customs. 2. Whilst the content of native title is accepted as being defined by native custom, the interest that is protected is a relationship with land or water; the Act speaks of interests “in land or waters”. Not all activities taking place on or with reference to an area of land or water and recognised by the local custom constitute an aspect of title. The Act provides a list of examples of recognisable interests but this list is expressed not to be exhaustive. The example furtherest removed from common law concepts is the conduct of social, religious, cultural, and spiritual activities on the land. The conduct of ceremonies and preservation sacred sites loom large in writings about traditional activities. Preservation does not require even presence on the land and may be evidenced simply by continued story telling. In Western Australia v Ward (2002) 213 CLR 1; [2002] HCA 28 the majority made the following observations: 2. Cultural knowledge and spiritual connection The determination made by the Full Court omitted any provision such as that in par 3(j) of the determination made at trial. The majority of the Full Court took that course saying: Although the relationship of Aboriginal people to their land has a religious or spiritual dimension, we do not think that a right to maintain, protect and prevent the misuse of cultural knowledge is a right in relation to land of the kind that can be the subject of a determination of native title. In this Court, it was submitted that the Full Court erred in this respect and that this Court should restore par 3(j) of the first determination. The first difficulty in the path of that submission is the imprecision of the term “cultural knowledge” and the apparent lack of any specific content given it by factual findings made at trial. In submissions, reference was made to such matters as the inappropriate viewing, hearing or reproduction of secret ceremonies, artworks, song cycles and sacred narratives. To some degree, for example respecting access to sites where artworks on rock are located, or ceremonies are performed, the traditional laws and customs which are manifested at these sites answer the requirement of connection with the land found in par (b) of the definition in s 223(1) of the Native Title Act. However, it is apparent that what is asserted goes beyond that to something approaching an incorporeal right akin to a [7.90]

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new species of intellectual property to be recognised by the common law under par (c) of s 223(1). The “recognition” of this right would extend beyond denial or control of access to land held under native title. It would, so it appears, involve, for example, the restraint of visual or auditory reproductions of what was to be found there or took place there, or elsewhere. It is here that the second and fatal difficulty appears. In Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244 at 256, von Doussa J observed that a fundamental principle of the Australian legal system was that the ownership of land and ownership of artistic works are separate statutory and common law institutions. That is the case, but the essential point for present purposes is the requirement of “connection” in par (b) of the definition in s 223(1) of native title and native title rights and interests. The scope of the right for which recognition by the common law is sought here goes beyond the content of the definition in s 223(1). That is not to say that in other respects the general law and statute do not afford protection in various respects to matters of cultural knowledge of Aboriginal peoples or Torres Strait Islanders. Decided cases apply in this field the law respecting confidential information, copyright, and fiduciary duties. Provision respecting moral rights is now made by Pt IX (ss 189-195AZO) of the Copyright Act 1968 (Cth).

Akiba v Commonwealth [7.95] Akiba v Commonwealth (2013) 250 CLR 209 High Court of Australia [Footnotes not reproduced] HAYNE, KIEFEL AND BELL JJ The native title rights and interests in issue 60. As has already been noted, debate about extinguishment must begin by identifying the native title rights and interests that are in issue. As s 225 of the NTA required, the determination of native title made in this case, by Finn J, identified the holders of the rights comprising the native title and identified the areas in respect of which those rights and interests existed. The relevant native title rights and interests were determined to be “the rights to access, to remain in and to use the native title areas” and, subject to some presently irrelevant qualifications about minerals and petroleum resources, “the right to access resources and to take for any purpose resources in the native title areas”. These are the rights and interests which are at stake. Have these rights and interests been partially extinguished? More particularly, did the enactment of laws which prohibited the unlicensed taking of fish or other aquatic life for commercial purposes partially extinguish the right to take resources for any purpose? Inconsistency of rights 61. This Court held in Western Australia v The Commonwealth (Native Title Act Case) [95] that, at common law, native title rights and interests can be extinguished by “a valid exercise of sovereign power inconsistent with the continued enjoyment or unimpaired enjoyment of native title”. In Yanner, the plurality noted [97] that the “extinguishment of such rights must, by conventional theory, be clearly established [98]”. Likewise, as the plurality held in Ward, under the NTA, “[w]hether native title rights have been extinguished by a grant of rights to third parties or an assertion of rights by the executive requires comparison between the legal nature and incidents of the right granted or asserted and the native title right asserted”. 62. As was also noted, however, by the plurality in Ward, while it is often said that a “clear and plain intention” to extinguish native title must be demonstrated, it is important that this expression not be misunderstood. The relevant question is one of inconsistency, and that is an objective inquiry. The “subjective thought processes of those whose act is alleged to have extinguished native title are irrelevant”. 572 [7.95]

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Akiba v Commonwealth cont. 63. Hence, as the NTA acknowledges in s 211, and as was held in Yanner, “[r]egulating particular aspects of the usufructuary relationship with traditional land does not sever the connection of the Aboriginal peoples concerned with the land (whether or not prohibiting the exercise of that relationship altogether might, or might to some extent)”. Likewise, regulating particular aspects of the usufructuary relationship with traditional waters does not sever the connection of the Torres Strait Islanders concerned with those waters (whether or not prohibiting the exercise of that relationship altogether might, or might to some extent). 64. Not only does regulation of a native title right to take resources from land or waters not sever the connection of the peoples concerned with that land or those waters, regulation of the native title right is not inconsistent with the continued existence of that right. Indeed, as was pointed out in Yanner, “regulating the way in which a right may be exercised presupposes that the right exists”. Of course, regulation may shade into prohibition, and the line between the two may be difficult to discern. But the central point made in Yanner, and reflected in each of Wik, Fejo, Yarmirr and Ward, is that a statutory prohibition on taking resources from land or waters without a licence does not conclusively establish extinguishment of native title rights and interests of the kind found to exist in this case: “the rights to access, to remain in and to use the native title areas”, and “the right to access resources and to take for any purpose resources in the native title areas”″. Prohibition of a particular activity 65. In this case, the majority in the Full Court identified the starting point for consideration of extinguishment as “whether the activity which constitutes the relevant incident of native title is consistent with competent legislation relating to that activity” (emphasis added). The essential premise for the analysis that followed was that the relevant “activity” was to be identified as “taking fish and other aquatic life for sale or trade” and that the activity identified in this way was an “incident of native title”. That premise is flawed. 66. The relevant native title right that was found to exist was a right to access and to take resources from the identified waters for any purpose. It was wrong to single out taking those resources for sale or trade as an “incident” of the right that had been identified. The purpose which the holder of that right may have had for exercising the right on a particular occasion was not an incident of the right; it was simply a circumstance attending its exercise. 67. Focusing upon the activity described as “taking fish and other aquatic life for sale or trade”, rather than focusing upon the relevant native title right, was apt to, and in this case did, lead to error. That shift of focus, from right to activity, led to error in this case by inferentially reframing the question determinative of extinguishment as being whether the statutory prohibition against fishing for a particular purpose without a licence was inconsistent with the continued existence of a native title right to fish for that purpose. But the relevant native title right that was found in this case was a right to take resources for any purpose. No distinct or separate native title right to take fish for sale or trade was found. The prohibition of taking fish for sale or trade without a licence regulated the exercise of the native title right by prohibiting its exercise for some, but not all, purposes without a licence. It did not extinguish the right to any extent. 68. The Full Court’s focus upon a particular activity was not consistent with the plurality’s observation in Ward that reference to activity “is relevant only to the extent that it focuses attention upon the right”. The focus upon the activity led to the majority framing the relevant question as being whether the identified activity was “consistent with competent legislation relating to that activity”. But extinguishment of native title rights and interests is not to be determined by asking whether the federal or State legislature has asserted control, or dominion, over a particular activity, and then concluding that the relevant native title right no longer includes the right to pursue that form of activity. To pursue an inquiry of that kind would be apt to revive some variation of the adverse [7.95]

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Akiba v Commonwealth cont. dominion test for extinguishment rejected by this Court in Ward. The enactment of legislation controlling some activity which may be undertaken in exercise of a native title right or interest presents a question about extinguishment. The extinguishment question is to be answered by deciding whether the legislation is inconsistent with the relevant native title right or interest; it is not determined by observing only that there is legislation which governs or affects the exercise of the right. 69. These are reasons enough to reject the conclusion reached by the majority in the Full Court. There are, however, three particular errors in reasoning to which reference must be made. Three particular matters 70. First, the majority in the Full Court said that the “general conservation objectives” of the relevant legislation prohibiting commercial fishing without a licence could “be easily defeated by the expedient of traders buying fish in commercial quantities from native title holders”. That is obviously right, but it is irrelevant to the issue of extinguishment. It is an observation that assumes that the native title holders may take fish for sale or trade without a licence under the relevant legislation. But it was not suggested in the Full Court, or in this Court, that the exercise of the native title right to take resources from the native title areas was, or is, unaffected by legislation about fishing. Contrary to the reasoning of the majority in the Full Court, inconsistency is not demonstrated by assuming that exercise of the native title right or interest would be unaffected by the law or laws in issue. That is, it is not to the point to ask, as the Full Court did, what the position would be if the legislation did not affect the exercise of native title rights and interests. The only question is whether the legislation has extinguished the right in whole or in part. 71. Second, the majority in the Full Court were wrong to treat the decision in Yanner as depending wholly upon the availability and operation of s 211 of the NTA. (It will be recalled that s 211 permits holders of native title rights to hunt or fish to exercise those rights “for the purpose of satisfying their personal, domestic or non-commercial communal needs”, despite legislation prohibiting or restricting that activity other than in accordance with a statutory licence.) Section 211 can be engaged only if relevant native title rights and interests continue to exist. 72. What is presently important is that Yanner established that legislation may regulate the exercise of native title rights and interests without extinguishing those rights or interests. And it is important to recognise that this Court held in Yanner that the relevant native title rights and interests continued to exist despite the nature and extent of the regulation effected by the legislation at issue in that case, the Fauna Conservation Act 1974 (Q). 73. Like the various forms of fisheries legislation at issue in this appeal, the Fauna Conservation Act prohibited taking fauna without a licence. But the Fauna Conservation Act went further than the legislation now in issue in two respects. First, it prohibited taking fauna without a licence for any purpose. Second, it provided that all fauna (other than fauna taken during an open season with respect to that fauna) “is the property of the Crown and under the control of the Fauna Authority”. This Court held that the Fauna Conservation Act did not extinguish the relevant native title rights and interests. 74. Third, Finn J was right to hold that this Court’s decision in Harper v Minister for Sea Fisheries does not have any direct application to the issues of extinguishment of native title rights and interests which arise in this appeal. Nor does Harper provide useful guidance about those issues. To the extent to which the decision of the majority in the Full Court depended upon drawing on what was said in Harper, that reasoning was erroneous. Harper decided that, on its true construction, legislation providing for the licensed taking of abalone abrogated the common law public right to fish for abalone. That is, Harper decided that an Act dealt with a subject comprehensively, to the exclusion of a common law right. The question decided in Harper was, therefore, radically different from the 574 [7.95]

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Akiba v Commonwealth cont. question presented in this appeal. This case concerns the relationship between legislation prohibiting commercial fishing without a licence and rights and interests which are rooted, not in the common law, but in the traditional laws acknowledged, and traditional customs observed, by Torres Strait Islanders. Conclusion and orders 75. As the plurality in Yanner held, “saying to a group of Aboriginal peoples, ‘You may not hunt or fish without a permit’, does not sever their connection with the land concerned and does not deny the continued exercise of the rights and interests that Aboriginal law and custom recognises them as possessing”″ (emphasis added). Likewise, telling the native title holders in this case, “You may not fish for the purpose of sale or trade without a licence”, did not, and does not, sever their connection with the waters concerned and it did not, and does not, deny the continued exercise of the rights and interests possessed by them under the traditional laws acknowledged, and traditional customs observed, by them. The repeated statutory injunction, “no commercial fishing without a licence”, was not, and is not, inconsistent with the continued existence of the relevant native title rights and interests. 76. The Full Court was wrong to conclude that the determination of native title rights and interests made at first instance should be varied. The orders proposed by French CJ and Crennan J should be made.

[7.100]

Notes

1. The nature of native title in relation to the sea was considered by the High Court in Commonwealth v Yarmirr (2001) 208 CLR 1; 184 ALR 113. The claim related to an area of the sea and seabed in the vicinity of Croker Island in the Northern Territory. A majority of the High Court held that traditional use for hunting, fishing and spiritual activities had extended beyond the low water mark and recognition of native title over these waters was not inconsistent with the common law even if the traditional common law territory did not extend as far. Today, rights may be asserted to the limits over which Australia asserts sovereign rights under the Seas and Submerged Lands Act 1973 (Cth). The Court concluded that fishing rights could not be exclusive because sovereignty over the sea is subject to rights of innocent passage and public rights of fishing and navigation. 2. The Full Court of the Federal Court in Commonwealth v Yarmirr (1999) 101 FCR 171 appears to be providing as a characteristic of native title – independent of native custom which otherwise defines the content of the title – that the interests are non-commercial. They are only for the purpose of satisfying personal or domestic needs. The catching of fish for the purpose of trade was not recognised as an acceptable aspect of native title. However some exchange of goods between neighbouring groups would have been essential to satisfy personal or domestic needs. Fish products are an example of something likely to have been exchanged between a coastal group and an inland group. 3. The courts have rejected the view that under native title there is a general relationship with the land such as occupation, hunting or ceremonial use. Instead native title is viewed as a bundle of rights and those rights are defined with some particularity. In Lardil Peoples v Queensland [2004] FCA 298, native title was held to encompass non-exclusive and non-commercial access to sea waters and waters of the Albert River to fish, hunt and [7.100]

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gather living and plant resources including turtle and dugong and taking and consuming fresh water. McDonald, McCrimmon, Wallace and Weir, Real Property Law in Queensland (3rd ed, Thomson Reuters, 2010), pp 49-50 criticise the detail of such definitions as imposing an extreme burden to establish continued use over time for such purposes. The claimant group: the need for a cohesive local community or group

De Rose v South Australia [7.105] De Rose v South Australia Australia (2003) 133 FCR 325 Full Court of the Federal Court of Australia [Land presently held under three pastoral leases that together comprised the De Rose Hill Station were the subject of a native title claim. Situated in the far north west of South Australia, the native title applicants were from the Pitjantjatjara and Yankunytjatyara peoples and not necessarily from one cohesive indigenous society. They claimed their rights by reason of their status as custodians or Nguraritja in respect of the claim area. The trial judge found against the applicants as they had not maintained their connection with the land. The Full Federal Court found this inconsistent with the findings of fact. The Question of Connection 284 As we understand the appellants’ submissions, they did not dispute that the primary Judge had correctly stated the principles governing the construction of s 223(1)(b) of the NTA. Rather, they contended that his Honour had applied those principles incorrectly, having regard to the findings we have summarised ([270]-[271] above). Accordingly, so they argued, his ultimate finding that the appellants had failed to prove the connection required by s 223(1)(b) of the NTA was flawed. 285 It is not an easy task to assess these submissions in a case where the primary Judge had to evaluate a very substantial body of evidence, both from Aboriginal witnesses and experts. In our view, the most convenient course is to consider the submissions, at least in the first instance, by reference to his Honour’s finding (at [599]) that Peter De Rose, the “dominant figure” in the presentation of the appellants’ case, had “abandoned his connection to the claim area long ago”. It seemed to be common ground on the appeal that if Peter De Rose could satisfy s 223(1) of the NTA, the basis for a determination of native title would be present even if the other appellants were unable to do so. While we recognise that this approach involves some repetition in describing his Honour’s findings and reasoning, it serves to expose the issues raised by the appellants’ submissions. Peter De Rose: Evidence and Findings 286 The primary Judge did not accept all of Peter De Rose’s evidence. But his Honour did accept much of Peter’s evidence and cast no doubt on other aspects of his testimony. The following account reflects evidence either accepted or not doubted by the primary Judge. 287 Peter De Rose, like most of the Aboriginal witnesses, gave evidence through an interpreter. He spoke both Pitjantjatjara (the dialect of his mother) and Yankunytjatjara (the dialect of his stepfather, Snowy De Rose), although he was more inclined towards the former. Peter’s Aboriginal name was Wapala. The name means “white man” and indicates that Peter De Rose’s biological father was probably European. Some Anangu people still referred to him by that name. 288 Peter’s mother, Katjiwala, was a Pitjantjatjara woman, who had grown up at Kantja (on De Rose Hill) and Witjintitja (Granite Downs). Peter believed that his stepfather, Snowy, was a Yankunytjatjara man whose “cord dropped off De Rose Hill way”. Peter identified three sites in the north-eastern section of De Rose Hill as the area where Snowy had told him that the event had recurred. For these 576 [7.105]

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De Rose v South Australia cont. reasons, Peter considered Snowy, who was born at Lambina, a station to the east of De Rose Hill, to be Nguraritja for the De Rose Hill area. He also believed that the De Rose Hill area was the country of Snowy’s father (Jimmy Piti Piti) and grandfather. The primary Judge appeared to accept that Jimmy Piti Piti had moved east, perhaps as long as 100 years ago in a pre-contact migration. The primary Judge cast no doubt on the genuineness or accuracy of Peter’s beliefs on these matters. 289 Peter was born in about 1949. At that time his mother, Katjiwala, and his stepfather, Snowy, were working on De Rose Hill. Peter believed, and the primary Judge accepted, that he had been born under an ironwood tree on the track of the Kalaya Tjukurpa. For that reason, the Kalaya Tjukurpa had become his Tjukurpa. 290 Both Peter and his mother were “put in the smoke”, in accordance with tradition, at a spot to the north of the ironwood tree where he had been born. Peter was reluctant to expand on the practice of “smoking” because (he said) the Aboriginal women would not want him to talk about it. The primary Judge did not suggest that Peter’s reluctance reflected anything other than a genuine cultural belief. 291 As a young child, Peter lived with his family in a wiltja or “humpy”. Katjiwala worked at the homestead on De Rose Hill and Snowy worked on the Station. Peter’s younger sister, Lorna, was born on De Rose Hill in about 1954. In those years, there was a small camp of Aboriginals on the Station, all of whom lived in wiltja. They included both Pitjantjatjara and Yankunytjatjara people. The food in the Anangu camp included damper, kangaroo meat and goanna, as well as bush tucker. The men mostly hunted with spears and spear throwers, although a few had rifles. 292 As a small boy, aged between five and seven, Peter lived in the young men’s camp at De Rose Hill, which was separate from the main camp. A few years later, because Snowy had an argument with Doug Fuller, the family moved to Finke. Peter stayed there for eighteen months and received some schooling. He left Finke in about 1959 to join his parents at Mount Cavenagh. Shortly after, the family returned to De Rose Hill to live. 293 Peter said that before leaving for Finke, his family would go on holidays and visit sites within the claim area. Snowy taught him stories about different sacred and secret places that were only for men. He also learned the signs for water, where to hunt and where to collect bush tucker. 294 When Peter was a tjiranka (a child of either sex in early teenage years) he started helping in the stock camps. Later he worked with horses and cattle. He was taught about different places and was also shown where the soakages and rock-holes were. At this time, he went out hunting the malu (kangaroo) with the men and was introduced to the intricacies of the hunt. Owen Kunmanara, the head stockman, had taught him a little about the Tjukurpa. When Peter was still a boy of 14 or 15, a kungkatja (little beard), he became a nyiinka (a bush boy) in a kipara (wild turkey) ceremony. Subsequently, he was taken by an ulpuru (a special boy, a messenger who travels with others to call people from various locations to attend the man-making ceremonies) to a ceremony at Areyonga where he was made a man (a Wati Pukuti). As a man, Peter went with Owen and another man to Ilpaka, on De Rose Hill, where he was told about the Tjukurpa for the site. He had learned other stories from some of the elders. Subsequently, he became a Wati Katarara which was the stage prior to the final stage in the life of a male Anangu, namely - that of Tjilpi (old men). Tjilpi hold ultimate responsibility for passing on the sacred stories they have learnt in their lifetime and are treated with respect and as having considerable authority. 295 Peter became head stockman himself at De Rose Hill in about 1970, when he was about 21. He said that he would still visit Dreaming tracks out of working hours. The primary Judge observed that that claim contradicted other evidence by Peter that he would have been at risk of being sacked if he had taken time to attend the sites, but his Honour did not resolve the conflict. At about this time Snowy, who was living at Mount Cavenagh or Indulkana, visited De Rose Hill Station because it was “his country”. On those occasions Snowy would also hunt. [7.105]

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De Rose v South Australia cont. 296 Work was not always constant at De Rose Hill Station. When he was laid off, Peter would live at Yuta, on the Station, and visit other sites to obtain wood for spears or gather mingkulpa (wild tobacco). 297 Peter De Rose left De Rose Hill in 1978, shortly after the death of his half brother Bobby. As we have explained, his Honour found that Peter “may have well thought, albeit incorrectly, that there had been some delay on Doug’s part” in telling him of Bobby’s death. His Honour also expressed the view that if the Aboriginal people left De Rose Hill for an unreasonable or illogical reason, they could not turn their lack of reasonableness to their advantage. 298 After Peter left De Rose Hill he worked as a builder’s labourer. About ten years later he was involved in establishing a homeland at Railway Bore, on AP Lands, a few kilometres to the south of De Rose Hill. This was Peter’s idea because he wanted a homeland close to De Rose Hill country. He stayed there for six years, from 1990 until 1996, until forced to leave because the quality of water was poor. During this time, he worked with young Aboriginal people from Indulkana who had a problem with petrol sniffing. Of course, by 1996, the claim for a determination of native title had already been lodged. 299 After he left De Rose Hill Station in 1978, Peter De Rose returned from time to time in order to hunt. He did not look after any sites on the Station. Peter explained his failure to visit the Station more often, or to camp there, as a consequence of his fear of Doug and Rex Fuller. The primary Judge noted that there was some difficulty reconciling this claim with his written statement that he had returned to the Station after Bobby’s death to visit Doug. His Honour did not, however, make a finding that Peter’s explanation was untrue. Rather, he found that Peter did not have any reason to be afraid to enter the property to hunt or to carry on traditional activities. 300 Peter De Rose also said that while at Railway Bore he became uneasy about visiting De Rose Hill Station because he was worried he might frighten the cattle. His Honour thought that this was a “paltry excuse”. 301 Peter claimed that, as Nguraritja, he had responsibilities for his country. He also had an obligation to teach appropriate people about the places on De Rose Hill. While his Honour accepted Peter’s claim to be Nguraritja for a watercourse on the claim area, he found that Peter had given little detail as to how he performed his duties, nor had he identified anyone who had benefited from his teaching. 302 However, it is important to note that Peter De Rose gave evidence as to the main Tjukurpa for his country and as to the role and responsibilities of Nguraritja. Thus Peter identified his own Tjukurpa, the Kalaya Tjukurpa, and four other Dreaming tracks: the Malu, Kanyala and Tjurki Tjukurpa; the Pakalira Tjukurpa; the Papa Itari Tjukurpa; and the Seven Sisters Tjukurpa. Peter De Rose gave detailed evidence in relation to the Kalaya Tjukurpa and the Malu, Kangyala and Tjurki Tjukurpa and Papa Itari Tjukurpa, the substance of which appears to have been accepted by his Honour as accurate. Peter De Rose said that he was unable to discuss the Pakalira Tjukurpa in mixed company because it was of great significance and secret to men, while the fifth Tjukurpa he regarded as only for women. The primary Judge cast no doubt on the genuineness of Peter’s reluctance to discuss the Pakalira Tjukurpa. Was the Correct Question Asked? 303 The finding made by the primary Judge that Peter De Rose abandoned his connection to the claim area does not conform to the language of s 223(1)(b) of the NTA. The question posed by that provision is not whether the appellants, or any of them, have abandoned their connection to the claim area. It is whether the appellants, by their traditional laws acknowledged and traditional customs observed, have a connection with the claim area. 304 We have referred to the guidance given by the High Court to the construction of s 223(1) of the NTA (see [156]-[177] above). The following propositions, derived from the joint judgment in Ward (HC), at 16 [17], 17 [18], 32 [64], are particularly relevant for present purposes: • the rights and interests claimed in relation to land must have the three characteristics specified in s 223(1)(a), (b) and (c); 578 [7.105]

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De Rose v South Australia cont. • s 223(1)(a) presents a question of fact, which requires identification of the traditional laws and customs and identification of the rights and interests in relation to land possessed under those laws and customs; • s 223(1)(b) also requires identification of the traditional laws and customs and, in addition: “the characterisation of the effect of those laws and customs as constituting a ‘connection’ of the peoples with the land or waters in question”; • the inquiries required by [paras] (a) and (b) of s 223(1) may well depend upon the same evidence, but there are two inquiries required by the definition:““in the one case for the rights and interests possessed under traditional laws and customs and, in the other, for connection with land or waters by those laws and customs”; • the absence of evidence of recent use of land or waters does not require the conclusion that there can be no relevant connection; this will depend on the content of traditional laws and customs and what is meant by “connection” by those laws and customs; and • so far as the High Court is concerned, no final view has been expressed as to whether a purely “spiritual connection” with land will suffice to satisfy s 223(1)(b) of the NTA. 305 At first glance, it may not be evident what par (b) of s 223(1) adds to par (a). If Aboriginal people possess rights and interests in relation to land under the traditional laws acknowledged and the traditional customs observed by them, it would seem to be a small step to conclude that the people, by those laws and customs, have a connection with the land. In the present case, for example, the evidence suggests that where Aboriginal people, under the traditional laws and customs of the Western Desert Bloc acknowledged and observed by them, are recognised as Nguraritja for particular land, they have certain “rights” and responsibilities under those traditional laws and customs. Thus, as his Honour found, the Nguraritja are able to live and hunt on the land and also have a special responsibility for the “constellation” of sacred locations on the site. Given that these rights and responsibilities are referable to particular land or sites, it would seem to follow that there is a “connection” by the traditional laws and customs between the Nguraritja and “their” land. It is difficult to conceive of a construction of the word “connection” that would not be satisfied in these circumstances. 306 Nonetheless, the High Court in Ward (HC) expressed the view (at [19]) that the distinction between pars (a) and (b) of s 223(1) can be “critical” to the resolution of a particular case. The relevant issue in Ward (HC) was whether the NTA is concerned with the maintenance and protection of cultural knowledge. Their Honours pointed out that cultural knowledge may be possessed under the traditional laws acknowledged and traditional customs observed by the relevant people. However, they held (at [60]) that the asserted right to maintain, protect and prevent the misuse of “cultural knowledge” did not satisfy the requirement of connection with the land imposed by s 223(1)(b) of the NTA. This was so because recognition of the asserted right would extend beyond denial or control of access to land held under native title and would amount to acknowledgement of a new species of intellectual property: see at [59]. 307 Their Honours did not explicitly address whether the asserted right, insofar as it went beyond permitting or controlling access to sites where artworks were located or ceremonies performed, could be said to be a right possessed under traditional laws and customs “in relation to land”. It may be implicit in their Honours’ reasoning that the asserted right was possessed “in relation to land”. If so, that fact was not enough, in their Honours’ view, to establish that the claimants had a “connection” with the land for the purposes of s 223(1)(b). The explanation may be that a right can exist “in relation to land” for the purposes of s 223(1)(a), even if the “right” carries with it no entitlement to do or [7.105]

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De Rose v South Australia cont. prevent anything from being done on the land; but that such a right is not of itself necessarily sufficient to establish that, by traditional laws and customs, the holder of the right has a “connection” with the land for the purposes of s 223(1)(b). 308 One of the difficulties in the present case is that the primary Judge appears to have approached the question of “connection” on the basis that at least some of the appellants, by virtue of their status as Nguraritja for sites on the claim area, possessed rights and interests in relation to the claim area under the traditional laws and customs acknowledged and observed by them. This would seem to follow from the findings that Peter De Rose was, and some of the other appellants may well be, Nguraritja for the claim area under their traditional laws acknowledged and traditional customs observed and may thereby satisfy s 223(1)(a) of the NTA. His Honour nonetheless rejected the appellants’ claims and did so squarely on the basis that they had failed to establish the connection with the claim area required by s 223(1)(b) of the NTA. It is true that later in the judgment the primary Judge made findings that appear to suggest that the appellants may no longer have acknowledged or observed traditional laws and customs. It will be necessary to return to these findings. But nowhere in the judgment does his Honour expressly base his rejection of the appellants’ claim for a determination of native title on their failure to satisfy s 223(1)(a) of the NTA, rather than their failure to satisfy s 223(1)(b). 309 The primary Judge did not explain in terms why he appeared to accept that the appellants (or some of them) had satisfied s 223(1)(a) of the NTA, yet concluded that they had failed to show that they had a connection to the claim area. In particular, his Honour made no finding that by reason of the appellants’ failure to continue to observe the traditional laws and customs of the Western Desert Bloc, they were regarded by those laws and customs as ceasing to have the requisite connection with the claim area. Rather, as his Honour stated (at [916]) his conclusion was that “those claimants who once had a relevant connection with the claim area have all abandoned that prior connection”. 310 It may be accepted, if only as a matter of inference, that his Honour identified the traditional laws and customs relevant to the question of “connection” as those of the Western Desert Bloc. He did not, however, explicitly ask, in relation to Peter De Rose or any of the other appellants, whether by those traditional laws and customs, they had retained a connection with the claim area. As Ward suggests, such an inquiry would have required the primary Judge to ascertain the content of the traditional laws and customs, to characterise the effect of those laws and then to determine whether the characterisation constituted a connection between Peter De Rose (and the other appellants) and the claim area. 311 It is fair to say that his Honour had in mind, in considering the question of connection, aspects of the traditional laws and customs of the Western Desert Bloc. His reasoning shows that he proceeded on the basis that the traditional laws and customs required persons who were Nguraritja for particular tracks or sites to pass on knowledge to the younger generations, to care for secret and sacred places and engage in “cultural activities” (presumably ceremonies and the like) at important sites. In the case of Peter De Rose, for example, his Honour appears to have given considerable weight to his own assessment of the significance of Peter’s failure to measure up to the standards of adherence to traditional obligations that he (the primary Judge) thought appropriate. It was that failure which played a large part in his Honour’s conclusion that Peter De Rose had abandoned his connection with the claim area. 312 In Yorta Yorta (HC), the joint judgment (at [90]) counselled against describing the consequences of interruption in the acknowledgment and observance of traditional laws and customs as “abandonment”” of native title. As we have explained (at [277]-[278]), the issue in the present case is not the same as that in Yorta Yorta. But the fact that his Honour used the language of “abandonment” suggests that he was very much influenced by his own assessment of whether the appellants had a reasonable excuse for their failure (as his Honour saw it) to do more to perform the obligations 580 [7.105]

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De Rose v South Australia cont. imposed or exercise the rights conferred by traditional laws and customs. In other words, his Honour appears to have applied a standard that was not sourced in the traditional laws and customs of the Western Desert Bloc, but was rather a construct of his own. 313 In our view, s 223(1)(b) of the NTA required the primary Judge to identify the content of the traditional laws acknowledged, and customs observed, of the Western Desert Bloc and to inquire whether the effect of those laws and customs constituted a “connection” between the appellants and the claim area: Ward (HC), at 32 [64]. If the traditional laws and customs of the Western Desert Bloc continued to recognise Peter De Rose, for example, as Nguraritja for the claim area notwithstanding his “failure” for a significant time to observe his responsibilities in relation to sites on the land, that would be a powerful indication that the effect of those traditional laws and customs was to constitute a connection between Peter De Rose and the claim area. That would be so because Peter De Rose, by the traditional laws acknowledged, and traditional customs observed, of the Western Desert Bloc had rights and responsibilities in relation to the claim area. 314 On the other hand, if the traditional laws and customs of the Western Desert Bloc no longer recognised Peter De Rose as Nguraritja or, although acknowledging that status, regarded him as deprived of his rights and responsibilities in relation to the claim area, that would be a powerful, perhaps determinative, indication that by the laws and customs he did not have a connection with the claim area. No such finding was made by his Honour. (Of course, had such a finding been made, it might also suggest that Peter De Rose no longer acknowledged or observed traditional laws and customs, or possessed rights and interests under those laws or customs. If that conclusion is correct, he presumably would have been unable to satisfy s 223(1)(a) of the NTA). 315 The test the primary Judge applied seems to us to have accorded undue weight to the appellants’ failure (as his Honour saw matters) to discharge their responsibilities as Nguraritja for the claim area, regardless of the view taken by the traditional laws and customs of the Western Desert Bloc of that failure. In other words, his Honour did not ask whether, according to the traditional laws acknowledged and customs observed by him, Peter De Rose had a connection with the land. Rather his Honour apparently considered that Peter De Rose’s failure over a period of time to discharge his responsibilities as Nguraritja, as his Honour understood them, demonstrated an absence of connection between Peter De Rose and the claim area for the purpose of s 223(1)(b) of the NTA. 316 We think, too, that because his Honour did not address the question posed by s 223(1)(b) of the NTA, he placed too much emphasis on the absence of physical contact with the claim area after 1978. The Full Court in Ward (FC), in a passage (at 382 [243]) not dissented from in the High Court, held that a spiritual connection and the performance of responsibility for land can be maintained even where Aboriginal people have been hunted off the land or it has become impracticable for them to visit. The Full Court said that physical presence is not essential in circumstances where it is no longer practicable or access to traditional lands is prevented or restricted by European settlers. We see no reason to depart from these propositions and indeed we were not invited to do so. 317 Although his Honour referred to the judgments in Ward (FC), he clearly gave considerable weight to what he regarded as Peter De Rose’s “absence from the claim area” after 1978. Leaving aside the fact that Peter De Rose (as his Honour found) made “the occasional hunting visit” to De Rose Hill Station, his Honour appears to have given little weight to Peter’s spiritual links with the land in the manner contemplated by Ward (FC). 318 Peter De Rose plainly had a detailed knowledge not only of the concept of Nguraritja but of the Tjukurpa. It was his evidence, after all, that provided the foundation for the primary Judge’s findings on these matters. As the Full Court suggested in Ward (FC), at 382 [243], knowledge of this kind must go some way to establishing a connection with land through traditional laws acknowledged and customs observed by the person having the knowledge. Peter De Rose participated in the ritual ceremonies, [7.105]

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De Rose v South Australia cont. stories, dances and songs that established to his Honour’s satisfaction (at [380]) that the participants “once had a religious or spiritual connection with the site at which the particular activity was performed”. Peter De Rose gave evidence at Ilpalka, a rock hole and semi-permanent source of water, which his Honour accepted was an important site on the Kalaya (Emu) Dreaming track – that is, Peter De Rose’s own Tjukurpa. After the proceedings had been instituted, he was one of those who engaged in a dispute with the Fullers about the disturbance of boulders and the construction of a fence around the rock hole at Ilpalka. He was also engaged with other appellants in a similar dispute with the Fullers after the proceedings began about the clearing of trees and the insertion of a line of posts and star pickets in the Apu Maru area. The rights and wrongs of the disputes matter less than the fact that Peter De Rose and other appellants asserted their rights and discharged their responsibilities in relation to those sites, which were of special significance to them. Indeed, they had asserted their rights in relation to the claim area by December 1994, when the application for a determination of native title was filed with the Native Title Tribunal. 319 It is also of some significance that in about 1990 Peter De Rose was involved in establishing a homeland at Railway Bore, very close to De Rose Hill Station, because (as his Honour found) he wanted a homeland close to his country. It is difficult to see this as anything other than strong evidence of a spiritual connection with the claim area. In the final section of the judgment, his Honour made a general observation (at [910]) that the appellants had been “scattered to the four winds”. Whatever might have been the case with some of the other appellants, Peter De Rose seems to have gone to a great deal of trouble to set up residence close to his traditional country for spiritual reasons. If “scattered to the four winds” means having left one’s own country and gone to distant parts, the expression cannot fairly be applied to Peter De Rose. 320 Further, his Honour did not find that Peter De Rose’s spiritual connection with the secret and sacred places on his country was not genuine, even though he was critical of Peter De Rose’s failure to discharge his responsibilities to the extent his Honour thought appropriate, particularly his obligation as Nguraritja to visit sacred sites and ensure they are clean and maintained. Even in relation to that matter, before reaching a conclusion on the significance of Peter De Rose’s failure to discharge his responsibilities, we would have expected consideration to have been given to the manner in which the responsibilities were required to be discharged in accordance with traditional laws and customs. For example, it would be relevant to consider whether, by those laws and customs, when a Nguraritja was not residing on his or her country the duty was to be pro-active or re-active. If, for example, the latter situation applied in the Western Desert his Honour might have taken a different view to the relevant conduct or the lack thereof, of the appellants. However, as already explained, his Honour appears to have reached his conclusion by reference to his own assessment of Peter De Rose’s conduct or inaction. 321 The primary Judge seems to have been influenced by his view that Peter De Rose and the other appellants had not provided satisfactory reasons or excuses for their failure to discharge their responsibilities as Nguraritja or to maintain contact with the claim area. His Honour recorded, however, that the evidence of the Aboriginal witnesses contained (at [907]) a “persistent theme” that they were too frightened to return to De Rose Hill Station because of the hostility displaced by the Fullers. 322 The primary Judge accepted (at [893]) that the conduct of Doug Fuller was “a factor” in the decision of the Aboriginal people to leave De Rose Hill Station, but found that it was not a “major factor”. Although there were plainly other factors at work, the finding is perhaps not easy to reconcile with an earlier finding (at [436]) that Doug Fuller had a demeaning attitude towards Aboriginal people and did not hesitate to intimidate Aboriginal people by the use of firearms. Nor is it entirely easy to reconcile with the description (at [895]), of Doug Fuller as a simple and predictable character who was 582 [7.105]

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De Rose v South Australia cont. mostly well disposed towards his Aboriginal workers and their families, but [who] was a strict disciplinarian and would not hesitate to physically assault people when he, in his sole judgment, thought it appropriate to do so. Be that as it may, clearly the conduct of the Fullers played a part in the decision of the Aboriginal people to leave the Station. 323 His Honour’s findings are also consistent with fear of the Fullers playing a part in the failure of the appellants to maintain contact with the claim area after leaving De Rose Hill Station. It is true that his Honour did not accept the evidence of all of the Aboriginal witnesses as to the reason for their leaving or not returning to the Station. But in some cases, despite expressions of scepticism, his Honour appears to have accepted that the appellants had genuine concerns about what the Fullers would do if they attempted to return to the claim area. It will be recalled, for example, that Peter De Rose and Tim De Rose left the Station because (as his Honour found) they genuinely believed, albeit erroneously, that Doug Fuller deliberately delayed telling them about Bobby’s death. Tim De Rose, whom his Honour regarded as Nguraritja for the claim area because of his place of birth, gave evidence that he did not want to return to the Station because “I was frightened if I go back I might get hunted out”. While his Honour thought that Tim’s association with the claim area was “tenuous”, he did not reject Tim’s evidence as to his fears. 324 Similarly, his Honour observed that there was “some difficulty” reconciling Peter De Rose’s evidence that he was frightened of Doug Fuller with the statement that he had “continued going back to visit Doug”. Even so, his Honour did not reject Peter’s evidence that he harboured fears. Instead, his Honour found (at [595]) that it was difficult to sustain the idea that Peter De Rose or any other Aboriginal people: had any reason to be afraid to enter the property to hunt or carry on traditional activities because of the conduct of Doug or Rex Fuller. His Honour did not explain how this finding could be reconciled with the findings about Doug Fuller’s attitudes and behaviour and we have considerable difficulty seeing how it can be reconciled. Even if the finding stands, it does not negate the appellant’s perceptions that they faced the prospect of a hostile response, perhaps even a violent one, if they returned to De Rose Hill Station without the Fullers’ permission. 325 The fact that some of the appellants genuinely feared the response of the Fullers if they attempted to visit De Rose Hill Station without permission does not demonstrate that they maintained a connection with the claim area by the traditional laws acknowledged, and the traditional customs observed, of the Western Desert Bloc. But it is a factor to consider in determining whether, despite the lack of physical contact with the claim area, the appellants, or some of them, maintained such a connection. 326 Yorta Yorta (HC), at 563 [90], makes it clear that if continuity of acknowledgement and observance of traditional laws and customs has been interrupted, the reasons for the interruption are irrelevant. But the judgment also indicates that the reasons why acknowledgement and observance has been affected might influence the fact-finder’s decision as to whether there was an absence of continuity. So it is in relation to the question of connection. If the requisite connection does not exist or has ended, it does not matter why this has occurred. But in determining whether there is a connection for the purposes of s 223(1)(b) of the NTA the reason why claimants have not sought to maintain a physical association with the land may be relevant. 327 We should make a final point about his Honour’s reasoning on the question of connection. At various points in the judgment, his Honour appears to suggest that the appellants faced a choice between traditional Aboriginal values and European values and that they chose the latter (for example at [107], [681], [896], [902]). Consistently with this approach, his Honour identified (at [896]) two [7.105]

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De Rose v South Australia cont. main reasons why the Aboriginal people left De Rose Hill Station, both of which were said to “deny the presence of a continuing native title connection with the claim area”. The first reason was the opening of the community centre at Indulkana in 1968; the second was that the opportunities for work, particularly for Aboriginal stockmen, dried up. 328 The primary Judge thought that the movement of Aboriginal people away from De Rose Hill was not associated with their Aboriginal lifestyle, traditions or customs; it was governed by aspects of European social and work practices. While this may be true, it is not apparent why the appellants’ reasons for leaving the Station necessarily denies “the presence of a continuing native title connection with the claim area”. Movement from traditional lands in search of regular food or shelter, as the evidence in this case shows, is not a new phenomenon or one unknown to traditional laws and customs of the Western Desert Bloc. Depending on the circumstances, it may well be possible for Aboriginal people, by their traditional laws and customs, to maintain a connection with land notwithstanding that they ceased to reside there because of the influence of “European social and work practices”. 329 The upshot is that, in our view, the primary Judge did not address the correct question posed by s 223(1)(b) of the NTA. His finding that Peter De Rose failed to satisfy s 223(1)(b) is therefore flawed. We think that the findings relating to the other appellants, even though their circumstances were each different, were also flawed for the same reason. Should We Make a Finding as to “Connection”? 330 While there are obvious virtues in this Court making its own evaluation of the evidence relevant to the question of “connection”, there is a difficulty in adopting this course. We were not taken to any evidence bearing on the significance, under the traditional laws and customs of the Western Desert Bloc, of a failure by persons who, under these laws, are Nguraritja for land, to discharge their responsibilities in relation to that land. If the evidence does address that question, we are not in a position to evaluate it at least without the benefit of detailed additional submissions. At this stage of the litigation, at least without the benefit of further submissions, we therefore cannot determine the questions that we think are critical to the application of s 223(1)(b) of the NTA. 331 Of course, if the evidence was such that on no view could any of the appellants satisfy s 223(1)(b) of the NTA, the ultimate findings of the primary Judge could be upheld notwithstanding the flaw we have identified in his Honour’s reasoning. We have referred earlier to the evidence relating to Peter De Rose’s connections with the claim area. Depending on the content of the traditional laws and customs of the Western Desert Bloc, the evidence may well be sufficient for a Court to conclude that Peter De Rose has satisfied s 223(1)(b) of the NTA. While we cannot say that that result is assured, we equally cannot say that his claim is bound to fail. The other appellants may or may not be in the same position, but there is little point in analysing their individual circumstances in depth if further consideration has to be given to Peter De Rose’s claim.

[7.110]

Note

In Sampi on behalf of the Bardi and Jawi People v Western Australia (2010) 266 ALR 537, North and Mansfield JJ commented: 63. On the basis of this and like evidence the primary judge should have found that the Bardi and Jawi people acknowledged the same laws and observed the same customs concerning rights and interests held in land and waters at least from the present back until the time of these witnesses’ “old people” or grandparents, namely, the latter part of the 19th century. 584 [7.110]

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64. The question then arises whether the Court can infer the existence of that acknowledgement and observance from about the latter part of the 19th century back to sovereignty. Selway J addressed this issue in Gumana v Northern Territory (2005) 141 FCR 457; [2005] FCA 50 and said at [201] by reference to the history of the approach of the common law to the proof of custom: …where there is a clear claim of the continuous existence of a custom or tradition that has existed at least since settlement supported by creditable evidence from persons who have observed that custom or tradition and evidence of a general reputation that the custom or tradition had “always” been observed then, in the absence of evidence to the contrary, there is an inference that the tradition or custom has existed at least since the date of settlement. 65. In the present circumstances the constitutional status and elaborate nature of the rules in question make it improbable that the system arose in the relatively short period between sovereignty and the time of the witnesses’ “old people”. We accept the view expressed by Mr Bagshaw in his report (at page 18) that: …the structural features (i.e. systems of kinship, social organization and local organization) common to both societies are, in my opinion, of a sufficiently fundamental order that they may be reasonably assumed to have developed among both peoples well before European contact. 66. From this evidence, the primary judge should have inferred that the Bardi and Jawi people are, and have since the time of sovereignty, been united by their acknowledgement of a common set of laws and their observance of a common set of customs. 67. It remains necessary to consider the matters which the primary judge viewed as indicating that the Bardi and Jawi people constituted separate, albeit similar, societies at sovereignty. These matters, referred to by the primary judge as a “constellation of factors”, include the existence of distinct languages, the use of the self-referents Bardi and Jawi, and the existence of separate territories. When viewed against the evidence that the Bardi and Jawi people at sovereignty shared a single belief system on the fundamental matters of the creation and existence of rights and interests in land and waters, these factors have little significance and are not inconsistent with the existence of a single society. 68. The difference in language was at the level of dialect. A person from Scotland is a member of the United Kingdom society even though she speaks a different dialect than a person from England or Wales. Indeed, the evidence in this case was that there were different speech styles within the Bardi community itself. Some spoke “heavy Bardi”, some spoke “light Bardi”, and some spoke “slow Bardi”. Although the styles were quite distinct it was not suggested that this distinction divided the Bardi people into separate societies. The difference in dialect, in the overall picture in this matter, does not tend to lead to the view that the traditional laws acknowledged and traditional customs observed by the Bardi and Jawi were not acknowledged and observed by them as one society or that they were not inextricably linked by those normative rules which existed at sovereignty. 69. There is also little significance for the present enquiry in the use of the self-referents Bardi and Jawi or in the linkage with the separate mainland and island territories. The existence of separate territories for people within a group who adhere to the same system of laws and customs, and the consequent reference to that linkage in identification is paralleled in many unified societies. By way of a coarse analogy, we call ourselves Victorians or Queenslanders or Western Australians because we have a residential linkage in those States. At the same time we are united in adherence to the law of Australia and we form part of the Australian society. 70. Indeed, the territorial delineation provides further evidence of a common set of laws and customs with respect to land. Mr Bagshaw indicated in his report (at page 28) that the Bardi and Jawi possession of particular territory is the result of a “supernaturally-authored territorial demarcation”. Such demarcation points to an overarching set of laws and customs derived from a common cosmology. 71. The circumstances of each native title application are different. They depend heavily on the facts concerning the beliefs, histories, and practices of the particular native title claim group. [7.110]

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It is therefore not normally useful to compare the facts in one case to the facts in others. However, the Court has ruled on quite a large variety of circumstances of native title claim groups so that certain lines have emerged between the characteristics of those groups which fall within the requirements laid down in Yorta Yorta and those which do not. Whilst it is not possible to push the comparisons too far, it is noteworthy that the Court has found in a number of cases that a native title claim group which adhered to an overarching set of fundamental beliefs constituted a society notwithstanding that the group was composed of people from different language groups or groups linked to specific areas within the larger territory which was the subject of the application. 79. It follows from these reasons that the primary judge should have inferred from the evidence that the Bardi and Jawi people constituted a single society from sovereignty until the present. The primary judge should not have excluded the country of the Jawi people from the determination. The determination should, subject to resolution of the remaining arguments, include the territory of both the Bardi and Jawi people. As a result of these findings, the cross-appeal by the State must fail.

Continued use

Members of the Yorta and Yorta Aboriginal Community v Victoria [7.115] Members of the Yorta and Yorta Aboriginal Community v Victoria (2002) 214 CLR 222; [2002] HCA 58 High Court of Australia GLEESON CJ, GUMMOW AND HAYNE JJ: In February 1994, application was made to the Native Title Registrar for a determination of native title to land and waters in northern Victoria and southern New South Wales. Several areas of land and waters were claimed; all were said to be public lands and waters. For the most part, the areas claimed straddled the Murray River (from a point in the west near Cohuna to a point in the east near Howlong) or straddled the Goulburn River (from its junction with the Murray, south to a point near Murchison). In addition to those areas, a number of other areas were claimed. All the areas claimed lay within a more or less oval-shaped area bisected by the Murray River (measuring about 150 kilometres on its north-south axis and over 200 kilometres on its east-west axis) which was said to be traditional Yorta Yorta territory. The precise basis for fixing the boundaries of this oval-shaped area was later to be said by the trial judge in this matter not to have been established in evidence. The application was originally made in the name of an incorporated body, but later, eight named persons were substituted as applicants on behalf of the members of the Yorta Yorta Aboriginal community. Although the proceedings in this Court, and in the courts below, have described the claimant party simply as “Members of the Yorta Yorta Aboriginal community” it is convenient to refer to them as “the claimants” or “the appellants”. Pursuant to the Native Title Act 1993 (Cth), as it stood at the relevant time, the application was accepted by the Native Title Registrar in May 1994, and in May 1995, under the then applicable provisions of that Act, the matter was referred to the Federal Court for decision. This was the first application for determination of native title to come on for trial after the enactment of the Native Title Act. It was tried between October 1996 and November 1998. Oral evidence was taken at trial from 201 witnesses; 48 witness statements were admitted into evidence without formal proof. The hearing occupied 114 days. After evidence had been completed, and the primary judge had reserved his decision, the Native Title Amendment Act 1998 (Cth) (the 1998 Amendment Act) came into operation. The parties were invited to, and did, make submissions to the primary judge (Olney J) about the consequences of those amendments. It will be necessary to return to consider some of the changes made by that Act. On 18 December 1998, Olney J published his reasons for decision and made a determination of native title under the Native Title Act that: 586 [7.115]

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Members of the Yorta and Yorta Aboriginal Community v Victoria cont. Native title does not exist in relation to the areas of land and waters identified in Schedule D to Native Title Determination Application VN 94/1 accepted by the Native Title Registrar on 26 May 1994. From this determination the claimants appealed to the Full Court of the Federal Court. The Full Court, by majority (Branson and Katz JJ, Black CJ dissenting), dismissed the appeal. By special leave, the claimants now appeal to this Court. The claim The claimants made their claim on behalf of the members of the Yorta Yorta Aboriginal community. In their native title determination application, as amended on 2 May 1995, the claimants adopted a description of the Yorta Yorta Aboriginal community which had been prepared by a consultant anthropologist and was included by them in their application. That description noted that, in the period of nearly 155 years since Europeans first came to the area claimed, there had been “massive alterations in technical, environmental and economic circumstance”. Reference was made in this regard to the use by the European settlers of land for pastoral purposes, to their use of forests for timber gathering, and to their use of waters for commercial fishing and irrigation, uses which had led to many plant and animal species which were once prolific becoming extinct or rare. Reference was made to the “impact of depopulation from disease and conflict during the early years of settlement” and to the policies of both government and others under which Aboriginal children had been separated from their parents, the performance of ceremonies and other traditional customs and practices had been forbidden, the use of traditional languages had been inhibited and “by controlling where and how the Yorta Yorta could live, they [that is, the government and others] forced the Yorta Yorta to make further adaptations to their new circumstances”. At various times, different policies had been followed – absorption, segregation, integration – and each had had its effect on Aboriginal society. The claimants thus acknowledged, at the outset of their claim, that much had changed in Aboriginal society as a result of European settlement. It is these changes and their consequences that lie behind the issues which arise in this matter. The consequences of sovereignty and change in sovereignty First, it follows from Mabo [No 2] that the Crown’s acquisition of sovereignty over the several parts of Australia cannot be challenged in an Australian municipal court. Secondly, upon acquisition of sovereignty over a particular part of Australia, the Crown acquired a radical title to the land in that part, but native title to that land survived the Crown’s acquisition of sovereignty and radical title. What survived were rights and interests in relation to land or waters. Those rights and interests owed their origin to a normative system other than the legal system of the new sovereign power; they owed their origin to the traditional laws acknowledged and the traditional customs observed by the indigenous peoples concerned. When it is recognised that the subject matter of the inquiry is rights and interests (in fact rights and interests in relation to land or waters) it is clear that the laws or customs in which those rights or interests find their origins must be laws or customs having a normative content and deriving, therefore, from a body of norms or normative system – the body of norms or normative system that existed before sovereignty. Thus, to continue the metaphor of inter-section, the relevant intersection, concerning as it does rights and interests in land, is an inter-section of two sets of norms. That intersection is sometimes expressed by saying that the radical title of the Crown was “burdened” by native title rights but, as was pointed out in Commonwealth v Yarmirr, undue emphasis should not be given to this form of expression. Radical title is a useful tool of legal analysis but it is not to be given some controlling role. [7.115]

587

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Members of the Yorta and Yorta Aboriginal Community v Victoria cont. An intersection of two normative systems To speak of an intersection of two sets of norms, or of two normative systems, does not identify the nature or content of either. Nor may it be immediately evident that a reference to “traditional laws acknowledged, and the traditional customs observed” is, in fact, a reference to a body of norms or normative system. Indeed, reference to a normative “system” of traditional laws and customs may itself be distracting if undue attention is given to the word “system”, particularly if it were to be understood as confined in its application to systems of law that have all the characteristics of a developed European body of written laws. Nonetheless, the fundamental premise from which the decision in Mabo [No 2] proceeded is that the laws and customs of the indigenous peoples of this country constituted bodies of normative rules which could give rise to, and had in fact given rise to, rights and interests in relation to land or waters. And of more immediate significance, the fundamental premise from which the Native Title Act proceeds is that the rights and interests with which it deals (and to which it refers as “native title”) can be possessed under traditional laws and customs. Of course, those rights and interests may not, and often will not, correspond with rights and interests in land familiar to the Anglo-Australian property lawyer. The rights and interests under traditional laws and customs will often reflect a different conception of “property” or “belonging”. But none of those considerations denies the normative quality of the laws and customs of the indigenous societies. It is only if the rich complexity of indigenous societies is denied that reference to traditional laws and customs as a normative system jars the ear of the listener. To speak of such rights and interests being possessed under, or rooted in, traditional law and traditional custom might provoke much jurisprudential debate about the difference between what HLA Hart referred to as “merely convergent habitual behaviour in a social group” and legal rules. The reference to traditional customs might invite debate about the difference between “moral obligation” and legal rules. A search for parallels between traditional law and traditional customs on the one hand and Austin’s conception of a system of laws, as a body of commands or general orders backed by threats which are issued by a sovereign or subordinate in obedience to the sovereign, may or may not be fruitful. Likewise, to search in traditional law and traditional customs for an identified, even an identifiable, rule of recognition which would distinguish between law on the one hand, and moral obligation or mere habitual behaviour on the other, may or may not be productive. This last question may, however, be put aside when it is recalled that the Native Title Act refers to traditional laws acknowledged and traditional customs observed. Taken as a whole, that expression, with its use of “and” rather than “or”, obviates any need to distinguish between what is a matter of traditional law and what is a matter of traditional custom. Nonetheless, because the subject of consideration is rights or interests, the rules which together constitute the traditional laws acknowledged and traditional customs observed, and under which the rights or interests are said to be possessed, must be rules having normative content. Without that quality, there may be observable patterns of behaviour but not rights or interests in relation to land or waters. The consequences of sovereignty for the pre-sovereignty normative system At trial, two separate questions were understood as arising. First, did the claimants demonstrate that they were descended from those who were indigenous inhabitants of the claim area in 1788? Secondly, what was the nature of the entitlement which the indigenous inhabitants enjoyed in relation to their traditional lands in accordance with their laws and customs, and what was the extent of those lands? At trial, the claimants sought to address the first question by identifying 18 individuals, from whom it was said the claimants were descended, and seeking to demonstrate that one or more of those 18 “known ancestors” was a descendant of an indigenous inhabitant who occupied the claim area at or 588

[7.115]

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Members of the Yorta and Yorta Aboriginal Community v Victoria cont. before 1788 and who enjoyed native title rights and interests to the claimed land and waters. Demonstrating this connection between the known ancestors and the people whose traditional laws and customs, at or before European contact, entitled them to the rights of ownership, possession, occupation and use claimed by the claimants was said by the primary judge to be “[o]ne of the major problems associated with the presentation of the [claimants’] case”. Of the 18 named ancestors, the trial judge found that only two had been shown to be descended from persons who were indigenous inhabitants of part of the claim area in 1788. Even so, what was said to be “a significant number of the claimant group” were found to be descended from one or other of these two persons. As to the second of the questions identified (requiring identification of the nature and extent of the entitlement which the indigenous inhabitants enjoyed), the primary judge said that “[t]he most credible source of information concerning the traditional laws and customs of the area” was to be found in Curr’s writings. He went on to say that: The oral testimony of the witnesses from the claimant group is a further source of evidence but being based upon oral traditional passed down through many generations extending over a period in excess of two hundred years, less weight should be accorded to it than to the information recorded by Curr. What is clear, however, is that demonstrating some change to, or adaptation of, traditional law or custom or some interruption of enjoyment or exercise of native title rights or interests in the period between the Crown asserting sovereignty and the present will not necessarily be fatal to a native title claim. Yet both change, and interruption in exercise, may, in a particular case, take on considerable significance in deciding the issues presented by an application for determination of native title. The relevant criterion to be applied in deciding the significance of change to, or adaptation of, traditional law or custom is readily stated (though its application to particular facts may well be difficult). The key question is whether the law and custom can still be seen to be traditional law and traditional custom. Is the change or adaptation of such a kind that it can no longer be said that the rights or interests asserted are possessed under the traditional laws acknowledged and the traditional customs observed by the relevant peoples when that expression is understood in the sense earlier identified? Interruption of use or enjoyment, however, presents more difficult questions. First, the exercise of native title rights or interests may constitute powerful evidence of both the existence of those rights and their content. Evidence that at some time, since sovereignty, some of those who now assert that they have that native title have not exercised those rights, or evidence that some of those through whom those now claiming native title rights or interests contend to be entitled to them have not exercised those rights or interests, does not inevitably answer the relevant statutory questions. Those statutory questions are directed to possession of the rights or interests, not their exercise, and are directed also to the existence of a relevant connection between the claimants and the land or waters in question. Secondly, account must no doubt be taken of the fact that both paras (a) and (b) of the definition of native title are cast in the present ense. The questions thus presented are about present possession of rights or interests and present connection of claimants with the land or waters. That is not to say, however, that the continuity of the chain of possession and the continuity of the connection is irrelevant. Yet again, however, it is important to bear steadily in mind that the rights and interests which are said now to be possessed must nonetheless be rights and interests possessed under the traditional laws acknowledged and the traditional customs observed by the peoples in question. Further, the connection which the peoples concerned have with the land or waters must be shown to be a connection by their traditional laws and customs. For the reasons given earlier, “traditional” in this context must be understood to refer to the body of law and customs acknowledged and observed by the ancestors of the claimants at the time of sovereignty. [7.115]

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Members of the Yorta and Yorta Aboriginal Community v Victoria cont. For exactly the same reasons, acknowledgment and observance of those laws and customs must have continued substantially uninterrupted since sovereignty. Were that not so, the laws and customs acknowledged and observed now could not properly be described as the traditional laws and customs of the peoples concerned. That would be so because they would not have been transmitted from generation to generation of the society for which they constituted a normative system giving rise to rights and interests in land as the body of laws and customs which, for each of those generations of that society, was the body of laws and customs which in fact regulated and defined the rights and interests which those peoples had and could exercise in relation to the land or waters concerned. They would be a body of laws and customs originating in the common acceptance by or agreement of a new society of indigenous peoples to acknowledge and observe laws and customs of content similar to, perhaps even identical with, those of an earlier and different society. To return to a jurisprudential analysis, continuity in acknowledgment and observance of the normative rules in which the claimed rights and interests are said to find their foundations before sovereignty is essential because it is the normative quality of those rules which rendered the Crown’s radical title acquired at sovereignty subject to the rights and interests then existing and which now are identified as native title. In the proposition that acknowledgment and observance must have continued substantially uninterrupted, the qualification substantially is not unimportant. It is a qualification that must be made in order to recognise that proof of continuous acknowledgment and observance, over the many years that have elapsed since sovereignty, of traditions that are oral traditions is very difficult. It is a qualification that must be made to recognise that European settlement has had the most profound effects on Aboriginal societies and that it is, therefore, inevitable that the structures and practices of those societies, and their members, will have undergone great change since European settlement. Nonetheless, because what must be identified is possession of rights and interests under traditional laws and customs, it is necessary to demonstrate that the normative system out of which the claimed rights and interests arise is the normative system of the society which came under a new sovereign order when the British Crown asserted sovereignty, not a normative system rooted in some other, different, society. To that end it must be shown that the society, under whose laws and customs the native title rights and interests are said to be possessed, has continued to exist throughout that period as a body united by its acknowledgment and observance of the laws and customs. Abandonment or expiry? Describing the consequences of interruption in acknowledgment and observance of traditional laws and customs as “abandonment” or “expiry” of native title is apt to mislead. “Abandonment” might be understood as suggesting that there has been some conscious decision to abandon the old ways, or to give up rights and interests in relation to the land or waters. Demonstrating continuous acknowledgment and observance of traditional laws and customs would, of course, negate any suggestion of conscious decision to abandon rights or interests. But the inquiry about continuity of acknowledgment and observance does not require consideration of why, if acknowledgment and observance stopped, that happened. That is, continuity of acknowledgment and observance is a condition for establishing native title. If it is not demonstrated that that condition was met, examining why that is so is important only to the extent that the presence or absence of reasons might infiuence the fact-finder’s decision about whether there was such an interruption. “Expiry” may be a more neutral term than “abandonment”. It does not invite attention to what those who held native title may have thought or intended at the time that acknowledgment and observance of traditional law and custom ceased. Even so, it is a term that may distract attention from the terms in which native title is defined. That is reason enough to conclude that its use is unhelpful for it is the words of the Native Title Act to which the inquiry must always return. 590 [7.115]

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Members of the Yorta and Yorta Aboriginal Community v Victoria cont. Conclusions It follows from what has been said, that the majority of the Full Court were wrong to locate questions about continuity of acknowledgment and observance of traditional law and custom in par (c) of the definition of native title. It also follows that it is wrong to read par (c) of that definition as incorporating notions of extinguishment by expiry of native title into the definition of native title. Rather, as these reasons have sought to demonstrate, questions of the kind presented for decision in this matter focus more upon the requirements of para (a) of that definition than they do on the requirements of para (c). The claimants contended that, the primary judge and the Full Court having misdirected themselves as to applicable legal principle, the findings of fact made at trial, and endorsed on appeal, were misdirected. At first the claimants submitted that the matter should be remitted for retrial, a course which would have imposed very large burdens on all parties to the proceeding and could properly be said to be “a most deplorable result”. Having regard to those, and perhaps other considerations, the claimants, supported by some respondents, reformulated the relief sought in this Court and submitted that the matter should be remitted for further hearing, albeit on terms that no further evidence be adduced except by leave of the Federal Court. The critical question is whether the errors of law which were made at trial bore, in any relevant way, upon the primary judge’s critical findings of fact that the evidence did not demonstrate that the claimants and their ancestors had continued to acknowledge and observe, throughout the period from the assertion of sovereignty in 1788 to the date of their claim, the traditional laws and customs in relation to land of their forebears, and that “before the end of the 19th century, the ancestors through whom the claimants claim title had ceased to occupy their traditional lands in accordance with their traditional laws and customs”. If those findings of fact stand unaffected by error of law, the claimants’ claim to native title fails and their appeal should be dismissed. These findings were findings about interruption in observance of traditional law and custom not about the content of or changes in that law or custom. They were findings rejecting one of the key elements of the case which the claimants sought to make at trial, namely, that they continued to observe laws and customs which they, and their ancestors, had continuously observed since sovereignty. More fundamentally than that, they were findings that the society which had once observed traditional laws and customs had ceased to do so and, by ceasing to do so, no longer constituted the society out of which the traditional laws and customs sprang. In the Full Court, the claimants submitted that the primary judge’s conclusions reflected a search for absolute identity between the laws and customs now observed with those that were observed at sovereignty. This attack failed, and was not renewed in this Court. In any event, however, the findings we have identified are more radical than is acknowledged by arguments about the particular content of laws and traditions at particular times. They are findings that the forebears of the claimants had ceased to occupy their lands in accordance with traditional laws and customs and that there was no evidence that they continued to acknowledge and observe those laws and customs. Upon those findings, the claimants must fail. The appeal should be dismissed with costs. McHugh and Callinan JJ agreed in the result; Gaudron and Kirby JJ dissented.

Note

[7.120]

There are two separate issues that can be confused in the question whether native title has continued to be exercised from the time of the assertion of British sovereignty until the present. [7.120]

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The first issue is whether rights and interests according to native custom have been exercised throughout that period; the second issue is whether any sovereign has extinguished native title. The first may be regarded as a factual matter; the second as a government matter. Continued use is part of the definition of native title and therefore is necessarily involved in making out a case. Extinguishment depends on any legislative or executive act affecting native title – it is discussed at [7.55]ff. The need to establish continued use often provokes concerns of unfairness as the most common impediment to continued use has been the actions of European settlers. Whilst interference may be the basis of a claim for compensation, in many cases it does defeat native title as a currently existing thing. At the same time it is connection with the land under native laws and customs which must be established. Interference may weaken physical use but not destroy spiritual activity and occasional access. The Australian Law Reform Commission in its report on Native Title (ALRC, Connection to Country: Review of the Native Title Act 1993 (Cth), 2015) made the following suggestions in relation to the substantive law in respect of native title (Summary Report, pp 30-33): Traditional Laws and Customs

Recommendation 5–1 The definition of native title in s 223 of the Native Title Act 1993 (Cth) should be amended to provide that traditional laws and customs may adapt, evolve or otherwise develop Recommendation 5–2 The definition of native title in s 223 of the Native Title Act 1993 (Cth) should be amended to clarify that it is not necessary to establish that the acknowledgment of traditional laws and the observance of traditional customs have continued substantially uninterrupted since sovereignty Recommendation 5–3 The definition of native title in s 223 of the Native Title Act 1993 (Cth) should be amended to clarify that it is not necessary to establish that traditional laws and customs have been acknowledged and observed by each generation since sovereignty. Recommendation 5–4 The definition of native title in s 223 of the Native Title Act 1993 (Cth) should be amended to clarify that it is not necessary to establish that a society united in and by its acknowledgment and observance of traditional laws and customs has continued in existence since prior to sovereignty. Recommendation 5–5 The definition of native title in s 223 of the Native Title Act 1993 (Cth) should be amended to provide that rights and interests may be possessed by a native title claim group where they have been: (a) transmitted or transferred between Aboriginal or Torres Strait Islander groups in accordance with the traditional laws and customs of those groups; or (b) otherwise acquired in accordance with traditional laws and customs. Connection with the Land or Waters

Recommendation 6–1 Section 62(1)(c) of the Native Title Act 1993 (Cth) provides that a claimant application may contain details of any “traditional physical connection” that a member of the native title claim group has, or had, with the land or waters claimed. This subsection should be repealed. Recommendation 6–2 Section 190B(7) of the Native Title Act 1993 (Cth) provides that the Registrar must be satisfied that at least one member of the native title claim group has, or previously had, a traditional physical connection with any part of the land or waters, or would have had such a connection if not for things done by the Crown, a statutory authority of the Crown, or any holder of a lease. This subsection should be repealed. 592 [7.120]

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Proof and Evidence

Recommendation 7–1 The Native Title Act 1993 (Cth) should provide guidance regarding when inferences may be drawn in the proof of native title rights and interests. The Act should provide that the Court may draw inferences from contemporary evidence that the claimed rights and interests are possessed under the traditional laws acknowledged and traditional customs observed by the native title claim group. The Nature and Content of Native Title

Recommendation 8–1 Without limiting s 223(1) of the Native Title Act 1993 (Cth), this recommendation is intended to give effect to the principle of a broadly defined native title right as recognised in Akiba v Commonwealth (2013) 250 CLR 209 and Western Australia v Brown (2014) 306 ALR 168; to reflect that a native title right can be exercised for any purpose (including commercial purposes); and to provide a non-exhaustive list of native title rights and interests. Section 223(2) of the Native Title Act 1993 (Cth) should be repealed and substituted with a subsection that provides: Without limiting subsection (1), native title rights and interests in that subsection: (a) may comprise a right that may be exercised for any purpose, including commercial or non-commercial purposes; and (b) may include, but are not limited to, hunting, gathering, fishing, and trading rights and interests. Recommendation 8–2 “Commercial purposes” and “trading” should not be defined in the Native Title Act.

[7.120]

593

CHAPTER 8 Security Interests in Land and Personal Property [8.05]

NATURE OF SECURITY AND CREATION OF SECURITY INTERESTS .................... 596 [8.10] [8.20]

[8.30]

LEGAL MORTGAGES OF LAND: EQUITABLE PROTECTION FOR THE MORTGAGOR ......................................................................................................... 604 [8.30] [8.40] [8.45]

[8.55]

[8.76]

Clogs on the equity of redemption ................................................... 622 [8.80]

[8.90] [8.100]

Toohey v Gunther ................................................................. 622

Postponement of redemption ........................................................... 626 [8.90]

Knightsbridge Estates Trust Ltd v Byrne ................................... 626

Penalties ............................................................................................... 629 [8.100]

Andrews v Australia and New Zealand Banking Group Ltd ....................................................................................... 629

REMEDIES OF A MORTGAGEE OF LAND ............................................................. 631 [8.115]

Right to possession ............................................................................. 632 [8.115]

[8.125] [8.135]

Fyfe v Smith .......................................................................... 632

Discharge of the proprietory interest and debt ............................... 634 [8.125]

Groongal Pastoral v Falkiner Co Ltd ........................................ 634

Availability of the power of sale ......................................................... 636 [8.135]

[8.145]

Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd ................................................................................. 616 Re Maiden Civil (P & E) Pty Ltd .............................................. 620

REDEEMABILITY ..................................................................................................... 622 [8.80]

[8.110]

World Tech Pty Ltd v Yellowin Holdings Pty Ltd ........................ 613 Ryan v O’Sullivan .................................................................. 614

PRIORITIES AMONGST MORTGAGEES OF LAND AND GOODS ....................... 616 [8.70]

[8.80]

Campbell v Holyland ............................................................. 604 Perry v Rolfe ......................................................................... 607 Re Forrest Trust ..................................................................... 610

NATURE OF EQUITABLE MORTGAGES OF LAND ............................................... 613 [8.55] [8.60]

[8.70]

Gurfinkel v Bentley Pty Ltd ..................................................... 597 Theodore v Mistford Pty Ltd ................................................... 599

King Investment Solutions v Hussain ...................................... 636

EXERCISE OF THE POWER OF SALE OF LAND .................................................... 639 [8.145]

Notice of intended exercise of a power of sale ................................ 639 [8.145]

[8.155]

Regard for the mortgagor’s interest .................................................. 645 [8.155]

[8.170]

Websdale v S & JD Investments Pty Ltd ................................... 639 Upton v Tasmanian Perpetual Trustees Ltd .............................. 645

Impact on third parties ....................................................................... 650 [8.170] [8.175]

Forsyth v Blundell .................................................................. 650 Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd ................. 654 595

Australian Property Law: Cases and Materials

NATURE OF SECURITY AND CREATION OF SECURITY INTERESTS [8.05] The mortgage of land is the most common transaction whereby a credit provider obtains a security for repayment of a debt. The security provides the credit provider with rights against property in the event of default by the borrower in repayment of the debt. Commonly the loan is provided to enable the purchase of the land over which the mortgage is granted but the value of the land can be used as security for as many loans as that value justifies. It is the nature of security that the proprietary rights are secondary to the personal obligations and operate in cases of default in performance of the primary obligations which include repayment of the loan. In cases where a loan is provided to enable the purchase of property (whether land or goods) over which security is taken, the credit provider can obtain security by retaining title until payment in full. The hire purchase transaction was developed as a peculiar form of instalment sale of goods where title remained with the seller and the buyer was unable to pass good title to a subsequent buyer as that original buyer had only an option to buy the goods. In relation to produce of the land, stock mortgages, wool liens and liens on fruit, are a peculiar Australian development as property rights by way of security were transferred with respect to a subject-matter which would come into existence in the future – the wool or fruit to be grown. The mortgage is but one form of security over land. Other common security transactions are legal and equitable charges and liens. In many jurisdictions the Torrens system recognises rent-charges as encumbrances on land (see [17.205]ff and covenants could be included as part of a rent-charge over land (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [18.30]. The rent-charge provided a means whereby land could be charged with payment of a sum of money where no debt existed. The imposition of a charge on land was often a way of providing for younger brothers and sisters where land was left to the eldest son. Security interests over personal property (including goods and intangible interests such as copyright and shares) can also take the form of a mortgage. In Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28 (see [4.15]), the High Court indicated that a division is drawn between security interests in chattels where the lender takes possession (a pledge or pawn) and those where the lender takes a proprietary interest without possession (often a mortgage). Security interests in goods have taken many forms over the centuries as legal and financial advisors have sought a form of transaction most favourable to their clients. In the 19th century a security interest was achieved by the use of a bill of sale which in its simplest form was a document evidencing a transfer of ownership of goods. The bills of sale legislation provided for the registration of documents providing for non-possessory security interests in goods. Advisors also sought to avoid regulations whereby a person in possession of goods could pass a good title to those goods to third parties. Today parties are free to adopt whatever form of interest in goods best suits them and sellers of goods acting in the course of a business often choose a consumer mortgage. The Personal Property Securities Act 2009 (Cth) regulates the enforceability of interests and priority disputes wherever the substance of a transaction is the grant of a security interest; see [8.76] for analysis of priorities in connection with security interests over goods. Licensing requirements apply to providers of credit by way of loans secured over land or goods or without security who act in the course of business in favour of private persons. Credit providers and intermediaries such as brokers must hold an Australian Credit Licence 596 [8.05]

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(National Consumer Credit Act 2009 (Cth), s 35). Duties of a credit provider or intermediary to be satisfied as to the financial capacity of a borrower, to disclose financial details of a proposed transaction and the required contents of a consumer credit contract are set out in ss 14 – 17 of the National Credit Code; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.120]-[7.155]). Unjust contracts may be reopened; assistance is available to borrowers facing unexpected difficulties and notice must be given before the exercise of any enforcement action by a mortgagee (National Credit Code ss 72, 76 and 88).

Gurfinkel v Bentley Pty Ltd [8.10] Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 High Court of Australia WINDEYER J: In my opinion these appeals should be dismissed. The facts which I consider lead to that conclusion are set out in the judgment to be delivered by my brother Owen. I shall not repeat them. I appreciate that certain incidents of the transaction between Gurfinkel and Panizza are incidents which ordinarily are more likely to be accompaniments of a conveyance by way of mortgage than of a conveyance on a sale. But none of them precludes the present transaction being in fact and in law what the document the parties executed states it to be, a sale with a right of repurchase. They do not, it seems to me, in the circumstances of this case of themselves shew that both parties intended the transaction to be not what they expressed it to be but something different. As regards their legal incidents, there is all the difference in the world between a mortgage and a sale with a right of repurchase. But if the transaction is completed by redemption or repurchase as the case may require there is no difference in the actual result. Lord Macnaghten said that in Manchester, Sheffield and Lincolnshire Railway Company v North Central Wagon Company ((1888) 13 App Cas 554 at 567, 568). He went on to say ((1888) 13 App Cas, 568): In all these cases the question is what was the real intention of the parties? As Lord Cranworth observed in a case where the documents were of a more formal character, “The rule of law on this subject is one dictated by common sense; that prima facie an absolute conveyance, containing nothing to shew that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase’”: Alderson v White (1858) 2 De G & J 97 at 105 [44 ER 924 at 928]. It is not enough that Gurfinkel approached Panizza for financial assistance to get him out of his difficulties and that Panizza came to his rescue. “A conditional sale is not a mortgage simply because both parties enter into the transaction in the confident expectation that the purchaser will take advantage of the condition, and that the final result will be the same as if they had agreed to reach that end by the road of mortgage”: per Cave J in Beckett v Tower Assets Co (1891) 1 QB 1 at 25. Gurfinkel did not exercise his option to repurchase in accordance with the condition stipulated in the agreement. Panizza has thus been able to obtain the property at much less than its true value, Gurfinkel (or his creditors, he being bankrupt) being the loser. But that does not mean that the transaction was not what the parties expressed it to be. It has of course long been the law that parol evidence is admissible to shew that a conveyance, absolute in its terms, was intended by both parties to be by way of security only. That was perhaps more easily shewn in earlier times when, as Maitland has said, a mortgage deed was “one long suppressio veri and suggestio falsi” than it is today, especially in the case of land held under the Torrens system. In 1750 Lord Hardwicke could say: “There is indeed a distinction in the nature of the transaction, between a power of redeeming and of repurchasing, obtained by usage, which governs the sense of words. But it is well [8.10]

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Gurfinkel v Bentley Pty Ltd cont. known that the court leans extremely against contracts of this kind, where the liberty of repurchasing is made at the same time, concomitant with the grant, as it must be considered in this case; being part of the same transaction; the court going very unwillingly into that distinction, and endeavouring if possible to bring them to be cases of redemption”: Longuet v Scawen (1750) 1 Ves Sen 402 at 405, 406 (27 ER 1106 at 1108). But the law has moved on since then. The attitude of the Court of Chancery in the mid-eighteenth century does not I think justify a court in the mid-twentieth century endeavouring to find that a bargain is not as the parties expressed it. A court will now ordinarily take at their word persons who execute agreements for sale at a price with an option of repurchase within a stipulated time: Rowe v Oades (1905) 3 CLR 73. Of course if it can be shewn by parol evidence that both parties to a document adopted the form they did as a disguise, then their true intent and not the form will prevail. Thus agreements that were in form sales have sometimes been held to be mortgages when the form of a sale had been adopted as a disguise: for example, in Douglas v Culverwell (1862) 4 De GF & J 20 (45 ER 1089), the purported sale at a price which preceded the conveyance was – Turner LJ said (1862) 4 De GF & J, at 28 (45 ER, at 1093) – “contemplated merely as a device for securing to the defendant usurious interest” (that is, a rate of interest more than the law then allowed). Similarly in Williams v Owen (1840) 5 Myl & Cr 303 (41 ER 386), Lord Cottenham, holding that what had occurred was a sale with a proviso for repurchase and not a mortgage, distinguished the case of Baker v Wind (1748) 1 Ves Sen 160 (27 ER 956), which had been relied upon because there, he said, “it was proved that the parties had throughout treated the transaction as a mortgage and had made it assume the appearance of a purchase to deceive the creditors of the mortgagor” (1840) 5 Myl & Cr, at p 308 (41 ER, at 388). In the present case the transaction between the parties was put into writing. The writing was approved by the legal advisers of each. After the action had been commenced on the basis that the writing meant what it said the plaintiff changed his ground and said that the parties always intended a different transaction. But the evidence does not, in my view, enable this to be said. They are, I consider, bound by the terms of their document. I do not think it necessary to discuss all the cases that were referred to in the course of the argument. I add to them Rees v Guardian Trust & Executors Company of New Zealand Ltd (1956) NZLR 340 at 344, 345. The conclusion of the Full Court was in my opinion correct. I would dismiss the appeals. Menzies and Owen JJ agreed with Windeyer J; Barwick CJ and McTiernan J dissented.

[8.15]

Notes

1. This case involves the issue of whether a transaction includes a security interest over property of a person to whom a loan is made. The case illustrates the determination of the courts to ascertain the substance of the transaction between the parties. The significance of finding that a transaction in reality amounts to a mortgage is that in the case of a mortgage equity intervenes to protect the mortgagor and thus to override what may have been agreed by the parties. Once a transaction is characterised as a mortgage, the proprietary interest obtained by the mortgagee is limited to a security to protect the debt owed to the mortgagee. The mortgagee was generally unable to gain more from the transaction than repayment of the debt plus interest plus costs. For an example of the application of this principle, see Postle v Sengstock [1994] 2 Qd R 290 noted at (1995) 69 ALJ 503. 598 [8.15]

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2. A similar analysis in relation to a securities lending agreement is provided by Beconwood Securities Pty Ltd v ANZ Banking Group Ltd [2008] FCA 594.

Theodore v Mistford Pty Ltd [8.20] Theodore v Mistford Pty Ltd (2005) 221 CLR 612; [2005] HCA 45 High Court of Australia GLEESON CJ, McHUGH, GUMMOW, CALLINAN AND HEYDON JJ. This appeal requires some consideration of the principles governing equitable mortgages by deposit of a duplicate certificate of title. The principles governing the creation of an equitable mortgage by deposit of title deeds were developed by the English courts of equity with respect to old system conveyancing. This appeal concerns their application in the Torrens system, in particular to the deposit of the duplicate certificate of title to land under the provisions of the Land Title Act 1994 (Q) (“the Act”). Section 75 of the Act states: (1) An equitable mortgage of a lot may be created by leaving a certificate of title with the mortgagee. (2) Subsection (1) does not affect the ways in which an equitable mortgage may be created. The statute law in Queensland thus stands in marked contrast to the present position in England established by the decision in United Bank of Kuwait plc v Sahib. In that case, the Court of Appeal held that the principles respecting the creation of an equitable security by deposit of title deeds were inconsistent with the requirements which had been introduced by the Law of Property (Miscellaneous Provisions) Act 1989 (UK). In Queensland, the predecessor of s 75 of the Act, s 30 of The Real Property Act 1877 (Q) had declared that: an equitable mortgage or lien upon land or any estate or interest in or security upon land under the provisions of this Act or any instrument affecting any such land may be created by deposit of the instrument of title and such deposit shall subject to the provisions hereinafter contained have the same effect on the estate interest or security sought to be charged as a deposit of title deeds would have had before the passing of this Act. Before the enactment of s 30, the Supreme Court of Queensland held in In re Wildash and Kenneth Hutchison, Ex parte Miskin that an equitable mortgage might be created by deposit of the duplicate certificate of title, although, as Lilley J put it, unless protected by caveat “its practical value as a security is very doubtful, and it is not to be commended as a mode of investment”. That warning notwithstanding, the subsequent legislation in Queensland and decisions in Victoria confirmed the adaptation of this species of equitable security to Australian conditions. It should be added that the Property Law Act 1974 (Q) (“the Property Law Act”) applies to land under the provisions of the Act. Section 5(1)(b) of the Property Law Act so provides. The Property Law Act contains various provisions whose origins may be traced to the Statute of Frauds 1677 (Eng). Two are presently significant. Section 11(1)(a) of the Property Law Act provides that subject to that statute, with respect to the creation of interests in land by parol: “no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law”. Section 59 states: No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised. It will be necessary to refer to s 11 and to s 59 later in these reasons. The primary judge found that on 12 July 1996 Mr Glen Theodore had advised Mr Peter Klar that he was ready to proceed with the purchase of the Air Monitoring Services business. He said that he had [8.20]

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Theodore v Mistford Pty Ltd cont. borrowed $30,000 from his mother and that he wanted to utilise $20,000 of that money for a deposit. Mr Klar told Mr Theodore that there would be a requirement by the respondents that the duplicate certificate of title to the Buderim land be deposited with his firm. Mr Theodore told him that, while the Buderim land was in the name of his mother, he was the beneficial owner. That was untrue. On 18 July 1996, Mr Theodore attended the offices of Allan Taylor & Associates, Mrs Theodore’s solicitors. He produced to them a handwritten authority evidently composed by him. It had been signed by Mrs Theodore and authorised her solicitors to release to Mr Glen Theodore the duplicate certificate of title to the Buderim land. On the same day, Mr Glen Theodore obtained possession of the duplicate certificate of title, deposited it with the respondents’ solicitors and obtained their letter of acknowledgment addressed to him. This stated that the certificate of title was “to be held in safe custody on your behalf as security on account of the purchase from M & V Vines of the business, Air Monitoring Services”. Up to the time of the settlement of the Sale Contract on 22 July 1996, neither the respondents nor their solicitors had any direct dealings with Mrs Theodore. Before the settlement, Mr Klar advised his clients that the holding of the certificate of title was insufficient security for payment of the balance of the purchase price without the support of an executed guarantee and mortgage. Notwithstanding that advice, the respondents, who wished urgently to settle, instructed Mr Klar to proceed. As a result, there was no insistence upon full compliance with the requirements of cl 4.3 of the Sale Contract. Those requirements had included provision on or before settlement not only of the duplicate certificate of title but also of a mortgage of the Buderim land in favour of the respondents. The primary judge commenced his consideration of the evidence given by Mrs Theodore as follows: Her evidence is in short compass. She said that she was aware in 1996 of the son’s interest in the business. She authorised the son to obtain the title deed from Mr Taylor. I find that this occurred on the 18th July 1996. This is the date of the hand written authority signed by her and is the same date that the title deed was delivered to Mr Klar by the son. [Mrs Theodore] strenuously denies any prior knowledge that her son was going to deliver the deed to Mr Klar, or any authority from her for him to deal with the deed in this way. This is the essential factual issue in the case. At the time of the trial, Mrs Theodore was aged 71 years. She had been a widow for 10 years. Her husband had been an Area Manager with the ANZ Bank and she said that her “whole life [had] been tied up with the ANZ Bank”. Her husband had told her never to give a guarantee and she was adamant in refusing to do so. Mr Glen Theodore was one of her four children. Mr Glen Theodore had been divorced in 1992 and, at the relevant time, was living at home with his mother. Mrs Theodore’s case was that she had agreed only to the delivery of the deed to the ANZ Bank at Maroochydore as security for a loan which Mr Glen Theodore proposed to obtain from that Bank. Mr Theodore had sought unsuccessfully to arrange finance from the ANZ Bank. On 18 July, he had attended the Maroochydore branch with Mrs Theodore but the Bank declined his application for an advance of $60,000. Mrs Theodore had already received advice from her accountant that a purchase of the respondents’ business at that price was not a viable proposition. Mrs Theodore’s evidence was that she had decided not to assist her son at all in the matter but that she relented and lent him $30,000, of which $20,000 was for the initial payment under the Sale Contract and $10,000 for his purchase of a van. The primary judge introduced his conclusions respecting the credibility of Mrs Theodore by saying that she had impressed him as a highly intelligent, astute and alert witness. His Honour continued:

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Theodore v Mistford Pty Ltd cont. She was not in the least overborne by cross-examination despite her obvious physical difficulties resulting from her distressing condition. I do not think she is a liar, however I regret to say that on the balance of probabilities, I do not accept her evidence that she did not know of her son’s plans to deal with the deed as he did on the 18th July 1996. I think it more probable than not that at the time of purchase of the business by the son, she did act with her heart and not her head; and that she has now convinced herself that she did not give him authority to deal with the deed, when in fact she did. … In my opinion, it is more probable than not that she was aware, after the failure to obtain finance, that the son was going to hand over the deed as security to enable him to complete the sale of the business. His Honour added that, although Mr Glen Theodore had not given evidence, he was satisfied that he was manipulative and probably dishonest. General Principles The respondents support the declaratory relief in their favour given by the Court of Appeal by reliance upon a basic proposition. This may be stated in the terms used by Maitland in the thirteenth of his “Lectures on Equity”. He said that the Court of Chancery had enabled people to create equitable mortgages without any writing at all and added: An equitable mortgage (enforceable by an order for foreclosure or for sale) can be made by a deposit of title deeds if they were deposited with intent that the land which they concern shall be security for the payment of a debt. In the present case, there were no direct dealings between the appellant and the respondents but, the respondents submit, this provides no fatal objection to their case. They say the findings of fact establish two sufficient planks for their case. First, Mrs Theodore had the necessary intention to deposit the duplicate certificate of title as security for her son’s indebtedness under the Sale Contract and, secondly, to effectuate that intention she conferred an actual authority on her son, in broad terms encompassing his subsequent dealing with the duplicate certificate of title to procure settlement of the Sale Contract. These submissions should be accepted and the appeal dismissed. We turn to explain why this is so. Several preliminary matters are to be noted. First, given the findings as to the intention of Mrs Theodore, this is not a case which tests the proposition in some of the leading English texts that from a relationship of debtor and creditor and the delivery of title deeds the court will presume an intention to create a security, a presumption to be rebutted only by proof that the deposit was made on other grounds. However, it may be noted that this proposition does have the formidable support of Lord Macnaghten. In delivering the reasons of the Privy Council in Bank of New South Wales v O’Connor Lord Macnaghten said: It is a well established rule of equity that a deposit of a document of title without either writing or word of mouth will create in equity a charge upon the property to which the document relates to the extent of the interest of the person who makes the deposit. In the absence of consent that charge can only be displaced by actual payment of the amount secured. Before the fusion of law and equity a Court of Equity would undoubtedly have restrained the legal owner of the property from recovering his title deeds at law so long as the charge continued, and now when law and equity are both administered by the same Court if there be any conflict the rules of equity must prevail. Secondly, the term “equitable mortgage” is not used in the texts and the authorities with any single denotation. The nature of the security created must turn upon the intention of the party dealing with the assets to be subjected to the security and the nature of those assets. So it is accepted that a mortgage of an equitable interest, being an equity of redemption, can only be by way of an equitable mortgage, although described as a second mortgage of the land in question. In respect of a legal interest, under the general law an agreement to give a legal mortgage is described as an equitable mortgage. Subject to compliance with any statutory formalities, it may be treated in [8.20]

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Theodore v Mistford Pty Ltd cont. equity as if a legal mortgage had been granted and therefore as carrying with it the remedies, including foreclosure, incident to a legal mortgage. Hence the statement that while in theory the equitable mortgagee may call for a legal mortgage, in the great majority of cases the mortgagee rests upon its equitable rights. Lord Eldon LC said of the Court of Chancery that “an equitable title to a mortgage is here as good as a legal title”. In this way, by looking at the intent rather than the form, equity is able to treat as done that which in good conscience ought to be done. However, in the present appeal, debate as to whether the factual findings were consistent with an agreement between the appellant and the respondents that she would execute a legal mortgage (ie, a memorandum of mortgage in registrable form) would have been misplaced. The trial judge found that authority had been given by Mrs Theodore for her son to furnish the duplicate certificate of title as the immediately effective security required by the respondents for their completion of the Sale Contract on 22 July 1996. Their case thus is not to be approached as one of an agreement, supported by deposit of the title deeds, to give a legal mortgage. It was a transaction of this nature which was discussed by Knox CJ in Cooney v Burns, to which reference was made in argument. Further, the respondents accept that, there being no such agreement and no personal covenant by the appellant, their remedy is limited to recoupment from the sale proceeds, with no judgment against the appellant upon a personal liability to pay moneys. The principles respecting part performance developed in cases where s 4 of the Statute of Frauds was pleaded in answer to a suit for specific performance of an oral land sale contract. These principles were treated, at least by analogy, as applying to the enforcement of agreements to create legal and equitable securities. The analogy was imperfect for at least two reasons. First, as Lord Eldon LC complained, the deposit of title deeds by itself was an equivocal act, being referable also, for example, to a pledge only of those chattels. Secondly, as Higgins J later explained in Cooney v Burns, the nature of the acts which suffice for part performance differ in the two situations. Given the nature of the respondents’ case which does not found upon an executory agreement by the appellant to provide security, the matter of part performance need not further be considered. The appellant correctly submitted that a consequence of the respondents’ fixing upon her intention to create a security immediately effective upon completion is that attention is required not to s 59 but to s 11(1)(a) of the Property Law Act. Section 59 is concerned with contracts, and s 11(1)(a) with dispositions. Here, there was no writing satisfying par (a) of s 11(1). The Issues on the Appeal The appellant did not select as a battleground for the appeal the general assertion that in the face of s 11(1)(a), the provision respecting dispositions rather than contracts, there was no scope for equity to effectuate an intention to create an equitable mortgage of the Buderim land. The ultimate question, rather, was whether in the circumstances as found at trial, the respondents having completed the Sale Contract on the faith of the provision of the duplicate certificate of title, the appellant had been entitled in equity to the return of that instrument (or, as it happened, to the full proceeds of sale) without satisfying the secured indebtedness. This approach to s 11 of the Property Law Act and other Statute of Frauds descendants is consistent with what was said by Hope J in Last v Rosenfeld. His Honour observed: “No sooner had the Statute of Frauds been enacted in 1677 than the courts set about relieving persons of its effect in cases where it was thought that the legislation could not have been intended to apply. In general terms, it was said that the courts would not allow the Statute of Frauds to be made an instrument of fraud, and that it did not prevent the proof of the fraud. No doubt, as was said by Selborne LC in Maddison v Alderson in relation to one of the principles that was developed in this way, namely, the doctrine of part performance, this summary way of stating the principle, however true it may be when properly understood, is not an 602 [8.20]

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Theodore v Mistford Pty Ltd cont. adequate explanation, either of the precise grounds, or of the established limits, of the relevant doctrine. The general approach indicated by this summary statement did, however, spread into a number of fields where a statute requires writing”. Counsel for the appellant pointed to features of the evidence which might have supported findings other than those adverse to the appellant which were made at trial but, in the end, did not challenge that outcome. However, counsel submitted that several aspects of the law respecting this species of equitable mortgage dictated the conclusion that no such security had been created here. Counsel for the appellant emphasised the circumstance that the deposit of the duplicate certificate of title with Klar and Klar on 18 July 1996 (a Thursday) was made in advance of the completion of the Sale Contract on the following Monday, 22 July. At the time of that deposit the purchaser, Mobile Lab, had incurred no indebtedness to the respondents for the balance of the purchase moneys. The appellant thus relied upon authorities suggesting that the deposit must be to secure an advance made at that time, or in some circumstances made antecedently, and upon general propositions that equity does not order specific performance of a contract to make or take a loan of money, whether the loan is to be on security or not. The unpaid balance of the purchase price under the Sale Contract for this purpose is treated as if it were a loan at an interest rate of 8 per cent per annum. There is no occasion to consider the implications of these submissions. The distinction between 18 and 22 July is indecisive of any issue in favour of the appellant. There was but one business day between the receipt of the duplicate certificate of title by Klar and Klar on 18 July and settlement on 22 July. The respondents correctly submit that there was a change in the nature of the dominion over the duplicate certificate of title on 22 July. Before settlement the solicitors held it in safe custody on account of the appellant; thereafter, in effectuation of the appellant’s intention found at trial, the duplicate certificate of title was held as security for the balance of the purchase moneys. The presumption described above and said to arise from the delivery of title deeds may not readily accommodate what thereafter is alleged to be a third party security where the depositor is not the principal debtor. The present appeal concerns a third party security. But the respondents do not rely solely upon any such presumption in their favour. There thus is no occasion here to decide whether, as Templeman J considered in In re Wallis and Simmonds (Builders) Ltd, such a “general rule” or “general presumption” applies to a deposit of title deeds securing debt owing by a third party. Templeman J said in Wallis and Simmonds that in logic there could be no distinction between deposits to secure a first and third party indebtedness. The appellant criticised that statement. But, putting aside the question of a presumption, evidence of the dealings between the parties may lead to the conclusion that, as in this case, a third party security was provided. In Wallis and Simmonds itself there was detailed consideration of the evidence and Templeman J relied upon the presumption he favoured in order to resolve the issue of intention in favour of the giving of security. In the present case, no such reliance is necessary for the respondents to succeed. On the other hand, the close analysis by Bryson J of the evidence in Arnick Holdings Ltd v Australian Bank Ltd led him to conclude that the delivery of the title documents to the bank was for the limited purpose of an overall credit assessment of the account of the third party customer. Finally on this point, the terms of s 75 of the Act do not foreclose the possibility of the provision of third party security by deposit of title deeds. It was accepted in the nineteenth century that a surety might

[8.20]

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Theodore v Mistford Pty Ltd cont. take security for its obligations to the principal creditor, by deposit with the surety of title deeds by the party for whose benefit the guarantee was given. There is nothing in the terms of s 75 to limit the nature of the obligations secured by an equitable mortgage by deposit of a certificate of title.

Notes and Questions

[8.25]

1. An equitable mortgage is one where the interest of the mortgagee is equitable. Such an interest occurs most commonly where the mortgagor’s interest is equitable or where the mortgage transaction lacks the formalities for the transfer of a legal interest. Why is a second mortgage of land under the general law always equitable? 2. A mortgage transaction will not only fail to confer a legal title upon the mortgagee but will be unenforceable unless it is evidenced in writing so as to satisfy the Statute of Frauds. The deposit of title deeds is significant as it is universally regarded as a sufficient act of part performance to render enforceable an otherwise purely oral transaction, see the discussion of the means to overcome the lack of formalities [7.50]–[7.60]. An equitable mortgage is one where the interest of the mortgagee is equitable. The deposit of title deeds is significant as it is universally regarded as a sufficient act of part performance to render enforceable an otherwise purely oral transaction, see [7.50]–[7.60].

LEGAL MORTGAGES OF LAND: EQUITABLE PROTECTION FOR THE MORTGAGOR Campbell v Holyland [8.30] Campbell v Holyland (1878) 7 Ch D 166 Chancery Division JESSEL MR: I have no doubt that I ought to make the order asked for. The question in dispute is really whether a mortgagor can be allowed to redeem after an order of foreclosure absolute, and I think, on looking at the authorities, that no Chancellor or Vice-Chancellor has ever laid down that any special circumstances are essential to enable a mortgagor to redeem in such a case. Now what is the principle? The principle in a Court of Equity has always been that, though a mortgage is in form an absolute conveyance when the condition is broken, in equity it is always security; and it must be remembered that the doctrine arose at the time when mortgages were made in the form of conditional conveyance, the condition being that if the money was not paid at the day, the estate should become the estate of the mortgagee; that was the contract between the parties; yet Courts of Equity interfered with actual contract to this extent, by saying there was a paramount intention that the estate should be security, and that the mortgage money should be debt; and they gave relief in the shape of redemption on that principle. Of course that would lead, and did lead, to this inconvenience, that even when the mortgagor was not willing to redeem, the mortgagee could not sell or deal with the estate as his own, and to remedy that inconvenience the practice of bringing a foreclosure suit was adopted, by which a mortgagee was entitled to call on the mortgagor to redeem within a certain time, under penalty of losing the right of redemption. In that foreclosure suit the Court made various orders – interim orders fixing a time for payment of the money – and at last there came the final order which was called foreclosure absolute, that is, in form, that the mortgagor should not be allowed to redeem at all; but it was form only, just the original deed was form only; for the Courts of 604 [8.25]

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Campbell v Holyland cont. Equity soon decided that, notwithstanding the form of that order, they would after that order allow the mortgagor to redeem. That is, although the order of foreclosure absolute appeared to be a final order of the Court, it was not so, but the mortgagee still remained liable to be treated as mortgagee and the mortgagor still retained a claim to be treated as mortgagor, subject to the discretion of the Court. Therefore everybody who took an order for foreclosure absolute knew that there was still a discretion in the Court to allow the mortgagor to redeem. Under what circumstances that discretion should be exercised is quite another matter. The mortgagee had a right to deal with an estate acquired under foreclosure absolute the day after he acquired it; but he knew perfectly well that there might be circumstances to entitle the mortgagor to redeem, and everybody buying the estate from a mortgagee who merely acquired a title under such an order was considered to have the same knowledge, namely, that the estate might be taken away from him by the exercise, not of capricious discretion, but of a judicial discretion by the Court of Equity which had made the order. That being so, on what terms is that judicial discretion to be exercised? It has been said by the highest authority that it is impossible to say à priori what are the terms. They must depend upon the circumstances of each case. For instance, in Thornhill v Manning 1 Sim (NS) 451 at 454, Lord Cranworth said you cannot lay down a general rule. There are certain things laid down which are intelligible to everybody. In the first place the mortgagor must come, as it is said, promptly; that is, within a reasonable time. He is not to let the mortgagee deal with the estate as his own – if it is a landed estate, the mortgagee being in possession of it and using it – and then without any special reason come and say, “Now I will redeem”. He cannot do that; he must come within a reasonable time. What is a reasonable time? You must have regard to the nature of the property. As has been stated in more than one of the cases, where the estate is an estate in land in possession – where the mortgagee takes it in possession and deals with it and alters the property, and so on – the mortgagor must come, much more quickly than where it is an estate in revision, as to which the mortgagee can do nothing except sell it. So that you must have regard to the nature of the estate in ascertaining what is to be considered reasonable time. Then, again, was the mortgagee entitled to redeem, but by some accident unable to redeem? Did he expect to get the money from a quarter from which he might reasonably hope to obtain it, and was he disappointed at the last moment? Was it a very large sum, and did he require a considerable time to raise it elsewhere? All those things must be considered in determining what is a reasonable time. Then an element for consideration has always been the nature of the property as regards value. For instance, if an estate were worth £50,000, and had been foreclosed for a mortgage debt of £5,000, the man who came to redeem that estate would have a longer time than where the estate was worth £5,100, and he was foreclosed for £5,000. But not only is there money value, but there may be other considerations. It may be an old family estate or a chattel, or picture, which possesses a special value for the mortgagor, but which possesses not the same value for other people; or it may be, as has happened in this instance, that the property, though a reversionary interest in the funds, is of special value to both the litigants: it may possess not merely a positive money value, but a peculiar value having regard to the nature of the title and other incidents, so that you cannot set an actual money value upon it. In fact, that is the real history of this contest, for the property does not appear to be of much more money value – though it is of some more – than the original amount of the mortgage. All this must be taken into consideration. Then it is said you must not interfere against purchasers. As I have already explained, there are purchasers and purchasers. If the purchaser buys a freehold estate in possession after the lapse of a considerable time from the order of foreclosure absolute, with no notice of any extraneous circumstances which would induce the Court to interfere, I for one should decline to interfere with such a title as that; but if the purchaser bought the estate within twenty-four hours after the [8.30]

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Campbell v Holyland cont. foreclosure absolute, and with notice of the fact it was of much greater value than the amount of the mortgage debt, is it to be supposed that a Court of Equity would listen to the contention of such a purchaser that he ought not to be interfered with? He must be taken to know the general law that an order for foreclosure may be opened under proper circumstances and under a proper exercise of discretion by the Court; and if the mortgagor in that case came the week after, is it to be supposed a Court of Equity would so stultify itself as to say that a title so acquired would stand in the way? I am of the opinion it would not. Now I come to the circumstances of this case, and I must say they are very strong in favour of opening the foreclosure. As I said before, it is a sum of money in reversion, the title to which, no doubt, is to some extent in dispute, but which both parties are very desirous to possess for special reasons of their own. It appears to have a special value as well for the purchaser as the mortgagor. The intrinsic money value was thought by the parties at the time of the negotiations I am about to mention, to be really less than the mortgage debt; the mortgage money was carrying seven percent interest, and negotiations were entered into but the mortgagor – or the persons standing in the position of mortgagor – with the mortgagee not to redeem in terms, but to buy up the mortgagee for a less sum. Those negotiations were supposed by the mortgagor to have resulted in an agreement to purchase, and acting under that belief he did not attend at the day with the money to pay off the mortgage, but he came and told the mortgagee he was willing to pay the purchase-money for the mortgage and keep the property. Now, what happened in the meantime? The present purchaser, Mr Ford, being very desirous to acquire the property for a collateral object – I am not saying a wrong object, but a collateral object – had, before the time for foreclosure absolute had arrived, entered into a contract with the mortgagee to buy it. He was not a purchaser coming in even the day after foreclosure, but a purchaser coming in before foreclosure, and at that time of course he knew the property was redeemable. He bought a property certainly redeemable, for the day for redemption had not even arrived. That is the kind of purchase I am dealing with. He was aware on the day of redemption that it was not from unwillingness to redeem that the mortgagor failed to pay the money, but because the mortgagor was under the belief that he had acquired a right to take the property on paying less than the mortgage money, by reason of a contract of purchase with the mortgagee. What happened next? The mortgagor endeavoured by suit in Equity to enforce his contract to purchase. That came on for hearing before Vice-Chancellor Malins in July, and then the Vice-Chancellor decided that Mr Ford, the present purchaser, had the better title, and the mortgagor failed in enforcing his agreement for purchase with the mortgagee. On the 2nd of November, as soon as the Courts opened after the Long Vacation, the motion to revive the suit and enable the redemption motion to come on was made, and very shortly after that this motion was made which I have now to decide. I think, under these circumstances, that the mortgagor has been sufficiently prompt. I entirely agree with the various authorities which have been quoted, that reasonable promptness ought always to be shewn. I say reasonable promptness, because what is promptness is, as I have said, not an abstract proposition, but must depend on the circum-stances of the case. I think the mortgagor has been sufficiently prompt. I think the purchaser is not in a position to terrorise the Court as to the evils that would happen by opening a foreclosure after sale. As I said before, I by no means say that the fact of a sale would not be an important fact; it ought to weigh with the Court in opening foreclosure.

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Campbell v Holyland cont. I am of the opinion, however, that such a sale as this ought to have no weight whatever, and that under the circumstances the mortgagor is entitled to open the foreclosure on the usual terms, that is, on payment of principal, interest, and costs.

[8.35]

Notes

1. Equitable intervention to protect the mortgage is essentially provided by the right of redemption. Foreclosure is the corollary to redemption. Redemption entitles the mortgagor to get back the property at any time by payment of the mortgage debt plus interest plus costs. The mortgagor’s entitlement to redeem significantly burdens the mortgagee’s interest in the land. Foreclosure enables the mortgagee to hold the property free from the right of redemption. However the case above illustrates the limited nature of foreclosure. 2. In Australia the remedy of foreclosure has been rarely exercised, and with respect to Torrens system land is subject to considerable restrictions, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.335]–[7.350]. By contrast in the United States the remedy of foreclosure has remained significant and commonly financial institutions have limited recourse after foreclosure. Consequently borrowers whose debt exceeds the value of the mortgaged property may simply abandon the property. These factors were part of the sub-prime loans crisis. In Australia liability on the personal covenant to pay is a primary obligation and discharge of the debt is not inferred lightly (see [8.125]–[8.130].

Perry v Rolfe [8.40] Perry v Rolfe [1948] VLR 297 Supreme Court of Victoria FULLAGAR J read the following judgement: When this matter came before me, the only question outstanding between the parties was the question of costs. In order to determine this question, however it is necessary to examine the nature and course of the proceeding and the events which led up to it. By an instrument of mortgage dated the 15th May 1941 the plaintiff, Mrs Ethel Burdett Perry, mortgaged to Arthur Watkins Rolfe certain land under the Transfer of Land Act to secure the repayment of a loan of £765 with interest at the rate of 6% per annum reducible to 4%. The instrument provided for the payment of principal and interest by weekly sums, interest to be calculated with half-yearly rests. It was registered under the Act. By an agreement in writing made on the 2nd June 1941 it was agreed that interest should be paid in respect of the sum of £700 only. The covenant for weekly payments was not performed according to its tenor, but payments were made from time to time, and it is now common ground that on the 13th July 1946 a payment was made which had the effect of discharging in full the indebtedness of the plaintiff to Arthur Watkins Rolfe. Arthur Watkins Rolfe, however died on the 23rd July 1946 without having executed a discharge of the mortgage. The defendants Charles Mascotte Rolfe and George Arthur Rolfe are the executors of his will. Probate was granted on the 27th November 1946. The plaintiff requested the defendant executors to execute a discharge of the mortgage, and produced to them a note-book containing what purported to be receipts initialled by the deceased mortgagee for the full amount of principal and interest payable. On the 13th May 1947 the defendants’ solicitors informed the plaintiff’s solicitor by letter that they were unable to trace six [8.40]

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Perry v Rolfe cont. amounts totalling £143, alleged to have been paid. All amounts, except one of £38 said to have been paid in cash on the 4th December 1941, appear to have been paid by cheque. Later the plaintiff obtained the cheques and made them available for inspection by the defendants. On the 28th November the defendants’ solicitors informed the plaintiff’s solicitor by letter that a cheque for £30 appeared to have been paid into a trust account of the plaintiff herself, and another cheque for £29 into a bank account of the plaintiff’s mother. A third cheque for £19 was found to have been cashed, and a fourth for £30 was found to have been cashed, and a fourth for £3 10s had not been presented for payment. They declined to admit that payment in full had been made, and declined to execute a discharge. On the 3rd December 1947 the plaintiff paid the sum of £3 10s to the defendants, it being conceded that the cheque for this amount had never been presented by the deceased, and on the 17th December 1947 issued an originating summons by which she claimed (a) an account of what if anything, was due under the mortgage and (b) an order that upon payment of what, if anything, should be found due, the plaintiff should “be at liberty to redeem” the mortgaged premises and that the defendants should “execute a discharge of the said mortgage”. It may be noted at this stage that no question of any right to redeem had arisen, and no question as to the amount payable, which on any view was simply a matter of calculation. The only question which had been raised was the question whether or not certain sums had in fact been paid to the deceased in his lifetime. The affidavit filed in support of the original summons alleged payment in full and set out the history of the controversy which I have summarised above. … In a true “redemption suit” or “foreclosure suit” it is always, I think, the mortgagor’s equity of redemption that is in issue. The nature of the equity of redemption is analysed by Lord Parker in G & C Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 at 47-50. At pp 47-48 he said: Taking the simple case of a mortgage by way of conveyance with a proviso for reconveyance on payment of a sum of money upon a specified date, two events might happen. The mortgagor might pay the money on the specified date, in which case equity would specifically perform the contract for reconveyance. On the other hand, the mortgagor might fail to pay the money on the date specified for that purpose. In this case the property conveyed became at law an absolute interest in the mortgagee. Equity, however, did not treat time as of the essence of the transaction, and hence on failure to exercise what may be called the contractual right to redeem there arose an equity to redeem, notwithstanding the specified date had passed. Till this date had passed there was no equity to redeem, and a bill either to redeem or foreclose would have been demurrable. Two observations may be made on this passage. In the first place, if the former of Lord Parker’s two events happened, it would be a misuse of terms to refer to the mortgagor’s suit for specific performance as a redemption suit. One way of making this clear is to say that every redemption suit involves as its complement the possibility of a foreclosure suit, and obviously there can be no foreclosure suit until the date for payment has passed and there is an equity of redemption capable of being foreclosed. In the second place, if the former of Lord Parker’s two events happened, it has never, I think, been suggested that the mortgagee would be entitled prima facie to his costs of the mortgagor’s suite for specific performance. In such a suit costs would be in the discretion of the Court, and prima facie, one supposes, would follow the event. And, whoever might be held entitled to costs, the order would be an ordinary direct order that A pay B’s taxed costs of the suit. In a true redemption suit, on the other hand, the position is quite different. Here the mortgagor is not merely seeking an equitable remedy for the enforcement of a legal right, but is seeking the intervention of equity to relieve him from the legal consequence of a failure to perform a legal duty. Clearly he must pay all reasonable expenses which are fairly incidental to the obtaining of this relief. So Lord Eldon in Detillin v Gale [1802] 7 Ves 583 at 584-5, said: 608 [8.40]

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Perry v Rolfe cont. The owner coming to deliver the estate from that incumbrance he himself put upon it, the person having that pledge is not to be put to expense [sic] with regard to that; and so long as he acts reasonably as mortgagee, to that extent he ought to be indemnified. The basis of the whole conception seems to be that the mortgage is a security not only for principal and interest but for all expenses reasonably and properly incurred by the mortgagee for all protection and preservation of his security. So all costs reasonably incurred for the purpose of preserving the security are added to the amount secured: Dryden v Frost [1838] 3 My & Cr 670 at 675. In Cotterell v Stratton [1872] LR 8 Ch App 295 at 302, Lord Selbourne, in a passage following immediately on that which is quoted above, says: The contract between mortgagor and mortgagee, as it is understood in this Court, makes the mortgage a security, not only for principal and interest, and such ordinary charges and expenses as are usually provided for by the instrument creating the security, but also for the costs properly incident for foreclosure or redemption. The difference between a suit for specific performance of a mortgagee’s contractual duty to reconvey on the one hand and a suit for redemption on the other hand is clearly revealed and emphasised by the character of the order relating to costs in each case. In the former case, as I have said, the order is simply a direct order that A or B pay the costs of the action, and the order is enforceable by execution in exactly the same way as any other judgement of the same kind. But, in the latter case, the payment of the mortgagee’s costs, if he is held entitled to them, is merely made a condition of redemption. The ordinary form of a redemption decree, like the ordinary form of a foreclosure decree, creates no personal liability in the mortgagor, the order is not enforceable by execution. The position created is simply that the mortgagor, in order to redeem, must pay the costs as well as the principal, interest, etc. In Ex parte Fewings; In re Sneyd [1883] 25 Ch D 338 at 346, Cotton LJ said in the course of argument: “It does not follow that costs which would be allowed as mortgagee’s costs on the redemption of the mortgage would be a debt due by the mortgagor.” And in the course of his judgement, at 532, he said: No doubt, if the debtor, in his character of mortgagor, claimed to redeem the mortgage, the Court would not grant him that which originally was an indulgence, a departure from the strict tenor of his legal right, without imposing upon him the condition of paying the mortgagee, not only the debt which he had contracted to pay by his covenant, but any expenses which had been properly incurred by the mortgagee in her position as such. But that is an entirely different thing from saying that an action of debt could be maintained by the mortgagee against the mortgagor for those expenses. It is said that the mortgagee’s right in a redemption action is founded on an implied contract by the mortgagor to pay these costs, but I am of the opinion there is no such contract, but as a condition of redemption that a Court of Equity imposes on the mortgagor the terms of paying all costs properly incurred by the mortgagee for the purpose of protecting the estate or himself as mortgagee. Lindley LJ and Fry LJ agreed with this judgement. In Wales v Carr [1902] 1 Ch 860 Farwell J was dealing with the case of a mortgagee’s solicitor’s costs of negotiating the loan and preparing the mortgage deed (costs incurred before the completion of the security), and he held that these constituted a simple contract debt at common law recoverable by the mortgagee from the mortgagor but not secured by the mortgage. He distinguished the case of a mortgagee’s costs of a redemption suit, and at 862 said: There are certain costs, charges, and expenses not recoverable at common law, but which in a proper case are given in Chancery as a term of redemption; that is to say, the mortgagee’s estate having become absolute at law, the mortgagor is allowed to redeem only on terms. As soon as this position is thus understood, it becomes plain, in my opinion, firstly, that the proceeding before me is not a redemption suit in any real sense, and secondly, that it is impossible to maintain that the mortgagee has any prima facie “right” to receive his costs of the suit. The mortgagor [8.40]

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Perry v Rolfe cont. is not seeking relief from forfeiture at law. He is seeking to enforce a right, which, though doubtless equity alone can give a satisfactory remedy, is really a legal right. It may be a contractual right, arising by implication from the terms of the Transfer of Land Act and especially s 163. In either case it is a legal right. How can a mortgagee say that the Court must or should impose, as a condition of giving effect to that legal right, an obligation to pay the mortgagee’s costs? It may of course, be just in any particular case to order payment of the mortgagee’s costs. But it is a matter of discretion, as in any other proceeding, and not of prima facie right. And, if such an order is made, it will normally be a direct order to pay: payment will not be imposed as a condition. I think, indeed, that there can be no such thing as a true redemption suit in the case of a mortgage under the Transfer of Land Act. And this was the view of Stawell CJ in Greig v Watson [1881] 7 VLR (Eq) 79. There the proceeding seems to have been in form by way of a bill for redemption, and the learned Chief Justice made a decree, as I propose to make a decree here, though the report does not reveal its precise form. But, after explaining at 82 the true nature of a redemption suit in language which reminds one of what Lord Parker said in Krelinger’s Case [1914] AC 25, and what Cotton LJ said in Ex parte Fewings; In re Sneyd [1883] 25 Ch D 338, he goes on to point out that under the Act there can be no foreclosure suit. There is a remedy given by what are no ss 161 and 162 of the Act of 1928, which is called “foreclosure” and which converts a charge into ownership. But no suit for foreclosure can be brought in the Courts. Conversely, there is no equity of redemption, because under the statute there is a legal right to redeem at any time, and so there can be no suit for redemption in the old sense. And rules which are appropriate and understandable in a redemption suit have no application in a proceeding to enforce such a right. For caution’s sake I repeat that this does not mean that a mortgagee in such a case as the present may not be held entitled to some or all of his costs. An account may be necessary, and it may well be just that the mortgagee should receive the costs of the account. But it is, in my opinion, a matter of discretion, as in any ordinary case. A right which exists in a redemption suit does not exist in a proceeding which is not a redemption suit but a suit to enforce a legal right. If it is, as I think it is, a matter of discretion to be exercised judicially, I feel no great difficulty as to the proper order in this case. The matter is to be treated as one in which the plaintiff has been wholly successful, and I can see no sufficient reason why the plaintiff should not receive the whole of her costs.

Re Forrest Trust [8.45] Re Forrest Trust [1953] VLR 246 Full Court of the Supreme Court of Victoria HERRING CJ read the following judgment: This originating summons, which was referred to this Court by the order of Martin J, raises two questions, first of all whether s 300 of the Property Law Act 1928 applies to Transfer of Land Act mortgages of land under the Act, and secondly whether, if it does, the right and title of the mortgagor to the said land is extinguished in cases in which that section is applicable. The essence of redemption would thus seem to be, whether it takes place in or out of Court, the fulfilment by the mortgagor of his obligations under the mortgage, that is to say payment of the moneys due thereunder, followed by whatever is necessary on the part of the mortgagee to free the land itself and the mortgagor in the use and enjoyment of it, to use the words of Lord Macnaghten in Noakes & Co Ltd v Rice (supra). This being so there is no reason for limiting redemption to the case where the charge is effected by means of a conveyance of the legal estate to the mortgagee, and equity found none. Thus a redemption suit was, until modern times, the appropriate method for a mortgagor to take in order to recover his title deeds, where he had merely charged his property with 610 [8.45]

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Re Forrest Trust cont. payment to the mortgagee of a sum of money by their deposit – Bank of New South Wales v O’Connor (1889), 14 App Cas 273. In such a case the mortgagee took no interest at law in the property charged, and the mortgagor’s right to redeem was “merely the right to have the property freed from the charge on payment of the moneys charged thereon” – Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25, per Lord Parker of Waddington, at 52. When the Legislature introduced the statutory mortgage under the Transfer of Land Act, it took the final step in the movement towards hypotheca that the Court of Chancery was unable, by reason of its limited jurisdiction, to take, and introduced what was practically the Roman hypotheca with the addition of registration. For it introduced a registered charge to take effect as a security, which conferred on the creditor merely a group of powers to secure the money lent, such as to sell, to take possession, etc, whilst leaving the owner what he is meant to be, owner subject to his fulfilling his obligations. The group of powers thus conferred included the power of sale, that had become an almost universal feature of mortgages under the general law at the time the Act was first introduced, and the powers and rights, which a mortgagee in such a mortgage usually acquired by reason of the conveyance of the mortgagor’s land to him, see, for example, such sections as 151, 152 and 156. The general law mortgage was thus obviously very much in the draftsman’s mind when the relevant sections were penned, and they are obviously addressed to a profession well acquainted with equity’s contribution to the law of mortgage under the general law, and well able, where the Act was silent, to supply from that contribution a method of working out and adjusting the mutual rights of mortgagee and mortgagor. Thus, to take one example, provision is made, as we have seen, to enable the mortgagee, on default by the mortgagor, to enter into possession, but not a word is said as the basis on which the mortgagee in possession should account. Here clearly recourse must be had to the doctrines of equity on the matter. See, too, the remarks of Higgins J in Fink v Robertson (1907), 4 CLR 864 at 891, and Cape v Trustees of Savings Bank of NSW (1893), 14 LR (NSW) (Eq) 33 at 204, where the equitable rule that a mortgagor must give six months’ notice or interest in lieu thereof on payment off, was held applicable to mortgages of land under the Real Property Act of New South Wales. The nature of a mortgage under the Act being what I have described, it necessarily followed that there was inherent in it a right on the part of the mortgagor, upon his fulfilling his obligations under the mortgage, to have the land freed from the mortgage and from all the powers and rights of the mortgagee, which formed a substantial curtailment of the mortgagor’s dominion over the land. This is a right to redeem in the sense in which equity understood that term, and the effect of its exercise, by payment off of the money secured by the mortgage, is aptly described in the last sentence of the passage set out above from the judgment of Lord Macnaghten in Noakes v Rice (supra). The proceedings that a mortgagor under the Act can bring against his mortgagee are, I think, the same in essence as those that a mortgagor under the general law can bring against his, viz, proceedings to redeem the mortgage. The right to redeem that is being enforced may not be derived from the same source in each case, nor may the relief required to “free the land itself and the owner of the land in the use an enjoyment of it … to all intents and purposes as if the land had never been made the subject of the security”, to use the words of Lord Macnaghten (in Noakes & Co Ltd v Rice (supra)), to be the same in each case, but in each case what equity does is to free the land and the owner in the way described upon the mortgagor fulfilling his obligations under the mortgage. And though what is required for this purpose appears very different in the two cases, viz, a reconveyance in one case and the discharge of the mortgage in the other, yet the result achieved is substantially the same. The intervention of equity in mortgages under the general law led to the mortgagor being considered the owner of the land, though he had parted with the legal estate, such ownership being subject to the rights and powers over the land which the mortgagee had for the purpose of enforcing his security. These rights and powers a mortgagee of land under the Act has by virtue of the statutory provisions, though he does not acquire the legal title, and the mortgagor’s dominion over the land is restricted [8.45]

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Re Forrest Trust cont. accordingly. A reconveyance in the one case and a discharge of the mortgage in the other destroy the rights and powers of the mortgagee, and in each case restore to the mortgagor his dominion over the land. The words “a suit to redeem the mortgage” seem equally apt to describe the proceedings referred to in either case. In fact I am at a loss to know how else they could be more appropriately described. There is, to my mind, no magic in the words, nor for that matter in the words “redemption suit”, which I would consider equally applicable to the proceedings in either case. The fact that in one case there is a forfeiture at law, whilst in the other there is not, does not, in my opinion, affect the essential nature of the proceedings. Once equity decided that the mortgage transaction should take effect as a security, the forfeiture that took place at law lost its sting, and (apart from agreement, lapse of time, or purchase at a sale of the mortgaged property) it was only by means of an order of the Court Equity itself, an order absolute for foreclosure, that the land became in any real sense the property of the mortgagee and then by a title new accrued – Heath v Pugh (supra) per Lord Selbourne LC, at 360-361. Nor do I think it material that a suit for foreclosure is not open to a mortgagee in mortgages under the Act. It is, of course, true that as a rule, in mortgages under the general law, the right to redeem is correlative to the liability of being foreclosed. But not ever here was this rule general application. Equity was, if anything, realistic and when, owing to the unsatisfactory nature of foreclosure as a means of realising a mortgage of land, conveyancers began to make use of mortgages in the form of a trust for sale, equity felt no difficulty in allowing the mortgagor to redeem though, owing to the nature of the mortgage, it felt bound to hold that he could not be foreclosed – Scweitzer v Mayhew (1862), 31 Beav 37; Kirkwood v Thompson (1865), 2 Hem & M 392 at 402; Locking v Parker (1872), LR 8 Ch 30; Re Alison (1879) 11 Ch D 284 at 297. So, too where the principal sum secured by the mortgage is to be paid off by instalments, the mortgagor may redeem though the mortgagee cannot foreclose as long as the instalments are punctually paid – Daniell’s Chancery Practice (8th ed) at p 1232. The views I have expressed are supported, I think by the Rules of the Supreme Court 1938, see Order LV, rule 5a, and also by the case of National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879), 4 App Cas 391, where Molesworth J, the Full Court and the Privy Council all seem to have been as prepared to treat a suit by a mortgagor of land under the Act as a common redemption suit. This case does not seem to have been brought to the notice of Stawell CJ in Greig v Watson (supra) or of Fullagar J in Perry v Rolfe (supra). The remarks of their Lordships on 412 would seem relevant to the decision in the latter case. For these reasons I have come to the conclusion that the appropriate legal process to recover possession that is open to a mortgagor of land under the Act, whose mortgagee has entered into possession under his statutory power so to do, is covered by the words “a suit to redeem the mortgage” within the meaning of these words in s 300 of the Property Law Act 1928. … [Gavan Duffy and Dean JJ agreed.]

[8.50]

Notes

1. The above two cases are concerned with different aspects of the nature of a mortgage under the Torrens System as opposed to a general law mortgage. A Torrens System mortgage is often described as representing in form the substance of a general law mortgage. What is emphasised in Perry v Rolfe [1948] VLR 297 is the change made to the form of the mortgage under the Torrens System. The mortgagee does not become the owner of the land but acquires a legal charge over the land. The mortgagor remains the 612 [8.50]

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legal owner of the land subject to the rights of the mortgagee. Consequently the Torrens System mortgagor is not dependent in the same way as under the general law upon equitable intervention to enable the mortgagor to redeem. In most cases the mortgagor will be discharging the mortgage through performance of the express contractual obligations. On the other hand the discharge of the mortgage remains consistent with the concept of redemption in the sense that the land is freed from the mortgagee’s interest. As will be seen later in this chapter, equitable protection for redeemability still provides significant rights for a mortgagor. 2. Although a mortgage of a fee simple interest is the most common mortgage of land, any interest in land which has value is able to be mortgaged. A leasehold interest for a period of years is a common business asset and thus mortgaged to support a loan to the business. Difficult problems can arise as to the rights of a lessee’s mortgagee as against the lessor to obtain and retain possession and as to the mortgagee’s liability to the lessor for rent; see The Church of England Collegiate School of St Peter v Chesser House Pty Ltd (1993) ANZ ConvR 110 and Carnovale v State Bank of NSW (unreported, NSW Supreme Court, 3 November 1992); referred to in Carnovale v Pollack [1995] NSWSC 133.

NATURE OF EQUITABLE MORTGAGES OF LAND World Tech Pty Ltd v Yellowin Holdings Pty Ltd [8.55] World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1993) ANZ ConvR 121 Supreme Court of New South Wales McLELLAND J: Mr Westoe asserts that the sending of the certificate of title to Centech was done without his knowledge or authority. There is conflicting evidence as to whether at the meeting of 8 December 1986 the immediate dispatch to Centech of the “title deed” to the Tabulum land was agreed to by Mr Westoe, or even discussed. I am not persuaded that any of the participants in that meeting, all of whom gave evidence, has a clear recollection of that matter. The evidence of Miss Joubert on that, and other matters, was particularly vague. However there was admitted in evidence under s 14B of the Evidence Act 1898 certain statements in a document signed by, among others, Miss Joubert, in the form of a letter to Mr Chandler dated 25 February 1987 reading as follows: This is to inform you that we the Directors of XL Computing Pty Ltd confirm that we were present at a Directors’ Meeting when Yellowin Holdings Pty Ltd through its Director Edward Westoe guaranteed to make available as security to your company a Bill of Mortgage over land near Tabulum in Northern NSW, Certificate of Title Volume 15129, Folio 196. This Bill of Mortgage was to secure repayment of outstanding amounts owing to WorldTech Pty Ltd for the supply of computer diskettes. Mr Westoe rang Mr Chandler in Brisbane to confirm that he had the consent of the shareholders in both XL Computing Pty Ltd and Yellowin Holdings Pty Ltd to allow this land to be used as security for both the outstanding debt and future supply of stock. He informed Mr Chandler that the title document would be sent to him in the next few days and for Mr Chandler to arrange to have drawn up the relevant mortgage documents. It was pointed out to Mr Westoe a Director of Yellowin Holdings Pty Ltd that this would be of considerable benefit to Yellowin Holdings Pty Ltd as Yellowin Holdings Pty Ltd was a shareholder in XL Computing Pty Ltd and this security would allow XL Computing Pty Ltd to trade out of its current cash flow crisis. This document was prepared following a visit by Mr Chandler to Miss Joubert in Sydney on the same day, at a time when Centech was still supplying goods to XL on credit, but the mortgage document (which had been prepared by Centech’s solicitors and sent to Yellowin at the end of January [8.55]

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World Tech Pty Ltd v Yellowin Holdings Pty Ltd cont. 1987 for execution) had still not been executed by Yellowin. Miss Joubert therefore had a strong motivation to assure Mr Chandler that all was well, and the accuracy of the statements in this document may be suspect for this reason. On the other hand it is the most closely contemporaneous documentary record available of what occurred on 8 December 1986. I therefore conclude that on 8 December 1986 Yellowin, through Mr Westoe, authorised the dispatch of the certificate of title to Centech. I am not satisfied however that Mr Westoe gave any authority to Miss Joubert to bind Yellowin to the inclusion in the amount to be secured, of interest at any particular rate. The question then arises as to whether the sending of the certificate of title to Centech with Yellowin’s authority gave Centech an immediate security over the Tabulum land. This depends upon the intention of the parties, either proved or presumed. It is clear that one purpose of sending the certificate of title to Centech was to facilitate the preparation by Centech’s solicitors of an instrument of mortgage for execution by Yellowin. In the case of an intended mortgage to secure an existing indebtedness, as in the present case, and not merely moneys to be advanced or credit to be extended in the future, there is a presumption that the deposit of muniments of title for the purpose of preparing a legal mortgage is intended to have immediate effect as part of the security, and creates an equitable mortgage (Keys v Williams (1838) 3 Y and C 56 at 61, 10 ER 612 at 614; Sun Tai v Attorney General of Hong Kong (1987) 1 WLR 948 at 950 (PC); and see Ex Parte Bruce (1813) 1 Rose 374 and Hockley v Bantock (1826) 1 Russ 141, 38 ER 55). The presumption relating to the creation of an equitable mortgage by the deposit of muniments of title extends to the deposit by a person other than the debtor (Re Wallis and Simmonds (Builders) (1974) 1 WLR 391). Furthermore the evidence does not establish that facilitation of the preparation by Centech’s solicitors of an instrument of mortgage for execution by Yellowin was the sole purpose for which Yellowin (through Mr Westoe) authorised the dispatch of the certificate of title to Centech. The continuation of supplies of goods from Centech was regarded by the directors of XL (including Mr Westoe) as a matter of considerable urgency. XL had a contract to supply such goods to Grace Brothers and it was considered a matter of high importance that that supply be maintained for the purpose of the pre-Christmas trade. It is I think a reasonable inference from the evidence that the directors of XL, including Mr Westoe, regarded the sending of the certificate of title to Centech as a material indication to that company of XL’s and Yellowin’s good faith in the matter of the intended mortgage, so that Centech would continue supplying goods to XL on credit during the critical pre-Christmas period, and that Centech (through Mr Chandler) so regarded it. For the above reasons I consider that on or about 16 December 1986 Centech acquired an equitable mortgage over the Tabulum land to secure payment by XL of the unpaid balance owing by XL to Centech for goods supplied together with amounts to become due in the future for goods supplied. I do not however consider that the moneys secured by that equitable mortgage extend to include interest on the unpaid purchase price of goods supplied or to be supplied. The evidence shows that the amount, payment of which is secured to Centech under the equitable mortgage, is $61,357.23. Since the equitable mortgage is purely a security interest the rights of Centech are confined to enforcement of the security against the Tabulum land. There is no right of action against Yellowin personally for recovery of the debt.

Ryan v O’Sullivan [8.60] Ryan v O’Sullivan [1956] VLR 99 Supreme Court of Victoria 614 [8.60]

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Ryan v O’Sullivan cont. DEAN J: read the following judgment: Motion for judgment in default of defence. The statement of claim was endorsed on the writ and the writ required pleadings. Defendant entered an appearance but has made default in delivering a defence. Plaintiff is therefore entitled to judgment upon the bases that the allegations in the statement of claim are established. The statement of claim alleged that defendant was the registered proprietor of certain land under the Transfer of Land Act, identified by reference to its certificate of title. It was further alleged that by way of equitable mortgage the defendant deposited the certificate of title to the land with the plaintiff as security for the repayment of the sum of £450 advanced by plaintiff to defendant in or about September 1947 to enable the defendant to purchase the land. It was alleged that plaintiff had demanded repayment of the amount of £450 with interest but that defendant had refused to repay the amount. Finally, it was alleged that plaintiff still held the certificate of title. Plaintiff claimed a declaration that the land was subject to an equitable mortgage in favour of the plaintiff; that the land was charged with repayment of the sum of £450 and interest; he also claimed accounts and an order that the mortgage be enforced in default of payment by foreclosure. I felt some doubt as to several matters and reserved consideration of the motion. The first question was whether the remedy of an equitable mortgagee of land who desired to enforce his security was by an order for foreclosure or an order for sale. By s 91 (2) of the Property Law Act 1928 it is provided that in any action for foreclosure of any mortgage the Court may on the request of the mortgagee of any person interested in the right of redemption direct a sale. But in this case there is no such request, and I need not refer further to this section. For some time the question whether the remedy of the mortgagee in equity was sale or foreclosure appears to have been unsettled. See Ashburner on Mortgages (2nd ed), pp 412-413; Ashburner on Equity (2nd ed), p 195. In Bank of Victoria v Cozens (1864), 1 WW & A’B (Eq) 93, and in White v Hunter (1868), 5 WW & A’B (Eq) 178, Molesworth J considered that a sale was the appropriate relief. But it seems now to be settled that the proper order is for foreclosure – James v James (1873), LR 16 Eq 153; National Bank of Tasmania Ltd (in liquidation) v McKenzie [1920] VLR 411 at 425, per Cussen J in a judgement with which Schutt and Mann JJ agreed. See also Seton on Decrees (6th ed), p 2052. I hold, therefore, that plaintiff is entitled to an order for foreclosure. The next question is where the principles of equity formerly applicable in the case of an equitable mortgage of land under the Transfer of Land Act. It is now settled that an equitable mortgage of land under the Act can be effected by a deposit of the certificate of title as security for a debt – London Chartered Bank of Australia v Hayes (1871), 2 VR (Eq) 104; Patchell v Maunsell (1881), 7 VLR (Eq) 6; Connolly v Noone [1912] St R Qd 70 (FC). But there remains the further question whether the procedure contained in s 79 of the Transfer of Land Act 1954 governing the foreclosure of registered legal mortgages applies to the foreclosure of equitable mortgages. Plaintiff does not allege that such procedure has been observed. The matter was raised by Madden CJ in Charters v The Cosmopolitan Land Banking Co Ltd (1902), 28 VLR 251, but an order for foreclosure was made by consent. If the basis on which equitable mortgages by deposit are enforced in equity be, as has been said, that the Court treats the deposit as evidence of an agreement to create a legal mortgage and treats such mortgage as having been duly executed, then it is difficult to see how the equitable mortgagee can obtain a foreclosure order except by the procedure laid down in the Transfer of Land Act 1954, s 79. In the first place, I do not think it is true to say that an equitable mortgage by deposit of title deeds carries an implied obligation on the part of the mortgagor to execute a legal mortgage, notwithstanding what was said by Sir Charles Pepys Mr in Parker v Housefield (1834), 2 My & K 419; 39 ER 1004, and by other Judges whom he quotes. See Ashburger on Equity (2nd ed), pp 194-5; Fisher and Lightwood’s Law of Mortgage (7th ed), p 18; Ashburner on Mortgages (2nd ed), pp 23-24; Coote on Mortgages (9th ed), p 88. In Sporle v Whayman (1855), 20 Beav 607; 52 ER 738, Sir John Romilly Mr [8.60]

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Ryan v O’Sullivan cont. refused to decree the execution of a legal mortgage in the absence of proof that this was intended by the parties. I think the obligation on the mortgagor is to all that is necessary to vest the legal title in the mortgagee in case of default, and to give the mortgagee all the rights he would have if the mortgage were legal. See Pryce v Bury (1853), 2 Drew 41. The remedy of the mortgagee should correspond as nearly as possible with those of legal mortgagees. In the next place, the Court has no jurisdiction in the case of a registered legal mortgage to make a decree for foreclosure. Foreclosure in such a case is the result of an order made by the Registrar of Titles under s 79 after the statutory provisions have been complied with. The only relief which the Court can give is by a decree for foreclosure in accordance with the accepted practices of Courts of equity, and such as decree was made by Cussen J in Beath v Armstrong (1910), 16 ALR 581. In Tietyens v Cox (1916), 17 SR (NSW) 48 at 55, Harvey J said: “The new practice as to foreclosure, which especially provided for registered interests under the Act, has left the old practice as to foreclosure undisturbed so far as equitable interests are concerned.” I therefore think I should make the order sought.

[8.65]

Notes

1. As discussed above [8.25], under the general law the equitable mortgage by way of deposit of title deeds was very common. The mortgage was equitable in the sense that the interest of the mortgagee was equitable; see Theodore v Mistford Pty Ltd (2005) 221 CLR 612; [2005] HCA 45 (at [8.20]). The above case recognises that the practice has continued under the Torrens System. The practice is recognised in the Real Property Act 1886 (SA), s 149. Often an equitable mortgagee of Torrens System land will hold a registrable instrument which can be registered in the event of default. This step overcomes substantive and procedural difficulties confronting an equitable mortgagee of Torrens System land particularly if a sale is contemplated. 2. Indeed two of the most common property transactions recognised by the common law, the lease and the mortgage were often purely oral dealings with the fundamental aspects of the deal (entry into possession and payment of rent, and loan plus handing over of title documents) providing sufficient acts of part performance to overcome any objection based on the Statute of Frauds. Both the requirements for a deed and those for written evidence were directed to substantiation of the existence of the transaction. Modern consumer legislation has the different aim of making obligations clear to the weaker party and has had to impose formal requirements which have not usually affected the validity of the transaction (see [8.105] and [15.20]).

PRIORITIES AMONGST MORTGAGEES OF LAND AND GOODS Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [8.70] Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 Supreme Court of New South Wales KEARNEY J: These proceedings raise a question as to priorities between mortgagees arising from the operation of the rule against tacking where a first mortgage is expressed to cover further advances and 616

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Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd cont. a second mortgage intervenes before a further advance is made under the first mortgage. The ultimate points on which the case turns are, first, whether the plaintiff first mortgagee is precluded from tacking such further advance by constructive notice only of the defendant’s second mortgage; and, secondly, whether the lodgement of a caveat by the defendant to protect its interest as second mortgagee constitutes such constructive notice. The parties have been able to reach agreement as to the relevant facts. It appears that at all material times one Warden was the registered proprietor of land being the whole of the land in Land Grant vol 12406, fol 167, being the property situate at and known as 46 Kokoda Crescent, Beacon Hill. By a memorandum of mortgage dated 5 February 1980 and registered number R682093, Warden mortgaged that property to the plaintiff to secure the repayment of the sum of $56,000 with interest “and all moneys mentioned herein …” Such mortgage contained cl 17 the relevant terms of which are: That … the mortgagor will upon demand pay to the mortgagee all moneys lent paid or advanced to or on account of the mortgagor by the mortgagee or which may be or become owing by the mortgagor to the mortgagee on any account whatsoever … and the same shall be a charge upon the mortgaged premises and be deemed moneys hereby secured and bear interest accordingly. The mortgage also contained cl 16, the relevant provisions of which are as follows: “That with respect to the mortgaged premises the mortgagor will not without the written consent of the mortgagee … execute any further mortgage charge or other encumbrance …” On 3 April 1981 the defendant lent to Warden the sum of $22,000 pursuant to a memorandum of mortgage charging the Beacon Hill property with repayment of such sum and interest thereon. The defendant’s mortgage instrument referred to the plaintiff’s registered mortgage as a prior incumbrance. The defendant’s mortgage has not been registered, but the defendant lodged, and there was entered on 9 July 1981, caveat number S562388 recording the defendant’s interest under its mortgage as an estate or interest “as second mortgagee under mortgage dated 3 April 1981”. At the time of the defendant’s mortgage, obviously the defendant knew that the property in question was subject to the plaintiff’s mortgage. The defendant did not give notice to the plaintiff of the defendant’s mortgage, nor of lodgment of the defendant’s caveat. On 23 December 1981 the plaintiff lent $128,000 to a company, which loan was secured by a bill of mortgage given by such company to the plaintiff over certain land in Queensland. Simultaneously Warden and another person gave to the plaintiff a joint and several guarantee to secure repayment by the mortgagor company to the plaintiff of all moneys due under the Queensland mortgage. Before taking the guarantee from Warden, the plaintiff did not search at the office of the Registrar-General against the title of the Beacon Hill property the subject of the plaintiff’s registered mortgage and the defendant’s unregistered mortgage. At the time of the mortgage advance by the plaintiff to the company in Queensland and of obtaining such guarantee, the plaintiff was unaware of the defendant’s mortgage and of the defendant’s caveat. It is common ground between the parties that the taking of the guarantee was analogous or equivalent to the making of a further advance. The company defaulted under its Queensland mortgage, and the plaintiff as mortgagee sold the Queensland property. A substantial deficiency exceeding $80,000 remained outstanding after such sale. Thereafter the plaintiff made demand upon Warden for payment under his guarantee, but Warden has failed or neglected to make any such payment to the plaintiff. Warden further made default under his first mortgage to the plaintiff, and the plaintiff in January 1984 in exercise of its power of sale sold the Beacon Hill property. There remains after payment of the amount secured under the plaintiff’s first mortgage and expenses of sale, a surplus of $19,315.23. By a consent order this amount has been paid into court to abide the result of these proceedings. [8.70]

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Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd cont. The plaintiff claims to be entitled to this surplus as a sum which has “become owing by the mortgagor to the mortgagee on any account whatsoever” within the terms of cl 17 of the plaintiff’s mortgage. The defendant by its cross-claim claims to be entitled to such surplus upon the basis of the equitable rule against tacking, resulting from the fact of the plaintiff’s entitlement under Warden’s guarantee arising after the plaintiff had received notice of the defendant’s second mortgage. The defendant invokes the principle declared by the House of Lords in Hopkinson v Rolt (1861) 9 HL Cas 514, 11 ER 829, to the effect that a mortgagee to whom a property is mortgaged for advances already made cannot, after receiving notice of a second mortgage, have priority over the second mortgagee for further advances under his first mortgage even if the first mortgage, to the knowledge of the second mortgagee, is expressed to be a security for further allowances which may be made. This principle has since been adopted and applied universally as appears from the various authorities referred to in the judgment of Holland J in Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 298, 299. It emerges from these various authorities that the principle so enunciated and applied is, in the words of Holland J (at 300), “founded on principles of justice and fair dealing as between the mortgagor and the mortgagees, and as between the competing mortgagees”. It further follows from the decision of Holland J that this principle is applicable in respect of land under the Real Property Act 1900. The rationale of the principle is summarised in the speech of Lord Blackburn in Bradford Banking Co Ltd v Henry Briggs Son and Co Ltd (1886) 12 App Cas 29 at 36, 37, where his Lordship said: As I understand it, the principle of Hopkinson v Rolt 9 HLC 534-536 is explained by Lord Campbell then Lord Chancellor, and it is this: The owner of property does not, by making a pledge or mortgage of it, cease to be owner of it any further than is necessary to give effect to the security which he has thus created. And if the security is, as that in Hopkinson v Rolt 9 HLC 514 was, a security for present and also for future advances, the pledgee or mortgagee, though not bound to make fresh advances, may, if he pleases, do so, and will, if the property at the time of the further advance remains that of the pledgor, have the security of that property. But the mortgagor (unless there is something to make it against conscience in him to do so) may cease to take further advances from the first mortgagee, and borrow money from anyone else ready to lend it on the security of that property remaining in him not already pledged to the first, subject to the priority of the first pledgee for advances made or begun to be made. The first mortgagee is entitled to act on the supposition that the pledgor who was owner of the whole property when he executed the first mortgage continued so, and that there has been no such second mortgage or pledge until he has notice of something to shew him that there has been such a second mortgage, but as soon as he is aware that the property on which he is entitled to rely has ceased so far to belong to the debtor, he cannot make a new advance in priority to that of which he has notice. As Lord Campbell says, “the hardship upon the bankers from this view of the subject at once vanishes, when we consider that the security of the first mortgage is not impaired without notice of a second”. It seems to me to depend entirely on what I cannot but think a principle of justice, that a mortgagee who is entitled, but not bound, to give credit on the security of property belonging to the debtor, cannot give that credit after he has notice that the property has so far been parted with by the debtor. There is no contest between the parties but that this principle applies in the present instance, the issue upon which the parties diverge being the question as to whether the plaintiff, before the further advance constituted by the taking of the guarantee, had received notice, within the meaning of the principle, of the defendant’s second mortgage. 618 [8.70]

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Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd cont. The plaintiff submits that actual notice is required in order to bring the principle into operation so as to deprive a first mortgagee of the benefit covenanted for under the mortgage. It is pointed out on behalf of the plaintiff that in this instance it is plain that the plaintiff had no actual notice of the defendant’s mortgage or caveat until the time of its mortgagee’s sale of the Beacon Hill property in January 1984. The plaintiff further submits that in paying regard to principles of justice and fair dealing as between the parties, it is to be borne in mind that the defendant was aware, when taking its second mortgage, of the first mortgage, which incorporated the provisions of cll 16 and 17. It follows, according to the plaintiff, that the defendant took its mortgage without ensuring that the consent of the first mortgagee was obtained and, of course, with knowledge of the entitlement of the first mortgagee to have secured under its first mortgage further amounts becoming due by the mortgagor to the first mortgagee. The plaintiff further points to the fact that the defendant did not take any step to notify the plaintiff of the defendant’s second mortgage, beyond merely lodging the abovementioned caveat. The plaintiff submits that in these circumstances where the plaintiff in effect made a further advance to the mortgagor through the medium of taking the guarantee from Warden, it did so without any knowledge of there having been any loan made by the defendant to the mortgagor in the meantime. I adopt these persuasive expressions of opinion. I conclude that in this instance, there being no notice in fact communicated to the plaintiff, the principle of Hopkinson v Rolt does not operate to preclude the plaintiff from the priority claimed by it in respect of the balance of moneys remaining after discharge of the first mortgage and expenses of sale. I merely add that there is in this case no suggestion of dishonest or fraudulent conduct on the part of the plaintiff designed to prevent its receiving actual notice.

Notes

[8.75]

1. In Davidson v Registrar of Titles [2002] WASC 168, EM Heenan J commented: 14 The presence of a third unregistered mortgagee lurking in the background has created anxieties for the plaintiff that, somehow, by operation of the doctrine of tacking, that mortgagee may have access to the first mortgage from the Commonwealth Bank and thus secure priority. There are very serious doubts over whether or not the doctrine of tacking, as described by the learned authors of “Sykes on Securities” in the fifth edition at page 462, applies to Torrens system land. It seems to me to be extremely unlikely that it does, but it is unnecessary to decide that point in this case because even if the third mortgagee were to take, by transfer or assignment, the Commonwealth Bank mortgage, I consider that no greater security would be obtained by that transfer or assignment than is already accorded by that first registered mortgage to the bank. 15 It seems to me, accordingly, that the risk of the third mortgagee obtaining priority by this most unusual possibility of tacking on to the first mortgage can be dismissed from consideration. There is a further important point. Even if the operation of tacking were to operate in the most unusual way feared by the plaintiff, the presence of the caveat of 15 November 2000 on the register would not serve to advance or protect the plaintiff’s interests. All that caveat could ever do would be to give notice of the unregistered interest so that Mr Davidson, as mortgagee, could protect his interests by preventing the registration of any intervening mortgage or charge, or secure an opportunity for himself to become registered as mortgagee, as he has, in fact, achieved in February. The resolution of the unlikely issue of tacking would need to be conducted without any regard to the effect of that [8.75]

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caveat. Accordingly, I am satisfied that the continuation of this caveat has no bearing at all even in the remote possibility of a tacked obligation gaining priority which was suggested. 16 I must say that in explaining my reasons in this fashion I have given more recognition to the possibility that there may be a tacked obligation than I consider the argument deserves but I do that out of an abundance of caution. Nothing I say is to be taken as a recognition of the argument that a tacked obligation of that kind can arise in a Torrens system mortgage.

2. The complication in relation to the doctrine of tacking is that a mortgage may be taken to cover further advances to the borrower. A subsequent mortgagee should be able to detect that coverage by examination of the mortgage document, at least where the prior mortgage is registered. Whether notice of the making of further advances is relevant to priority disputes is not fully settled. 3. Normally a registered mortgage confers indefeasibility on the mortgagee even if the mortgage is forged. But the mortgage may be security for an amount lent under a separate agreement, and indefeasibility may not cure the void quality of a forged loan agreement. See [5.115].

Re Maiden Civil (P & E) Pty Ltd [8.76] Re Maiden Civil (P & E) Pty Ltd [2013] NSWSC 852 Supreme Court of NSW 2. The Caterpillars are vehicles that can be driven, and are powered by their own engines, which use diesel fuel. The 930 is a wheeled vehicle, while the 330 and 320 are tracked. The Caterpillars are emblazoned with Maiden’s name. 3. Between 2010 and May 2012, Maiden undertook civil construction work in the Northern Territory at a number of construction sites, including at Alice Springs. 4. Hastings Deering sold the Caterpillars to QES on 25 May and 18 August 2010; the deposits were paid by QES, and the balances were financed by Esanda (for the 320) and Westpac (for the 330 and 930), secured on the home of QES’s principal Mr Callum Rutherford and guaranteed by Mr Rutherford and his company Calani Plastering & Carpentry Pty Ltd. More or less concurrently with payment of the deposits to Hastings Deering, QES received from Maiden funds that corresponded with the amounts of the deposits. Maiden took possession of the Caterpillars and used them in its civil construction work in the Northern Territory. QES thereafter invoiced Maiden on a periodical basis for amounts that corresponded to finance charges payable by QES to Esanda and Westpac, plus ten percent, which Maiden paid. In March 2011, Maiden provided to QES the funds required to payout the Esanda finance in respect of the 320, and QES thereupon discharged that finance. After 23 March 2011, QES rendered no further invoices to Maiden in respect of the hire of the 320; but it continued to render invoices - and Maiden continued to pay them, if irregularly, in respect of the 330 and 930. 5. In about March 2012, Maiden approached a finance broker, Mr Gary Serkeci, seeking short-term finance. The broker approached Fast, following which Maiden provided various lists of its assets, which included the Caterpillars, to a valuer appointed by Fast, Mr Schiller. Mr Schiller prepared a valuation of Maiden assets, including the Caterpillars, which he sent to Fast in mid-April 2012. Following Mr Schiller’s valuation, Fast’s solicitors McCabe Terrill prepared loan and security documentation, which on 2 May 2012 they sent by email to Maiden’s lawyer Mr John Cockburn, together with a Loan Agreement for a loan in the amount of $250,000 for a three-month term, and a General Security Deed, which attached schedules listing Maiden’s property, including the Caterpillars. 6. Maiden executed the Loan Agreement and the General Security Deed by its then directors, Mr Scott McLean and Mr James Gallaugher, signing counterpart copies of them. On 31 May 2012, Fast executed the Loan Agreement and the General Security Deed, and transferred $192,989.38 (being the 620 [8.76]

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Re Maiden Civil (P & E) Pty Ltd cont. amount of the loan, less the establishment fee and certain other prepayments) into an account as directed by Maiden. The General Security Deed purported to grant to Fast a “security interest” in, inter alia, the Caterpillars. 20. The plaintiffs assert that Fast has a security interest in the Caterpillars within the meaning of the PPSA, which has priority over any interest of QES, Central or Mr Cullenane. That interest is said to arise from the terms of the General Security Deed. The plaintiffs contend that, even if QES be the owner of the Caterpillars, the operation of the PPSA has the effect that its ownership does not give it a superior right to the Caterpillars than Fast. 21. It is now common ground that, if QES be the owners of the Caterpillars or any of them, QES has a “security interest” in those Caterpillars, within the meaning of the PPSA. It was also ultimately not in dispute, that Fast has a security interest in the Caterpillars. However, in order to inform the discussion of the question of priorities, it is useful to explain how these “security interests” arise. 22. By PPSA, s 10, “grantor” means, inter alia, “a lessee under a PPS lease”; “security agreement” means “(a) an agreement or act by which a security interest is created, arises or is provided for; or (b) writing evidencing such an agreement or act”; and “security interest” has the meaning given by s 12, which provides as follows: 39. As already explained, Fast’s security interest had attached to the Caterpillars; accordingly, s 20(1)(a) is satisfied. The General Security Deed is a security agreement evidenced by writing signed by Maiden as grantor within s 20(2)(a)(i), and contains a description of the particular collateral (s 20(2)(b)(i)) and a statement that a security interest is taken in all of the grantor’s present and after-acquired property (s 20(2)(b)(ii). Accordingly, the security agreement “covers the collateral” for the purposes of s 20(1)(b) (pursuant to s 20(b)(iii)), and Fast’s security interest in the Caterpillars is therefore enforceable against a third party (which, in relation to the General Security Deed, includes QES). 40. That Fast’s security interest had attached to the Caterpillars means that s 21(1)(b)(i) is also satisfied. As that security interest is enforceable against a third party, s 21(1)(b)(ii) is satisfied. Fast’s security interest in the Caterpillars has been registered, and accordingly a registration is effective with respect to the collateral within the meaning of s 21(2)(a); accordingly, s 21(1)(b)(iii) is satisfied. It follows that Fast’s security interest in the Caterpillars is perfected within the meaning of s 21(1) of the PPSA. So much is common ground. 41. However, QES has not registered its security interest in respect of any of the Caterpillars, and its security interest is therefore not perfected. In those circumstances, s 55(3) applies, so that Fast’s perfected security interest in the Caterpillars has priority over QES’ unperfected security interest in them. This also is no longer in dispute, subject to a number of further arguments now raised by QES in its Amended Defence, and which now represent the real issues in dispute between the parties, to which I shall shortly turn. Conclusion 86. Maiden was the true owner of the 320, but QES was the true owner of the 330 and 930. 87. Fast has a security interest in all three Caterpillars pursuant to the General Security Deed, which interest is attached to the Caterpillars, enforceable against third parties, and perfected by registration. 88. Central and Mr Cullenane have not proved that they have any security interest in the 320, or any other interest beyond mere possession. In any event, it is not apparent how any interest they might have could be superior to that of Fast. 89. QES has a security interest in the 330 and the 930 as a lessor under a PPS lease. QES has not registered its security interest on the PPS Register. While the interest was a transitional security interest, it was registrable on a transitional register, namely the NT Register, but not so registered prior to the [8.76]

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Re Maiden Civil (P & E) Pty Ltd cont. registration commencement time, so the exception in s 322(3) of the PPSA applies, and the protection afforded to transitional security interests by sub-section 322(1) and (2) does not avail QES. The choice of law rules in s 238 are not relevant, nor applicable, but if applicable s 238(3) would not be attracted as it has not been shown to be characteristic of earth moving equipment that it will be moved from one jurisdiction to another. 90. Accordingly, QES’s security interest was unperfected. In those circumstances, s 55(3) applies, so that Fast’s perfected security interest in the Caterpillars has priority over QES’ unperfected security interest in them. 91. Moreover, upon Maiden going into administration and/or liquidation, Maiden became entitled to the Caterpillars - subject to the perfected security interest of Fast - because QES’s (and Central’s or Mr Cullenane’s, if any) unperfected security interest thereupon vested in Maiden.

[8.78]

Notes

1. This case involves consideration of the system of security interests introduced by the Personal Property Securities Act 2009 (Cth) and the process for registering security interests (perfecting). Whilst the Act generally leaves for the parties the decision as to the form of any transaction, it does classify the interest of a party who retains title (an owner who leases goods to another) as a security interest and thus liable to be outranked on failure to protect that interest. Under previous laws that party could only be defeated if the grant of possession led to the possessor being a buyer in possession; under a contract of hire purchase the possessor did not satisfy that description because the possessor had not agreed to buy. A party retaining title will normally pass possession to another. Registration (perfection) is consequently the means of protection. Even if a security interest is perfected (registered), the holder of that interest will lose out to a buyer who has no knowledge of the security interest if that person buys in the ordinary course of business from a dealer. 2. The case involves what are described as transitional interests. The facts occur in the time when the legislation is being brought into operation and the system requires registers of security interests. The transitional precaution in respect of motor vehicles has been to record the security interest (the title being retained) on the State and Territory register of security interests in motor vehicles; the recording had not taken place.

REDEEMABILITY Clogs on the equity of redemption

Toohey v Gunther [8.80] Toohey v Gunther (1928) 41 CLR 181 High Court of Australia ISAACS J: The purchaser’s objection to title by reason of which he refused to proceed with the contract was that the bond given by Astby to the brewery company still subsists and contains a restrictive covenant which would bind him in the use of the land purchased. The contract is dated 1926. The vendor was and is the registered proprietor of the land under the Real Property Act 1900. The bond, of course, is not registered. The mortgage given by Astby at the same time had been discharged in 1922, before Mrs Gunther became registered proprietor free from the mortgage when 622 [8.78]

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Toohey v Gunther cont. he transferred to Mrs Gunther in 1924. The vendor at the time of the contract held, and still holds, a clean certificate of title except for a mortgage to an assurance company as to which no question arises. I will assume, without deciding, that on principle of the Lord Strathcona Case (1926) AC 108 the obligation of the bond given by Astby would, if originally valid and binding with respect to him, ensure so as to constitute by the common law a restrictive covenant charging the property in the hands of a purchaser with notice from the mortgagor. Nevertheless, for two reasons, I am of opinion that the bond, even if not itself discharged, as the respondent contends, by the discharge of the mortgage, gives rise in the circumstances of this case to no objection to title. The first reason arises under the equitable doctrine of preserving intact the equity of redemption. The second follows from the provisions of the Real Property Act, which singularly enough, almost escaped attention. The bond on its own individual construction unquestionably contains an obligation which would prevent and impede the redemption of the property mortgaged by means of the instrument of mortgage of even date, although full payment were made of principal, interest and costs, that is to say, redemption in as free and unfettered a condition as before the mortgage was given. Not only does it bind the obligor to trade for a fixed term not necessarily ending with the payment of the debt, but it stipulates that for a fixed period or until the bond is discharged the obligee (who was the mortgagee) should not hold and retain the certificate of title to the land, the subject of the mortgage and of the purchase. The last mentioned stipulation is very important in view of the control it gives to the mortgagee, because, as Lord Macnaghten said in Bradley v Carritt (1903) AC 253 at 261 “you cannot do indirectly that which you must do directly”. Were the obligation and stipulation in the bond valid and operative when made? The central principle governing the determination of that question is stated by Lord Macnaghten for the Privy Council, in Fairclough v Swan Brewery Co (1912) AC, at 570 in these words: “It is now firmly established by the House of Lords that equity will not permit any device or contrivance being part of the mortgage transaction or contemporaneous with it to prevent or impede redemption.” The House of Lords case referred to was Samuel v Jarrah Timber and Wood Paving Corporation (1904) AC 323 where the reason for the rule appears at 326 and 327. To this statement of the law, Lord Parker of Waddington gave his assent in Krelinger’s Case (1914) AC, at 60. It thus appears that, if the bond were given either (a) as part of the mortgage transaction or (b) contemporaneously with that transaction, the obligation and stipulation referred to would be inoperative. The appellant contends that the bond, though given contemporaneously, was not part of the mortgage transaction but was a separate and independent instrument. One answer is that, even so, the bond on construction comes within the principle stated by the two supreme judicial tribunals of the Empire, and within the mischief which that principle is intended to guard against. The other answer is that the contention is true only if the expression “mortgage transaction” is limited to the narrow sense of the mortgage instrument creating the formal legal relation of mortgagee and mortgagor under the Act. That by force of the statute is necessarily a separate instrument, a circumstance which plays an important part later, but in no way alters the broad character of the transaction from which it flows and from which it forms part. “The mortgage transaction” in this connection must be understood in the wider sense as the general comprehensive arrangement or agreement made between Astby and the brewery company whereby the Company was to advance £4,500 and Astby was to execute the mortgage, the bill of sale and the bond. (See per Lord Parker in Kreglinger’s Case (1914) AC, at 48.) Had the bond been executed on a later date, the fact that in truth it was part of the mortgage transaction would bring it within the principle quoted. It was argued, notwithstanding the contemporaneous execution of the instruments, that because the bond says “whereas the said Company at the request of the said obligor has agreed to advance him on certain terms the sum of £4,500,” etc, the bond was an independent contract based on the promise to advance, and so proclaims itself. Much the same could be said of the recital in the bill of sale. The true principle of [8.80]

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Toohey v Gunther cont. construction in such cases is stated by Knight Bruce LJ, when delivering the judgment of the Privy Council in Shaw v Jeffery (1860) 13 Moo PCC 432 at 456-457 as follows: When the same parties execute contemporaneously several instruments relating to different parts of the same transaction, all must be considered together; all must be examined in order to understand each; apparent inconsistencies, the governing intention of the parties is still to be collected from a consideration of the language of all the instruments, and effect given to it. Applying that principle, no doubt can exist that the three documents are integral parts of the same wide transaction, intended to regulate as a totality the relations and rights and obligations of the parties with reference to the advance of £4,500, and therefore incapable of being treated as independent of each other in the only sense that would avail the mortgagee, and, therefore, the present appellant. (As an instance, see Reeve v Lisle (1902) AC 461.) Apart, therefore, from any special statutory difficulty and resting solely on the recognised rules of equity, the appeal fails. But it would be unwise to ignore the effect of the statute which governs so much of the property law of New South Wales, the Real Property Act of 1900. From the state of the title in November 1926, as narrated, it is plain that the vendor was free from the bond obligation and stipulation referred to. The certificate of title mentioned in the bond had been cancelled and another, differently numbered, had been issued. Section 43 of the Act then left her free, as it had already left Trautwein free, from any possible restriction arise from the bond. It would be obviously an abridgment of the registered proprietor’s rights if in such a case his or her purchaser could, until actual registration, be bound by an obligation to which the proprietor was not subject. The case of Waimiha Sawnmilling Co v Waione Timber Co (1926) AC 101 is authoritative on this point. Singularly enough that case immediately precedes the Lord Strathcona Case (1926) AC 108. On this ground also, and independently, the appeal fails. [Knox CJ, Higgins and Starke JJ agreed; Gavan Duffy J dissented.]

Notes

[8.85]

1. Cases on clogs on the equity of redemption have produced much analysis: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.125]–[7.135] for a discussion of the leading cases. Generally any collateral advantage for the mortgagee cannot continue once the mortgage has been redeemed. The most difficult case is that of Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25 where the collateral advantage (that for five years the mortgagor would not sell sheep-skins other than to the mortgagee so long as the mortgagee was willing to buy at the best price otherwise available) was upheld as independent of the mortgage. But as Toohey v Gunther (1928) 41 CLR 181 illustrates separate documents agreed contemporaneously have been held to constitute a single transaction. 2. Today the restraint of trade issue will raise possible contraventions of the Competition and Consumer Act 2010 (Cth). In particular s 45B provides: Covenants affecting competition (1) A covenant, whether the covenant was given before or after the commencement of this section, is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation or on a person associated with a corporation if the covenant has, or is likely to have, the effect of substantially lessening competition in any market in which the corporation or any person associated with the corporation supplies or acquires, or 624

[8.85]

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is likely to supply or acquire, goods or services or would, but for the covenant, supply or acquire, or be likely to supply or acquire, goods or services. (2) A corporation or a person associated with a corporation shall not (a) require the giving of a covenant, or give a covenant, if the proposed covenant has the purpose, or would have or be likely to have the effect, of substantially lessening competition in any market in which (i) the corporation, or any person associated with the corporation by virtue of paragraph (7)(b), supplies or acquires, is likely to supply or acquire, or would, but for the covenant, supply or acquire, or be likely to supply or acquire, goods or services; or (ii) any person associated with the corporation by virtue of the operation of paragraph (7)(a) supplies or acquires, is likely to supply or acquire, or would, but for the covenant, supply or acquire, or be likely to supply or acquire, goods or services, being a supply or acquisition in relation to which that person is, or would be, under an obligation to act in accordance with directions, instructions or wishes of the corporation; (b) threaten to engage in particular conduct if a person who, but for subsection (1), would be bound by a covenant does not comply with the terms of the covenant; or (c) engage in particular conduct by reason that a person who, but for subsection (1), would be bound by a covenant has failed to comply, or proposes or threatens to fail to comply, with the terms of the covenant. (3) Where a person (a) issues an invitation to another person to enter into a contract containing a covenant; (b) makes an offer to another person to enter into a contract containing a covenant; or (c) makes it known that the person will not enter into a contract of a particular kind unless the contract contains a covenant of a particular kind or in particular terms, the first-mentioned person shall, by issuing that invitation, making that offer or making that fact known, be deemed to require the giving of the covenant. (4) For the purposes of this section, a covenant or proposed covenant shall be deemed to have, or to be likely to have, the effect of substantially lessening competition in a market if the covenant or proposed covenant, as the case may be, would have, or be likely to have, that effect when taken together with the effect or likely effect on competition in that market of any other covenant or proposed covenant to the benefit of which – (a) a corporation that, or person who, is or would be, or but for subsection (1) would be, entitled to the benefit of the first-mentioned covenant or proposed covenant; or (b) a person associated with the corporation referred to in paragraph (a) or a corporation associated with the person referred to in that paragraph, is or would be, or but for subsection (1) would be, entitled. (5) The requiring of the giving of, or the giving of, a covenant does not constitute a contravention of this section by reason that giving effect to the covenant would, or would but for the operation of subsection 88(8) or s 93, constitute a contravention of s 47 and this section does not apply to or in relation to engaging in conduct in relation to a covenant by way of (a) conduct that contravenes, or would but for the operation of subsection 88(8) or s 93 contravene, s 47; or (b) doing an act by reason of a breach or threatened breach of a condition referred to in subsection 47(2), (4), (6) or (8), being an act done by a person at a time when [8.85]

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(i) an authorisation under subsection 88(8) is in force in relation to conduct engaged in by that person on that condition; or (ii) by reason of subsection 93(7) conduct engaged in by that person on that condition is not to be taken to have the effect of substantially lessening competition within the meaning of s 47. (6) This section does not apply to or in relation to a covenant or proposed covenant where the only persons who are or would be respectively bound by, or entitled to the benefit of, the covenant or proposed covenant are persons who are associated with each other or are bodies corporate that are related to each other. (7) For the purposes of this section, s 45C and subparagraph 87(3)(a)(ii), a person and a corporation shall be taken to be associated with each other in relation to a covenant or proposed covenant if, and only if (a) the person is under an obligation (otherwise than in pursuance of the covenant or proposed covenant), whether formal or informal, to act in accordance with directions, instructions or wishes of the corporation in relation to the covenant or proposed covenant; or (b) the person is a body corporate in relation to which the corporation is in the position mentioned in subparagraph 4A(1)(a)(ii). (8) The requiring by a person of the giving of, or the giving by a person of, a covenant in relation to which subsection 88(5) applies is not a contravention of subsection (2) of this section if (a) the covenant is subject to a condition that the covenant will not come into force unless and until the person is granted an authorisation to require the giving of, or to give, the covenant; and (b) the person applies for the grant of such an authorisation within 14 days after the covenant is given, but nothing in this subsection affects the application of paragraph (2)(b) or (c) in relation to the covenant. (9) This section does not apply to or in relation to a covenant or proposed covenant if (a) the sole or principal purpose for which the covenant was or is required to be given was or is to prevent the relevant land from being used otherwise than for residential purposes; (b) the person who required or requires the covenant to be given was or is a religious, charitable or public benevolent institution or a trustee for such an institution and the covenant was or is required to be given for or in accordance with the purposes or objects of that institution; or (c) the covenant was or is required to be given in pursuance of a legally enforceable requirement made by, or by a trustee for, a religious, charitable or public benevolent institution, being a requirement made for or in accordance with the purposes or objects of that institution.

Postponement of redemption

Knightsbridge Estates Trust Ltd v Byrne [8.90] Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 English Court of Appeal The judgment of the Court (SIR WILFRID GREENE MR, SCOTT and FARWELL LJJ) was read by SIR WILFRID GREENE MR: 626 [8.90]

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Knightsbridge Estates Trust Ltd v Byrne cont. We will deal first with the arguments originally presented on behalf of the respondents. The first argument was that the postponement of the contractual right to redeem for forty years was void in itself, in other words, that the making of such an agreement between mortgagor and mortgagee was prohibited by a rule of equity. It was not contended that a provision in a mortgage deed making the mortgage irredeemable for a period of years is necessarily void. The argument was that such a period must be a “reasonable” one, and it was said that the period in the present case was an unreasonable one by reason merely of its length. This argument is not one accepted by the learned judge. Now an argument such as this requires the closes scrutiny, for, if it is correct, it means that an agreement made between two competent parties, acting under expert advice and presumably knowing their own business best, is one which the law forbids them to make upon the ground that it is not “reasonable.” If we were satisfied that the rule of equity was what it is said to be, we should be bound to give effect to it. But in the absence of compelling authority we are not prepared to say that such an agreement cannot lawfully be made. A decision to that effect would, in our view, involve an unjustified interference with the freedom of business men to enter into agreements best suited to their interests and would impose upon them a test of “reasonableness” laid down by the Courts without reference to the business realities of the case. It is important to remember what those realities were. The respondents are a private company and do not enjoy the facilities for raising money by a public issue possessed by public companies. They were the owners of a large and valuable block of property, and so far as we know they had no other assets. The property was subject to a mortgage at a high rate of interest and this mortgage was liable to be called in at any time. In these circumstances, the respondents were, when the negotiations began, desirous of obtaining for themselves two advantages: (1) a reduction in the rate of interest, (2) the right to repay the mortgage moneys by instalments spread over a long period of years. The desirability of obtaining these terms from a business point of view is manifest, and it is not to be assumed that these respondents were actuated by anything but pure considerations of business in seeking to obtain them. The sum involved was a very large one, and the length of the period over which the instalments were spread is to be considered with reference to this fact. In the circum-stances it was the most natural thing in the world that the respondents should address themselves to a body desirous of obtaining a long term investment for its money. The resulting agreement was a commercial agreement between two important corporations experienced in such matters, and has none of the features of an oppressive bargain where the borrower is at the mercy of an unscrupulous lender. In transactions of this kind it is notorious that there is competition among the large insurance companies and other bodies having large funds to invest, and we are not prepared to view the agreement made as anything but a proper business transaction. But it is said not only that the period of postponement must be a reasonable one, but that in judging the “reasonableness” of the period the considerations which we have mentioned cannot be regarded; that the Court is bound to judge “reasonableness” by a consideration of the terms of the mortgage deed itself and without regard to extraneous matters. In the absence of clear authority we emphatically decline to consider a question of “reasonableness” from a standpoint so unreal. To hold that the law is to tell business men what is reasonable in such circumstances and to refuse to take into account the business considerations involved, would bring the law into disrepute. Fortunately, we do not find ourselves forced to come to any such conclusion. Mr Stamp, when pressed as to the matters which, upon the respondent’s argument, the Court might legitimately consider, upon the question of reasonableness, made a curious concession. He said that the Court might hold a longer period to be reasonable where the borrower was a body like the Corporation of the City of London with a long expectation of life than where the borrower was a private individual or a limited company which for this purpose (at any rate in the case of private companies) he treated as a mere body of individuals. [8.90]

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Knightsbridge Estates Trust Ltd v Byrne cont. This was because he said that the period of reasonableness must be judged by reference to the normal duration of human life – what age the borrower was to be assumed to be, and whether a longer period would be permissible for a borrower aged thirty than for a borrower aged sixty-five he preferred not to say. This was the extent of Mr Stamp’s concession: the fact that it was made illustrates very pointedly what appears to be the inadmissibility of a principle by which the test of “reasonableness” is to be so artificially circumscribed. Assuming therefore, without in any way deciding, that the period during which the contractual right of redemption is postponed must be a “reasonable” one (a question which we will now proceed to examine), we are of opinion that the respondents have failed to establish (and the burden is on them) that there is anything unreasonable in the mere extension of the period for forty years in the circumstances of the present case. But in our opinion the proposition that a postponement of the contractual right of redemption is only permissible for a “reasonable” time is not well-founded. Such a postponement is not properly described as a clog on the equity of redemption, since it is concerned with the contractual right to redeem. It is indisputable that any provision which hampers redemption after the contractual date for redemption has passed will not be permitted. Further, it is undoubtedly true to say that a right of redemption is a necessary element in a mortgage transaction, and consequently that, where the contractual right of redemption is illusory, equity will grant relief by allowing redemption. This was the point in the case of Fairclough v Swan Brewery Co (1912) AC 565 decided in the Privy Council, where in a mortgage of a lease of twenty years the contractual right to redeem was postponed until six weeks before the expiration of the lease. The following passage from the judgment explains the reasons for that decision: Ibid 565, 570. “The learned counsel on behalf of the respondents admitted, as he was bound to admit, that a mortgage cannot be made irredeemable. That is plainly forbidden. Is there any difference between forbidding redemption and permitting it, if the permission be a mere pretence? Here the provision for redemption is nugatory.” Moreover, equity may give relief against contractual terms in a mortgage transaction if they are oppressive or unconscionable, and in deciding whether or not a particular transaction falls within this category the length of time for which the contractual right to redeem is postponed may well be an important consideration. In the present case no question of this kind was or could have been raised. But equity does not reform mortgage transactions because they are unreasonable. It is concerned to see two things – one that the essential requirements of a mortgage transaction are observed, and the other that oppressive or unconscionable terms are not enforced. Subject to this, it does not, in our opinion interfere. The question therefore arises whether, in a case where the right of redemption is real and not illusory and there is nothing oppressive or unconscionable in the transaction, there is something in a postponement of the contractual right to redeem, such as we have in the present case, that is inconsistent with the essential requirements of a mortgage transaction? Apart from authority the answer to this question would, in our opinion, be clearly in the negative. Any other answer would place an unfortunate restriction on the liberty of contract of competent parties who are arm’s length – in the present case it would have operated to prevent the respondents obtaining financial terms which for obvious reasons they themselves considered to be most desirable. It would, moreover, lead to highly inequitable results. The remedy sought by the respondents and the only remedy which is said to be open to them is the establishment of a right to redeem at any time on the ground that the postponement of the contractual right to redeem is void. They do not and could not suggest that the contract as a contract is affected, and the result would accordingly be that whereas the respondents would have had from the first the right to redeem at any time, the appellants would have had no right to require payment otherwise than by the specified instalments. Such an outcome to a bargain entered into by business people negotiating at arm’s length would indeed be unfortunate, and we 628 [8.90]

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Knightsbridge Estates Trust Ltd v Byrne cont. should require clear authority before coming to such a conclusion.

Notes

[8.95]

1. There is a question of construction whether the right to repay is postponed to a named date or repayment simply must be made by the named date: see Hyde Management Services Pty Ltd v FAI Insurances Ltd (1979) 144 CLR 541. 2. The impact of the extracted decision is that in general the mortgagor has no right to insist on repayment before the named contractual date. In New South Wales pursuant to s 93 of the Conveyancing Act 1919 the mortgagor may redeem before the contractual date provided that as well as meeting all other financial obligations the mortgagor pays interest on the principal sum for the unexpired balance of the mortgage term. Penalties

Andrews v Australia and New Zealand Banking Group Ltd [8.100] Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30 High Court of Australia FRENCH CJ, GUMMOW, CRENNAN, KIEFEL AND BELL JJ 3. There is pending in the Federal Court of Australia a representative action pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”) against the respondent (“the ANZ”). There are approximately 38,000 group members. In addition there also are pending in the Federal Court six proceedings against other banks which raise the same or similar issues. 4. The prolix pleading filed by the applicants puts their case on various grounds. These include engagement by the ANZ in “unconscionable conduct” in contravention of the Australian Securities and Investments Commission Act 2001 (Cth) and the Fair Trading Act 1999 (Vic) (“the FTA”), the application of s 32W and s 32Y of the FTA to avoid “unfair terms”, and the operation of provisions of the Consumer Credit (Victoria) Code and the National Credit Code with respect to “unjust transactions”. 5. These aspects of the litigation are not before the Court. But it may be observed that this pattern of remedial legislation suggests the need for caution in dealing with the unwritten law as if laissez faire notions of an untrammelled “freedom of contract” provide a universal legal value. 6. What is immediately material is the claim for declaratory relief under s 21 of the Federal Court of Australia Act 1976 that certain provisions in contracts between the ANZ and the applicants are void or unenforceable as penalties, and that the applicants and group members are entitled to repayment of fees charged to them under those provisions, as moneys had and received by the ANZ to their use. 7. In this Court the applicants rely upon the doctrine identified with relief against penalty obligations and, on its part, the ANZ refers to matters of legal history to demonstrate the inapplicability of that doctrine to the present case. 8. It is convenient to begin with some reference to settled aspects of the penalty doctrine. 48. In AMEV-UDC Gibbs CJ emphasised that this Court was not required to consider the proposition, said to be derived from ECGD, that no clause which provided for the payment of money on the happening of a specified event other than a breach of a contractual duty owed by the contemplated payor to the contemplated payee could ever be a penalty. [8.100]

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Andrews v Australia and New Zealand Banking Group Ltd cont. 49. Brereton J in Interstar rejected the submission that liability to pay, forfeit or suffer the retention of money or property which engages the penalty doctrine may never be triggered by the failure in occurrence of an event which is stipulated in a prior agreement between the parties but is not itself the subject of a contractual promise between them. Brereton J pointed to the regard paid by equity to substance rather than merely to form and referred to the grant of relief in the case of penal bonds for non-performance of a condition which was not the subject of any contractual promise. These are significant considerations. They are not displaced by fixing solely upon a breach of contract by the party seeking relief from an alleged penalty. 50. In Interstar the Court of Appeal misunderstood the scope of the penalty doctrine. The question whether in a given case the operation of a stipulation which is not a contractual promise may attract the penalty doctrine is not foreclosed by the rejection in the Court of Appeal of what had been said by Brereton J at first instance. The common law action of assumpsit 51. There remains for consideration the further proposition in Interstar which, rather than acknowledging the concurrent administration in New South Wales (as elsewhere) of law and equity, appears to treat the penalty doctrine as having disappeared from equity by absorption into the common law action of assumpsit. This proposition should be rejected. 78. The upshot is that the restrictions upon the penalty doctrine urged by the Court of Appeal in Interstar should not be accepted. The primary judge erred in concluding, in effect, that in the absence of contractual breach or an obligation or responsibility on the customer to avoid the occurrence of an event upon which the relevant fees were charged, no question arose as to whether the fees were capable of characterisation as penalties. 79. Indeed, a further issue appears to have been presented by her Honour’s findings set out above. This may be stated as being whether the requirement to pay the fees in question was not enjoyed by the ANZ as security for performance by the customer of its other obligations to the ANZ, or whether the fees were charged by the ANZ, as specified in pre-existing arrangements with the customer, and ANZ, respectively, for the further accommodation provided to the customer by its authorising payments upon instructions by the customer upon which the ANZ otherwise was not obliged to act, or upon refusal of that accommodation. 80. The operative distinction would be that upon which the majority of the New South Wales Court of Appeal (Jacobs JA and Holmes JA) decided Metro-Goldwyn-Mayer Pty Ltd v Greenham. Their Honours contrasted a stipulation attracting the penalty doctrine and one giving rise consensually to an additional obligation. This distinction had been identified long before, by Lord St Leonards in French v Macale, as follows: [I]t appears, that the question for the Court to ascertain is, whether the party is restricted by covenant from doing the particular act, although if he do it a payment is reserved; or whether according to the true construction of the contract, its meaning is, that the one party shall have a right to do the act, on payment of what is agreed upon as an equivalent. If a man let meadow land for two guineas an acre, and the contract is, that if the tenant choose to employ it in tillage, he may do so, paying an additional rent of two guineas an acre, no doubt this is a perfectly good and unobjectionable contract; the breaking up the land is not inconsistent with the contract, which provides, that in case the act is done the landlord is to receive an increased rent. (emphasis added) 81. The applicants should have leave to appeal upon grounds 1-4 of the amended draft notice of appeal, and, to that extent, the appeal should be allowed with costs. The answers to so much of paragraphs 1 and 2 of the orders of the primary judge against which the applicant appeals should be set aside. In place of those answers, the answer should be substituted that the circumstances that the 630 [8.100]

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Andrews v Australia and New Zealand Banking Group Ltd cont. honour, dishonour, non-payment and over limit fees were not charged by the respondent upon breach of contract by its customers and that the customers had no responsibility or obligation to avoid the occurrence of events upon which these fees were charged, do not render the fees incapable of characterisation as penalties.

[8.105]

Notes

1. The decision did not examine the question whether the charges involved did amount to a penalty but rather whether the charges were subject to scrutiny under the penalties doctrine. The court rejected the argument that the charges could not be reviewed on the basis that they were penalties because the payments were not due for breach of the agreement. The case was remitted for further consideration of whether the amounts charged went beyond a genuine pre-estimate of losses. 2. Assessment of amounts imposed on default occurred in Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251. White J described the amounts being sought as follows: In the case of the first loan, the mortgagor/borrower, and hence the guarantor, is liable in the event of default to pay as damages interest of at least four times the rate charged on the loan, which was itself 60 percent per annum. In the case of the second loan, the rate of interest per annum (payable as damages) is increased from 100.2 percent to at least 360 percent. Whilst I can accept that there is a market in which the plaintiff may have been able to re-deploy its money at very high rates of interest of 60 percent or 100 percent or even 120 percent per annum, in the absence of evidence from the plaintiff, I would not conclude there was a market in which it could lend at rates of 240 percent or 360 percent per annum. Still less would I conclude in the absence of evidence from the plaintiff that had the loans been repaid, the moneys could have been used to reduce or discharge liabilities of the plaintiff which incurred interest at those rates. In my view, the disparity between the interest rates charged for the term of the loans and the interest payable as damages for late repayment is so great that the proper conclusion is that the provision for payment of damages is not a genuine pre-estimate of damage, but the imposition of a different financial obligation in the nature of a punishment. The disparity is so great that it is out of all proportion to the damage which it can be inferred the plaintiff could suffer as the result of the borrowers’ failure to repay the loan and the guarantor’s default. I conclude that those provisions are void as penalties.

REMEDIES OF A MORTGAGEE OF LAND [8.110] The principal rights conferred upon a mortgagee under a Torrens System mortgage of land are the right to sue on the personal convenant, the right to take possession, the right to lease, the right to appoint a receiver, the right to sell and the right to foreclose. The existence of the right to sell in relation to informal mortgages remains unclear and is analysed in this section. Details of the exercise of the power of sale are discussed at [8.145]ff. The existence and extent of other rights depends on detailed contractual and statutory provisions and they are discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.225]–[7.380].

[8.110]

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Right to possession

Fyfe v Smith [8.115] Fyfe v Smith [1975] 2 NSWLR 408 New South Wales Supreme Court HELSHAM J: The parties are agreed that no authority specifically covers the main problem that falls to be resolved here. It is a problem involving the charging of an occupation rent to a mortgagee in possession. The problem arises in this way: The plaintiffs were the owners in fee simple of a hotel in a little country town called Fifield, which is near Trundle. They were also the licensees of the licensed premises, or at least one of them was. They had bought the hotel from the defendants. There was a second mortgage over the property given in favour of the defendants as mortgagees. The terms of the mortgage are not really material; they reserved to the mortgagees the right to enter into possession and management of the mortgaged property and the receipt of the rents and profits thereof upon default by the mortgagors, and they contained a covenant that the mortgagors would transfer the licence held in connection with the hotel and the premises to the mortgagees or such person as they might appoint. I only mention the terms because it is clear, in my view, that the parties contemplated that entry into possession would mean running the hotel business conducted upon the land the subject of the mortgage, and this aspect of running the hotel had a bearing upon the findings which were made by the Master in relation to this matter and to which I shall come in a moment. On 7th May, 1965, and following, apparently, default by the mortgagors in performance or observance of the covenants in the mortgage, the mortgagees entered into possession. Thereafter for about two years they ran the hotel, no doubt becoming licensed, or one of them becoming licensed, to do so upon entry. In order to run the hotel they occupied one room in the premises and used certain facilities of the hotel such as the dining room service and the laundry services. On 7th November, 1966, this suit was commenced, and it is a suit for the redemption of the mortgage by the plaintiffs as mortgagors. On 26th April, 1967, the defendants (the mortgagees) went out of possession, and the plaintiffs resumed possession of the hotel. On 16th March, 1970, a decree was made in the suit. By that decree it was ordered that the matter be referred to the Master in Equity to take an account of all moneys due to the defendants as mortgagees under the mortgage by the mortgagors, and to take an account of the rents and profits of the hereditaments and premises comprised in the mortgage received by the defendants as mortgagees, or by any other persons for the use of the defendants, or which, without the wilful default of the defendants, might have been so received. This decree, of course, is in the usual form relating to the taking of accounts in a redemption suit. … They alleged that the defendants should be surcharged with a large sum of money made up of various items, of which item (a) was as follows: “The Defendants should have paid the sum of $5 per day from the 14th May, 1965, until 27th April, 1967, being 714 days in respect of board and lodging and the amount claimed is $3,570.” The second basis upon which the Master founded his reason for rejecting the claim of the plaintiffs was that the use of the room in the premises by the defendants during their period of occupation was essential to the carrying on and management of the business. The Master formed the view that there was no basis for charging an occupation rental or fee where a mortgagee occupies part of the mortgaged premises under circumstances which render it essential that he do so. He concluded that the present case was such an instance, and that no occupation fee was, therefore, properly chargeable against the mortgagees. 632 [8.115]

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Fyfe v Smith cont. The matter relating to the occupation rental raised in surcharge (a) is the novel matter, and the one to which most of the argument in this hearing has been directed. There is a proposition in Coote on Mortgages to be found in the ninth edition at p 1226 and in Fisher and Lightwood’s Law of Mortgages, 8th ed, pp 294 and 555, which is said to govern the position in this case. At p 294 of the latter work it is put in this way: Amount of rent to be accounted for.- Where a mortgagee enters into receipt of rents he accounts at the rate of the rent reserved. Where he enters into actual possession, it has been said that he will be charged with the utmost value the lands are proved to be worth. But this liability is limited by the circumstances of the case, and he will not usually be required to account for more than he has received, unless it is proved that, but for his gross default, mismanagement or fraud, he might have received more. At p 555, under the heading of “Occupation Rent”, the following is stated: “The mortgagee, if he has been in actual occupation of the whole or some part of the property, may be charged an occupation rent …” It is said, relying on these propositions, that as a general rule a mortgagee in possession will be charged an occupation rent, and it is further said that the cases support this proposition. Thus in Trimleston (Lord) v Hamill (1810) 1 Ball and B 377, 385 Lord Manners, Lord Chief Justice of Ireland, said: “If a Mortgagee enters into Possession of the Lands, he is always charged with the utmost Value they are proved to be worth; but if he only enters into the Receipt of the Rents, he accounts at the Rate of the Rent reserved”, and in Metcalf v Campion (1828) 1 Mol 238 at 239 Sir Anthony Hart, Lord Chancellor of Ireland, in dealing with the matter of onus in relation to the taking of accounts by a mortgagee in possession, said: “If the mortgagee occupied a fair occupation rent should be charged to him.” It is said that these cases establish a principle as wide as that put by counsel for the plaintiffs, namely that, where a mortgagee goes into possession of premises, he will be charged an occupation rent. The question is do these cases support such a wide principle? I do not believe that they do. The basic principle upon which the Court approaches the matter of accounts between a mortgagor and a mortgagee in possession is that the mortgagee will be charged with an account for the rents and profits. If a complaint is made that a mortgagee has not properly accounted for the rents and profits received by him during the period that he was in possession under the mortgage, the onus is on the party making the surcharge to show that he has received rents and profits in excess of those which are stated in his accounts, or that he would, except for his wilful neglect and default, have received rents and profits for which he must account. That is what a mortgagee in possession must account for. But it assumes that premises have yielded rents and profits during the period of possession or that they could, with proper management, have yielded rents and profits. In a circumstance such as this, where one is dealing with a case of rents, and not profits, the principle assumes that the property is producing, or can produce, a return from the fact of it being occupied. That is a proper basis for the taking of an account in the form in which accounts are ordered to be taken in such cases. It stems from the possession of a mortgagee who, although clothed in the legal title, is regarded, once he has taken possession, either before or after default, as a mortgagee, as being under a duty to account. He is regarded as exercising a special right over somebody else’s property in which he has merely a limited interest. The basis of the approach to the taking of accounts will not be different in the case of land held under statutory title. The mortgagee must give a mortgagor, of whose property he has taken possession, the full benefit of what the mortgagor was getting before possession was taken, or could have got from his continued possession of the land. But I do not believe that the converse of this position is true, namely that the mortgagee must pay for his occupation merely because he occupies premises. Counsel seeks to support the proposition put by him upon the basis that a mortgagee may be saved the expense of providing other accommodation for himself by virtue of his occupation of the [8.115]

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Fyfe v Smith cont. mortgaged premises. But that is not the basis upon which an account of rents and profits must be taken. A mortgagee is not obliged to account to a mortgagor upon the same basis that a trustee must account to his cestui que trust. A mortgagee in possession is obliged to account for rents and profits received by him or which, but for his wilful neglect and default, would have been received. Where there is no rental value of the property then there is no obligation upon a mortgagee taking possession to pay an occupation rent. That is the case here. There is no evidence that the property was let to or was occupied by anybody paying rent or fee for such occupation. And there is no evidence that the property could have been let or so occupied to anyone who would pay for the fact of occupation, whether in order to run the business or otherwise. Therefore the claim put forward by the plaintiffs for an account by the mortgagee on the basis that he must pay an occupation rent fails.

[8.120]

Note

The duty of a mortgagee in possession to account not only for actual receipts but also receipts which ought reasonably have been gained is a factor inclining mortgagees to appoint a receiver. A receiver is regarded as the agent of the mortgagor and so no liability for the receiver’s actions attaches to the mortgagee. Receivers are more commonly encountered today in creditors’ arrangements for complex commercial undertakings. A further problem facing mortgagees in possession is that of potential liability under environmental protection legislation so that, for example, a mortgagee in possession may be obliged to comply with a clean-up order. Discharge of the proprietory interest and debt

Groongal Pastoral v Falkiner Co Ltd [8.125] Groongal Pastoral v Falkiner Co Ltd (1924) 35 CLR 157 High Court of Australia THE COURT delivered the following written judgment: On 29th March 1912 the respondent executed in favour of the appellant a mortgage, under the Real Property Act 1900, to secure the repayment of £120,000 and interest at 4 per cent per annum. The mortgage was duly registered, and on 1st September 1921 was duly discharged under the provisions of the Act. The Company over series of years paid, to the Federal Government and to the Government of the State of New South Wales, income tax upon income including the interest it received from the respondent. By an action at common law it seeks to recover from him the total amount of tax so paid. The appellant’s case rests on the second clause of the mortgage. It will be desirable to quote that clause together with the preceding clause. They run as follows: Firstly: That I will pay to the Groongal Pastoral Co Limited hereinafter called the mortgagee in Sydney the above sum of one hundred and twenty thousand pounds by ten equal instalments of twelve thousand pounds each payable on the first day of September in each and every year from exchange and all other deductions the first of such instalments to be payable on the first day of September one thousand nine hundred and twelve. Secondly: That I will pay to it in Sydney interest on the said sum of one hundred and twenty thousand pounds or such part thereof as shall for the time being remain unpaid at the rate of four pounds by the £100 in the year as follows: namely by equal half-yearly payments free from exchange income tax and all other deductions on the first day of the months of March and September in each and every 634 [8.120]

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Groongal Pastoral v Falkiner Co Ltd cont. year until the said principal sum of one hundred and twenty thousand pounds shall be fully paid and satisfied the first of such payments computed from the first day of September last was made on the first day of March instant. That renders other defences necessary to be considered. One stands prominently forward, namely, the effect of the discharge of 1st September 1921. The appellant contends that the only effect of that discharge is to liberate the land as a security, leaving the personal obligations untouched. The respondent contends that its effect is to put an end to all personal liability as well as to free the land. The Real Property Act 1900 is an Act the purpose of which is to simplify and facilitate dealings with land, including its mortgage to secure repayments of debts. But, except so far as may be inconsistent with its provisions (see s 2(4)), it does not interfere with the ordinary operation of contractual or other personal relations, or the effect of instruments at law or equity. In Barry v Heider (1914) 19 CLR 197 as a result of the decisions cited, Isaacs J said: “They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of equity have enforced, as against registered proprietors, conscientious obligations entered into by them” ((1914) 19 CLR, at 213). The Land Transfer Act does not touch the form of contracts. “A proprietor may contract as he pleases, and his obligation to fulfil the contract will depend on ordinary principles and rules of law and equity, except as expressly or by necessary implication modified by the Act” ((1914) 19 CLR at p 216). In order to carry out its purposes the Act provides, in the Schedule, forms of instruments to be followed. But by s 103 (1914) 19 CLR, at 213 it enables those forms to be used with “such alterations as the character of the parties or the circumstances of the case may render necessary.” Registration is necessary to give statutory effect to an instrument, and by s 36, subs 4, every instrument when registered and stamped with the seal of the Registrar-General “shall have the effect of a deed duly executed by the parties signing the same.” In the Ninth Schedule are forms of mortgage and of discharge. As mentioned however, those forms may be accommodated to meet the actual requirements of the case, and so contain the actual bargain of the parties. When completely registered and stamped they are by force of law deeds with all the effect that law gives to a deed. The mortgage itself (s 57) is a security only. The personal obligation itself is independent of the security, but it is contained in and constituted by the statutory deed by which also it is secured. A discharge of the land may be effected by an endorsement on the mortgage under s 65, and that may be, according to its tenor and as s 65 says, a discharge (1) of the whole land from the whole of part of the principal sum secured or (2) of any part of the land from the whole of the principal sum. Reading that with s 100 (2), the discharge may be moulded to the agreement of the parties. Then, says s 65, upon entry of the discharge the land is, to the extent of the discharge, no longer subject to the encumbrance. The particular form of the discharge in this case is: “Received from Ralph Sadlier Falkiner, this first day of September 1921, the sum of one hundred and twenty thousand pounds, being in full satisfaction and discharge of the within obligation. The common seal of Groongal Pastoral Company Limited (in Liquidation) was hereto affixed by Sir Henry Yule Braddon and Wilfrid Cecil Metcalfe in the presence of Fred IW Harrison, secretary – (Sgd) Hy Y Braddon-Wilfrid Cecil Metcalfe – (Seal of Company).” The discharge is in the most ample terms, apt to express a full and complete discharge of all personal “obligation”. The Company executed the discharge under its common seal, and by the twelfth written admission the discharge was handed with the certificate and title issued in respect of the mortgaged property to the defendant’s solicitors. They procured its registration. Had the discharge released all the land except an insignificant part, the full personal liability would clearly have continued. But if so, it shows that the personal liability for the debt and the burden on the land are not coincident. The extinguishment of the remaining unsubstantial security could not make all the difference between the existence and the non-existence of the personal liability for the debt. The discharge is an instrument duly registered and bears the stamp of the Registrar-General’s seal, and, [8.125]

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Groongal Pastoral v Falkiner Co Ltd cont. therefore, in law, has the effect of a deed, and without expressing any opinion as to whether it is in fact a deed duly executed and delivered, it operates by its terms to discharge the respondent from his personal obligation, as well as to release his land from the encumbrance. A discharge differently worded would not necessarily have that effect. The appeal therefore should be dismissed.

Note

[8.130]

The decision in this case has been challenged on the basis that the discharge does not constitute an implied release of the debt but is merely a receipt. As a receipt, the discharge will have effect only as an estoppel, and if the mortgagor is aware of the true position an estoppel cannot operate in the mortgagor’s favour: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.355]–[7.380]. Availability of the power of sale

King Investment Solutions v Hussain [8.135] King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 New South Wales Supreme Court CAMPBELL J Availability of a Statutory Power of Sale Exercisable Out of Court by a Mortgagee 55. Before turning to the power of the Court to order a sale of the mortgaged property in the present case, it is appropriate to look at the circumstances in which a mortgagee can sell the mortgaged property without invoking the assistance of the Court. 56. Section 58 Real Property Act 1900 confers on a mortgagee a power to: … sell the land mortgaged … or any part thereof, and all the estate and interest therein of the mortgagor … However, as section 58(1) makes clear, that power can be exercised only when the mortgagee is authorised by section 57(2) to exercise the power under section 58. Section 57(2) confers power on “a registered mortgagee …” to exercise the powers conferred by section 58, if certain preconditions arise. Thus, the statutory power of sale of Real Property Act 1900 land conferred by section 58 can be exercised only by a mortgagee who is registered: Midland Montagu Australia Ltd v Cuthbertson & Anor (1989) 17 NSWLR 309 at 313-5. Hence, that statutory power could not be availed of by the second mortgagee in the present case. 57. Section 109(1) Conveyancing Act 1919 (which applies to Real Property Act 1900 land: section 108 Conveyancing Act 1919) also confers on a mortgagee a power “to the like extent as if [it] had been in terms conferred by the instrument creating the mortgage… but not further” to sell mortgaged property. Following amendments made to section 109 by the Conveyancing (Covenants) Amendment Act 1986 it is no longer a requirement, for the existence of a power of sale under section 109, that the mortgage in question be made by deed. 58. While section 109 also confers the same power of sale upon a “chargee”, in that section “charge” means a charge imposed under section 88F Conveyancing Act 1919: section 108 Conveyancing Act 1919. However, even if the word “chargee” in section 109 is construed analogously, so that it is limited 636

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King Investment Solutions v Hussain cont. to the type of chargees who have the benefit of a charge of under section 88F, the definition of “mortgage” in section 7 Conveyancing Act includes “a charge on any property for securing money or money’s worth”. Thus by that route the power conferred on a “mortgagee” by section 109 might extend to the type of equitable mortgage or charge that exists in the present case. 59. That same possibility also arises by a different route. Section 7 Conveyancing Act 1919 says that “mortgagee”, in relation to land under the provisions of the Real Property Act 1900, has the same meaning as in that Act. Section 3 Real Property Act 1900 defines “mortgage” as “any charge on land (other than a covenant charge) created merely for securing the payment of a debt”, and defines “mortgagee” as “the proprietor of a mortgage”. Further, in section 3 Real Property Act “proprietor” is defined as “any person seised or possessed of any freehold or other estate or interest in land at law or in equity in possession in futurity or expectancy.” Thus, the “proprietor” of a mortgage can, within this definition, be the person entitled to an equitable charge over land, even if that equitable charge is not registered. 60. In light of these matters I conclude that the power of sale conferred by section 109 attaches to the interest of the second mortgagee in the present case. 61 That the power of sale under section 109 attaches to a particular mortgage does not necessarily mean that the power has become exercisable. Section 111 Conveyancing Act 1919 sets out preconditions to a mortgagee exercising the power of sale under section 109. One of them involves the service of a notice under section 111(2)(b), which (in substance) tells the mortgagor what it must do to avoid the power of sale being exercised. Those preconditions do not apply to mortgages which are registered under the Real Property Act 1900 (section 111(1) Conveyancing Act 1919). However, as a matter of statutory construction, the preconditions apply to mortgages of Real Property Act 1900 land which are not registered. 62. There was argument before me about whether the second mortgagee had ever served on the mortgagor a notice complying with section 111(2)(b). 63. However there is a more fundamental problem lying in the way of the second mortgagee exercising a power of sale conferred by section 109 in a way that is likely to provide it with a commercially effective remedy. It is that as a matter of construction of the power in section 109, it does not enable an unregistered second mortgagee of Real Property Act 1900 land to sell the interest of the first mortgagee in the land. A sale of the land subject to the interest of the first mortgagee is unlikely to prove attractive to potential purchasers. 64. There are two reasons for concluding that the power of sale under section 109 does not enable the unregistered second mortgagee to sell the interest of the first mortgagee. The first is that section 109 itself says that the power of sale (and other powers conferred by section 109) are conferred “to the like extent as if they had been in terms conferred by the instrument creating the mortgage … but not further…”. It would not be possible for a contract between a mortgagor and a second mortgagee of land to empower the second mortgagee to convey the interest of the first mortgagee, unless the first mortgagee consented or in some other way conferred authority on the mortgagor to affect its interest in the land. Thus, the statutory power of sale under section 109 can stretch no further. 65. The second is that section 112(1) Conveyancing Act 1919 sets out the effect of exercise of the statutory power of sale, namely that the mortgagee can … convey the property sold for such estate and interest therein as is the subject of the mortgage …, freed from all estates, interests, and rights to which the mortgage … has priority, but subject to all estates, interests, and rights which have priority to the mortgage … (emphasis added) [8.135]

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King Investment Solutions v Hussain cont. In this way, the statute itself recognises that the second mortgagee cannot convey the interest of the first mortgagee. See also Guardian Mortgages v Miller [2004] NSWSC 1236 at [120]; Re Hodson and Howes’ Contract (1887) 35 Ch D 668; F&L para [20.39]. 66. There is no other candidate for a statutory power of sale out of court which might apply to this mortgage. Thus, if the second mortgagee wanted to sell the entire interest in the mortgaged land, it needed to obtain a court order authorising it to do so. 79. No party argued that Part 30 of the Supreme Court Rules 1970 provided a jurisdictional basis for the order. That Part, which is reproduced in substance in Part 27 UCP Rules, allows the court to make orders for the disposal of land in certain circumstances. It is derived from section 55 of the Chancery Procedure Act 1852 (Imp). It does not seem to provide a promising candidate for a basis for the jurisdiction in the present case: notes to section 14 Equity Act 1901 in Parker’s Practice in Equity (NSW) 2nd edition 1949 page 21-22. 80. In the present case, the mortgage of the second mortgagee contains a contractual power of sale. In itself, that provides a basis for the Court to have jurisdiction to make an order for sale of the mortgaged property, by way of an action for specific performance. 81. Another route leads to this same conclusion. The interest of a mortgagee of Torrens title land is only ever, even when the mortgage is registered, in the nature of a statutory charge, together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. An unregistered mortgage will likewise be regarded by equity as conferring an equitable charge together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. As seen earlier (para [53] above), an order for judicial sale is the standard way of enforcing an equitable charge. Indeed, the Court can order sale even where there is a charge or lien which expressly excludes the right to a legal mortgage: Tenant v Trenchard (1869) LR 4 Ch App 537. 82. I conclude that the Court has jurisdiction to order a sale at the suit of an unregistered mortgagee of Real Property Act 1900 land. However, further consideration will need to be given to the circumstances in which, and terms on which, it is proper to make such an order. In particular, consideration will need to be given to the precise interest in the land over which the unregistered mortgage has been granted that can be ordered to be sold.

[8.140]

Note

As this case illustrates, under the Torrens system whether or not a power of sale exists, an informal mortgagee faces great difficulty in transferring an interest to any purchaser. It is often easier, when default is likely or has occurred, as a first step to seek a registrable mortgage and carry out its registration. Failure to register in the first instance may simply reflect a desire to avoid registration fees

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EXERCISE OF THE POWER OF SALE OF LAND Notice of intended exercise of a power of sale

Websdale v S & JD Investments Pty Ltd [8.145] Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 Court of Appeal of New South Wales CLARKE JA: On 2 November 1988, the first and second appellants granted a mortgage to the first respondent over land which they owned being the land contained in certificate of title, folio identifier 2/630220 and known as “Folly Lodge” situated at Glen Quarry near Bowral. On the same day the third appellant granted a mortgage to the first respondent over land owned by it being the whole of the land contained in certificate of title, vol 14455, fol 93 which was situated at Kangaroo Valley and upon which was erected a hotel known as “The Friendly Inn Hotel”. Both mortgages, and another mortgage over land at Lawson, to which it is unnecessary to refer further, secured a loan of $9,000,000 to the third appellant, were in substantially identical terms requiring repayment of the principal sum on 5 October 1989 and were duly registered. On 1 December 1989, variations of both mortgages were executed by the parties extending the term of the currency of each mortgage for one year, so that the principal sum fell due on 5 October 1990, and increasing the rate of interest payable. Neither variation of mortgage was registered. The mortgagors defaulted in the payment of interest under both mortgages and on 15 June 1990, the first respondent served notice of default pursuant to s 57(2)(b) of the Real Property Act 1900 (the Act) on both mortgagors which notice, omitting formal matters and the statement to the effect that the notice was given pursuant to the abovementioned section of the Real Property Act 1900, read as follows: As at the date hereof the principal sum totalling $900,000.00 and $109,931.30 by way of interest are outstanding and interest is accruing at the rate of $15,000.00 per month together with interest at the rate of twenty (20%) per centum per annum on all monies (including principal and unpaid interest) outstanding from 5 December 1989 to the date of payment of same pursuant to cl 14 of the said Mortgages. In addition you are indebted in an amount of $300.00 in respect of legal costs incurred in respect of your default. YOU ARE HEREBY REQUIRED to pay the said sums in respect of principal, interest and interest on unpaid interest and costs within one month after service of this Notice. IN DEFAULT of such payment, s and JD Investments Pty Ltd proposes to exercise its power of sale in respect of the land comprised in the said Mortgages. A further notice was given on 9 July which was, except in so far as it referred to a greater amount of interest outstanding, in identical terms to the first notice. The mortgagors did not comply with either notice with the consequence that the first respondent, in circumstances with which it will be necessary to deal later, exercised its power of sale and on 22 May 1991, the first respondent exchanged a contract of sale with the second and third respondent in respect of “Folly Lodge” and a contract of sale in respect of “The Friendly Inn” with the fourth respondent. On 31 May 1991, the appellants commenced the proceedings which are the subject of this appeal and which were heard with great expedition on 19 and 20 June. In these proceedings the appellants sought declarations that the power of sale which the first respondent sought to exercise had not, as at 22 May 1991, arisen in respect of either property and orders permanently enjoining the respondents from completing the agreements for sale which had been entered into on 22 May 1991. The appellants based their claims for relief on two grounds. First, that the notices given in June and July 1990 were ineffective with the consequence that the power of sale had not arisen and secondly, [8.145]

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Websdale v S & JD Investments Pty Ltd cont. that the first respondent had breached the duty of care which it owed to its mortgagor in carrying out the sale of “Folly Lodge”. In a judgment delivered on 21 June 1991, Bryson J dismissed the proceedings. The appellants have appealed from that decision on the sole ground that the notices given in June and July 1990 were not valid or effective with the consequence that the first respondent had improperly purported to exercise its power of sale. The submission which was made in support of this ground was that the notices were defective because they included an erroneous claim that the principal was outstanding as at the date of the giving of the notices and a requirement that the outstanding principal be repaid together with the outstanding interest and an amount in respect of legal costs. The questions which arise are whether it was wrong to claim, in June and July 1990, that the principal sum was outstanding and, if it was, whether the erroneous inclusion of such a claim affected the validity of the notices. Upon the execution of the variations the term of each mortgage was extended to 5 October 1990. Accordingly, breach apart, the principal sum was not due at the time of the giving of the notices. However, each mortgage contained a provision, the relevant effect of which was that upon default being made in payment of interest the principal sum should immediately become due and the mortgagor would be bound to pay the same on demand. This provision, which would appear to support the terms of the respective notices, is, however, subject to the provisions of s 57 and s 58 of the Real Property Act 1900. The power of a mortgagee to sell the mortgaged property, where that property is registered under the Act, is conferred by s 58(1) which applies only where the mortgagee is authorised by s 57(2) to exercise that power. For its part s 57(2) authorises a mortgagee to exercise the powers conferred by s 58 if, relevantly, default in the payment of principal or interest secured by the mortgage occurs and a written notice complying with subs(3) has been served on the mortgagor. The latter subsection lays down the following requirements with which the notice must comply: (a) it must specify that it is a notice given pursuant to s 57(2)(b) of the Act; (b) it must, relevantly, require the mortgagor to pay the principal and/or interest in respect of the payment of which he/she made default; (c) if the costs of the service of the notice are to be demanded it requires payment of a reasonable amount for those costs and specifies that amount; and (d) it must notify the mortgagor that, unless the requirements of the notice are complied with within one month after service of the notice it is proposed to exercise the power of sale. It is important to have regard to subs(4) and subs(5) in determining whether the notices given in this case complied with s 57(3) of the Act. subs(4) provides that if a notice is duly given and its requirements are complied with within the relevant time the default to which the notice relates shall be deemed not to have occurred. The effect of subs(5) is to deny a covenant in a mortgage providing that upon default in, for instance, the payment of interest the whole of the principal becomes payable, of force or effect “… until the powers conferred by s 58 become exercisable by reason of that default”. The mortgages in question both contained a covenant, cl 6, the effect of which was to make the principal immediately due and owing upon the occurrence of default in the due payment of interest and the clear effect of s 57(5) is to deny this clause of any force or effect until a power of sale under s 58 had arisen. By virtue of s 57(2)(c) the power of sale does not arise until the expiry of the time specified in the notice for compliance with it. Accordingly, the principal, repayment of which was to take place on 5 October 1990, could not have become due and payable prior to that date unless default in the payment of interest had occurred, a notice complying with s 57(3) had been given in respect of the default in the payment of interest and the time specified by the notice had expired. Once those three conditions had been 640 [8.145]

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Websdale v S & JD Investments Pty Ltd cont. satisfied then the power of sale under s 58 would have arisen and cl 6 would have become effective. Until, however, the power of sale had arisen cl 6 remained without force or effect and the mortgagor was not liable to repay the principal. Both notices which were given asserted that the principal and an identified amount of interest were outstanding and required repayment of those sums together with specified costs within one month after service of the notice. In including a statement that the principal was outstanding they were in error. By virtue of s 57(5), cl 6 had no force or effect until the power of sale had arisen and this had not occurred when the notices were given. The position would have been otherwise if, for instance, a notice specifying non payment of interest had been given and not complied with prior to the service of the notice in July. In that event cl 6 would have been effective. The question which then arises is whether a notice which contains both a correct assertion that the mortgagor has defaulted in the payment of interest and an erroneous statement that the principal is outstanding complies with s 57. The trial judge relied on authority, and in particular Mir Bros Projects Pty Ltd v 1924 Pty Ltd (1980) 2 NSWLR 907 especially at 925-926, in concluding that the notice was effective. Putting authority to one side for the moment and having regard to the provisions of s 57 and its clear purpose I would myself come to a different conclusion. The requirement laid down by the statute is, relevantly, that a notice be served on the mortgagor requiring it to pay the outstanding moneys and notifying it of the proposal to exercise a power of sale unless payment is made within one month (or other stipulated time). That requirement would not be satisfied by serving a notice which identified only a non existent default. Nor, in my opinion, would it be satisfied by including two defaults one of which had occurred and one of which had not. Given that the purpose of the notice is to bring to the mortgagor’s attention the existence of particular defaults and to give it the opportunity of remedying that default I do not think it can be said that a notice which requires the mortgagor to remedy a non existent default can be regarded as complying with the section. This view is supported by the decision in Jaffe v Premier Motors Ltd 1960 NZLR 146, in which Shorland J, in considering a differently worded section, held that a notice wrongly maintaining that the mortgagor was in default in the payment of principal did not comply with the relevant section. One consideration which weighed heavily with his Honour was that there was a provision in the New Zealand Act, similar to s 57(5), the effect of which was to enable a mortgagor who had defaulted in the payment of interest to avoid the obligation immediately to repay the principal by complying with the notice given in respect of the outstanding interest. As his Honour pointed out a notice which demands payment of principal not then due denies the mortgagor the very privilege the section was intended to give. Although the terms of the New Zealand statutory provision are different from s 57 it seems to me that the remarks of Shorland J are relevant to the section under consideration. The respondents, however, rely on Mir and a line of authority the effect of which is stated in Fisher and Lightwood’s, Law of Mortgage, 10th ed (1988) at 309, to be that at notice is still an effective demand even if it does not state the amount due or if it overstates that amount. Mir is direct authority for the proposition that a notice given pursuant to s 57 is not invalidated because it includes a requirement to make a payment which is not due. Powell J, who decided Mir, was influenced by the decision of the Privy Council in Campbell v Commercial Banking Co of Sydney (1881) 2 LR (NSW) 375 at 385, and the cases cited in Fisher and Lightwood. Putting to one side the fact that none of those cases dealt with a statute in the terms of s 57 and s 58 of the Act, it should be observed they provide no direct support for the proposition that a notice which included a mistaken statement that principal was then due was a good notice. Counsel for the mortgagor in Mir pointed this out to the judge when he submitted that the authorities applied only in the case of a misstatement of an amount of principal or interest otherwise due and should not be held [8.145]

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Websdale v S & JD Investments Pty Ltd cont. to extend to a case in which a claim is made for a payment of principal not then due. His Honour thought that this was a distinction without a difference. For my part I regard the distinction as a fundamental one in the light of the terms of s 57. The section requires the mortgagee to bring to the attention of the mortgagor the particular default and to require him to make it good. It does not in terms require the mortgagee, in a case in which it is claimed that the mortgagor is in default in the payment of interest or principal, to specify the particular amount outstanding. What it requires is that the mortgagee identify the particular default or defaults. In these circumstances it is difficult to see why, provided the default is correctly identified, the specification of a greater or lesser amount than actually due should affect the validity of the notice. This is consistent with Campbell which was relied upon by Powell J and which has been considered an authority for the proposition that the overstate-ment of the amount owing in a notice given by a mortgagee will not invalidate it. Although I am of the view that the differences between s 57, s 58 and the relevant statutory provisions under consideration in Campbell are sufficient to require the exercise of caution in the application of the decision in Campbell to a notice given under s 57, I would myself be inclined to the same view simply as a matter of construction of s 57 itself. That is, that in the absence of a requirement that the notice identify with particularity the precise amount outstanding, it will be good so long as it identifies correctly the defaults which the mortgagor is given the opportunity of remedying. None of the cases, apart from Mir, however, provide any support for the view that a notice will be good notwithstanding that it misstates the defaults which are said to have occurred. This distinction I regard as of substance and one which leads me to conclude that Mir should not be followed and that the notices given in this case were defective.

[8.150]

Notes

1. The provisions of the Torrens system statutes requiring notice before the exercise of a power of sale are discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), at [7.405]–[7.410]. 2. The Torrens system statutes provide that after a period of default a mortgagee may give notice and after the period specified in the notice may exercise a power of sale. The Torrens System statutes specifically provide for variations in the periods from default to notice and from notice to exercise of the power of sale. It is however suggested that notice of default prior to sale is an inherent part of the Torrens System mortgage and cannot be done away with by agreement of the parties, see Sykes, Securities (5th ed), p 279 and Hall v Hall [1956] QWN 28. 3. s 88 of the National Credit Code sets out the major consumer protection requirement for notice prior to the exercise of a mortgagee’s remedies. It is relevant to personal property securities as well as land mortgages. It states: 88. Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor Enforcement of credit contract (1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless: (a) the debtor is in default under the credit contract; and 642 [8.150]

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(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period; and (d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so: (i) the debtor; (ii) a practising lawyer representing the debtor; (iii) a person with a power of attorney relating to the debtor’s financial affairs. Criminal penalty: 50 penalty units. Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94. Enforcement of mortgage (2) A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless: (a) the mortgagor is in default under the mortgage; and (b) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period. (d) if the mortgage secures an obligation under a credit contract for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the mortgagor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so: (i) the mortgagor; (ii) a practising lawyer representing the mortgagor; (iii) a person with a power of attorney relating to the mortgagor’s financial affairs. Criminal penalty: 50 penalty units. Note: If a mortgagor has given a credit provider a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see section 94. Default notice requirements (3) A default notice must contain a prominent heading at its top stating that it is a default notice and specify: (a) the default; and (b) the action necessary to remedy the default; and (c) a period for remedying the default; and (d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property may begin if the default has not been remedied; and (e) that repossession and sale of mortgaged property may not extinguish the debtor’s liability; and [8.150]

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(f) the information prescribed by the regulations about the debtor’s right to: (i) give a hardship notice under section 72; or (ii) give a postponement request under section 94; or (iii) make an application to the court under sections 74 and 96; and (g) the information prescribed by the regulations about: (i) the approved external dispute resolution scheme of which the credit provider is a member; and (ii) the debtor’s rights under that scheme; and (h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and (i) that, under the Privacy Act 1988, a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and (j) any other information prescribed by the regulations. Combined notices (4) Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor. When default notice not required (5) A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if: (a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property. Non remedial default (6) If the credit provider reasonably believes that a default is not capable of being remedied: (a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice. (7) Subsections (1) and (2) are offences of strict liability. Some defaults are not a basis for a default notice (7A) So far as a notice purporting to be a default notice relates to an alleged default under a credit contract for a reverse mortgage that is an event described in subsection 18A(3), the notice is not a default notice for the purposes of any of the following provisions: (a) subsections (1) and (2) of this section; (b) section 93. Note: This has the effect that: 644 [8.150]

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(a) if the credit provider begins enforcement proceedings relating to the alleged default the credit provider will contravene subsection (1) or (2) of this section (unless subsection (5) of this section applies); and (b) section 93 will affect the operation of an acceleration clause on the basis of the alleged default. (7B) To avoid doubt, subsection (7A) does not affect the status of the notice as a default notice for the purposes of section 89, 94 or 95. Other law about mortgages not affected (8) This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section. Note: By virtue of subsection 183(2), a notice may contain information required to be given under other legislation or be included in a notice given under other legislation.

Regard for the mortgagor’s interest

Upton v Tasmanian Perpetual Trustees Ltd [8.155] Upton v Tasmanian Perpetual Trustees Ltd [2007] FCAFC 57 Federal Court of Australia Full Court KIEFEL and BESANKO JJ: 1. The appellant brought proceedings against the respondent claiming damages arising out of the respondent’s exercise, as mortgagee, of its power of sale of lands owned by him. The lands had been mortgaged by the appellant to secure an advance of $100 000. At the time of sale the lands had been approved for rural-residential subdivision. Title to Lots 1 and 2 had issued but title to the other six potential lots remained subject to the provision of essential amenities such as roads and water. We shall nevertheless refer them as “the six lots”, as they were referred to in the proceedings. 12. The appellant’s case, as pleaded, relied upon s 81(2)(iii) of that Act [Land titles Act 1980 (Tas)], as His Honour noted. That subsection does not provide a basis for a claim for damages for an improper exercise of a power of sale. It provides that one effect of the registration of a memorandum of transfer executed by a registered mortgagee “for the purpose of a sale pursuant to section 78” is that the title of the purchaser is not impeachable on the ground that “the power of sale was otherwise improperly or irregularly exercised”. The appellant must have intended to rely upon s 81(2)(b) and this is borne out by the oral argument before his Honour. That subsection provides that a person who suffers any loss or damage by reason of the registration of the memorandum of transfer is entitled to recover damages from the person who exercised the power of sale. The appellant did not however plead reliance upon s 78(1) as conditioning a mortgagee’s exercise of power of sale. 13. The appellant seeks to argue that the obligations imposed upon a mortgagee by s 78(1) are more onerous than the requirements of the general law, as summarised by his Honour. More is required than that the mortgagee act in good faith, even if this duty includes one to take reasonable steps to obtain a proper price. Section 78(1) requires the mortgagor’s interests to be protected and part of that obligation is to sell at “the best price”, as the subsection provides, the appellant would contend. No mention appears to have been made of these matters in the hearing before his Honour. At the commencement of closing submissions for the appellant his Honour sought to clarify the bases upon which it was contended that the respondent’s duties as mortgagee had been breached. Counsel agreed with the issues identified by his Honour and later stated in his reasons for judgment. At this [8.155]

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Upton v Tasmanian Perpetual Trustees Ltd cont. point his Honour asked whether the breach of provisions of the Land Titles Act added anything to the appellant’s case. It is apparent from the transcript that his Honour was enquiring whether the statute was different in any respect from the requirements of the general law. Counsel for the appellant did not suggest that it was. It was submitted for the appellant that there was something of a misunderstanding, on his part, about the concession and that he was attempting to draw attention to the Land Titles Act and not the general law. We have no reason to doubt that that may have been his intention, but it could not however have been obvious to his Honour. Nevertheless it does not seem possible to consider his Honour’s formulation of the duties owed by a mortgagee but ignore what the Land Titles Act states them to be. 14. The statements in s 78, that a mortgagee act in good faith and having regard to the interests of the mortgagor, are found in the general law. It is convenient then to refer, in the first place, to the state of the case law in Australia and then to consider the Tasmanian legislation in that background, a course which is permissible: see eg Commercial and General Acceptance Limited v Nixon [1981] HCA 70; (1981) 152 CLR 491 at 503. 15. The starting point is that the power of sale is given to a mortgagee for his or her own benefit, to enable the realisation of the debt: Fisher & Lightwood’s Law of Mortgage 2nd Aust edn, par 20.21 and the cases there cited, including Forsyth v Blundell [1973] HCA 20; (1973) 129 CLR 477 at 483. Equity however required a mortgagee exercising that power to act in good faith and not to deal with the property “in such a manner that the interests of the mortgagor are sacrificed”. In the passage from Kennedy v De Trafford [1897] AC 180 at 185, cited by Menzies J in Forsyth v Blundell 129 CLR at 481, it was said: ... if a mortgagee in exercising his power of sale exercises it in good faith, without any intention of dealing unfairly by his mortgagor, it would be very difficult indeed, if not impossible, to establish that he had been guilty of any breach of duty towards the mortgagor. Lindley L.J. in the Court below, says that “it is not right or proper or legal for him either fraudulently or wilfully or recklessly to sacrifice the property of the mortgagor”. Well, I think that is all covered really by his exercising the power committed to him in good faith. It is very difficult to define exhaustively all that would be included in the words “good faith”, but I think it would be unreasonable to require the mortgagee to do more than exercise his power of sale in that fashion. Of course, if he wilfully and recklessly deals with the property in such a manner that the interests of the mortgagor are sacrificed, I should say that he had not been exercising his power of sale in good faith. (Kennedy v de Trafford [1897] AC 180 was followed by the High Court in Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925 and Pendlebury v The Colonial Mutual Life Assurance Society Limited [1912] HCA 9; (1912) 13 CLR 676). 16. Mason J in CAGA v Nixon 152 CLR at 502 commented that, after much debate, equity decided that a mortgagee was not a trustee of the power of sale and the power was not a fiduciary power. Nevertheless, his Honour observed, there remained in equity the long-standing controversy: Was the duty of the mortgagee in exercising his power of sale limited to acting bona fide or did it extend to the taking of reasonable precautions to ensure that the property was sold at the market value? 17. That debate was discussed in Forsyth v Blundell [1973] HCA 20; 129 CLR 477 . By that time English cases such as Cuckmere Brick Co. Ltd. v Mutual Finance Ltd. [1971] 1 Ch 949 had accepted that the more onerous requirements were referrable to a selling mortgagee. Salmon LJ in that case held that that duty was owed by a mortgagee on “neighbour” principles (see at 966). The High Court did not need to resolve the debate in Forsyth v Blundell [1973] HCA 20; 129 CLR 477. Menzies J, however in a dissenting judgment, viewed the statements in Cuckmere Brick Co. Ltd [1971] 1 Ch 949 in light of the equitable duty and was of the view that they were not at odds with the rule stated in 646 [8.155]

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Upton v Tasmanian Perpetual Trustees Ltd cont. Kennedy v de Trafford [1897] AC 180, because to take reasonable precautions to obtain a proper price was “but a part of the duty to act in good faith” (at 481). More recently a Full Court in Gomez v State Bank of New South Wales Ltd [2002] FCA 442 at [20] commented that there is much to be said for this view, one which has more recently been elaborated upon in Medforth v Blake [1999] EWCA Civ 1482; [2000] Ch 86 at 101-102. The Full Court did not however suggest that this approach had been adopted by Australian courts. 18. The differences of approach have been regarded as irreconcilable: CAGA v Nixon 152 CLR at 494 per Gibbs CJ. The question has not been authoritatively ruled upon by the High Court. Australian courts have not applied the more stringent requirements: see Fisher & Lightwoods, Law of Mortgage at 20.21 and the cases there cited; Gomez v State Bank of New South Wales Ltd [2002] FCA 442 at [24] and [26]; Jovanovic v Commonwealth Bank of Australia [2004] SASC 61; (2004) 87 SASR 570 at 593; [2004] SASC 61 at [91]. They have continued to regard a mortgagee’s duty as equitable but they do not appear to have accepted that the duty is as extensive as that described by Menzies J in Forsyth v Blundell [1973] HCA 20; 129 CLR 477. 19. The reliance placed by the appellant upon Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646 at 650, as indicative of an approach towards some wider obligation on the part of a mortgagee, is misplaced. In that case Young CJ in Eq held that authority compelled the view that there was no duty on a mortgagee in New South Wales to render a mortgagee liable for common law damages if a good price was not obtained for the mortgaged property. The duty of which his Honour spoke, and which the appellant sought to adopt for the purposes of his argument, that to act “conscionably” (see at [38]), was that of good faith and no more. 20. The power to sell in s 78(1) of the Land Titles Act is expressed to require a mortgagee to act in good faith “and having regard to the interests of the mortgagor” and other persons. The appellant relies upon the decision in Henry Roach (Petroleum) Pty. Ltd. v Credit House (Vic.) Pty. Ltd [1976] VR 309 at 312, where Lush J considered a section of the Victorian Transfer of Land Act 1954 (Vic), which required the mortgagee to act in good faith and having regard to the interests of the mortgagor. His Honour was of the opinion that the effect of the words is to bring together the concepts of an obligation to act in good faith and an obligation akin to an obligation to exercise care in much the same way as they are blended in the dissenting judgment of Menzies, J. in Forsyth v Blundell ... and in that of Salmon, L.J. in the Cuckmere Brick Co’s case ... 21. It may be observed that his Honour the primary judge also adopted much the same approach. It is not however one which has the support of any pronouncement of the High Court nor is it one which has been adopted by Australian courts. 22. It is apparent from the passage cited from Kennedy v De Trafford [1897] AC 180 above that the equitable duty is expressed to have regard to the “interests of the mortgagor”’, as an incident of good faith. The mortgagee was not to wilfully or recklessly deal with the property “in such a manner that the interests of the mortgagor are sacrificed”. Brennan J observed in CAGA v Nixon 152 CLR at 525 that, stated in that way, the duty acknowledges the mortgagee’s interest as the primary interest which the power of sale is conferred to protect. It does not require the mortgagee to act in protection of the interests of the mortgagor, unless the mortgagee’s failure to do so would be fraudulent or would amount to a wilful or reckless sacrificing of those interests. 23. It is difficult to avoid the conclusion that the reference in s 78 of the Land Titles Act to “the interests of the mortgagor”, in the context of the requirement of good faith, was intended in the sense referred to in Kennedy v De Trafford [1897] AC 180 and applied by the courts. If it were sought to impose another, more onerous, obligation upon a mortgagee different language could have been chosen. By the time the Act was passed other legislation, containing different requirements, had been [8.155]

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Upton v Tasmanian Perpetual Trustees Ltd cont. passed in some Australian States. The provision considered in Forsyth v Blundell [1973] HCA 20; 129 CLR 477 is one example. If there were doubt about what was intended in this regard by the subsection, reference could be had to the Bill’s second reading speech: see s 8B(1) of the Acts Interpretation Act 1931 (Tas). In that speech (The Parliamentary Debate (Hansard) Tasmania, House of Assembly, 38th Parliament, Second Session, Vol II No 1, 1980 p 630) it was made plain that the section “declares the case law” with respect to a mortgagee’s power of sale. 24. The appellant’s argument with respect to s 78 is not however limited to the words appearing at the commencement of s 78(1). Particular reliance is placed by him upon the reference, in par (b) of the subsection, to the mortgagee being able to do anything that the mortgagor could do “for the purposes of making a sale of the land or any part of the land at the best price”. In the second reading speech the Minister was obviously referring to par (b) when he went on to say of the section: ...But it also extends his power to subdivide, change the use of, or otherwise develop the land for the purpose of sale. The object is to enable him to get the best price for the land. ... This was said to be in the interests of the mortgagor and subsequent mortgagees. 25. In our view the speech makes plain what is evident from the terms of s 78(1)(b) itself. What is provided is a power to carry out certain things with respect to the mortgaged property. It does not cast an obligation upon a mortgagee to undertake activities, such as the improvement of the property or the obtaining of further approvals with respect to it; nor does it require a mortgagee to seek the best price in every case. To extend a mortgagee’s duty to obtain the best price would be to convert the mortgagee to something akin to a trustee of the power of sale. Equity long ago resolved that this was not the case: CAGA v Nixon 152 CLR at 502. There is no indication in the Land Titles Act that it was intended to alter the role of a mortgagee in this way. 26. The decision of Slicer J in Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd [2000] TASSC 185 was brought to the attention of this Court. His Honour there refers to s 78 as conditioning the power of sale to the undertaking of certain procedures, an exercise in good faith and that the sale “is at the best price”’. The construction of s 78 was not a matter squarely raised in that case, which was principally concerned with the right to caveat. His Honour did not therefore undertake a detailed analysis of the point raised in this appeal. 27. In our view the Land Titles Act states the law as it is generally accepted to be in Australia. It does not extend a mortgagee’s duty to obtain the best price reasonably possible or to act in such a way so as to advance the interests of the mortgagor. These were the basic tenets of the appellant’s argument on the appeal. 28. The argument put by the appellant in these respects is without foundation. The relevant enquiry is even more limited than as stated by his Honour the primary Judge, with respect. The relevant enquiry is whether the respondent acted in good faith or whether it sacrificed the respondents interests by acting in a wilful or a reckless way. 29. The difference in his Honour’s approach of course provides no basis for a different conclusion on the issue of good faith. To the contrary his Honour went further in examining the respondent’s conduct in connexion with the sale and concluded that it had taken reasonable steps to obtain a proper price. The complaints made by the appellant on the appeal depend upon the same facts as those determined by his Honour. In our view no reason has been shown to depart from his Honour’s findings. 30. Although the appellant’s argument on the appeal took a different course, the complaints remained essentially the same, although it was even more strongly suggested that the respondent acted improperly in its dealings with Mr Patmore. In this regard it was argued that it was a breach of good faith for the respondent to advise him of the sum that was sought for the land. This seems an 648 [8.155]

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Upton v Tasmanian Perpetual Trustees Ltd cont. extraordinary proposition. The property had been properly marketed and put to auction. It remained on the market at a price based upon an independent valuation. 31. Critical to the appellant’s case, which ever way it was put, was a finding that the value of the land was substantially in excess of that for which it was sold. His Honour however accepted the opinion of the respondent’s valuer and rejected that of the appellant’s, for the reasons given. It is not suggested that that course was not open to his Honour. Rather, reliance was placed upon the appellant’s sale of Lot 2 to Mr Patmore for $32 000, as suggesting that the price obtained by the respondent for the six lots, $75 000, was insufficient. This was not however put to the respondent’s valuer as a matter which might affect his opinion. It may be that it was realised $32 000 was not the nett profit to be made. The appellant’s contract for the sale of Lot 2 required works to be undertaken so that title could issue. 32. The appellant also submitted that the respondent did not have a current valuation which supported the price at which it was sold. It did not obtain an updated valuation until after the contract had been signed. This may not have been the most prudent course, but of itself is not evidence of want of good faith. In any event the evidence shows that if the respondent had sought an updated valuation, immediately prior to its entry into the contract with Mr Patmore, it would have confirmed that there had been no increase in the value of the land to this point. Even the appellant’s valuer can be taken to have confirmed, at this time, the value he had earlier attributed to the land. The appellant’s case always assumed that the land had increased in value at the time of the respondent’s sale to Mr Patmore. Clearly the land did become more valuable, by the time Mr Patmore sold it. There was however no evidence of any increase in value as at 12 March 2003. 33. The balance of the appellant’s case was founded upon misconceptions about the obligations of a mortgagee and the rights of a defaulting mortgagor. They proceeded upon assumptions that the respondent was obliged to communicate with the appellant, advise of its intentions to sell and respond to his proposals. As his Honour the primary judge observed, they appeared to be based upon some notion that the appellant had a right of first refusal, because his interest in the lands might be lost. The argument advanced for the appellant concerning the respondent’s obligations following its entry into the contract with Mr Patmore are even more difficult to comprehend. It was suggested that it was obliged to seek a higher price from him and that it ought to have accepted his tender of outstanding monies some months later despite having a binding contract with Mr Patmore which was not liable to be set aside.

[8.165]

Notes

1. Although there has been no conclusive statement of position by the High Court, the case reflects the consistent approach of Australian courts to the effect that the duty of a mortgagee in exercising the power of sale is to act in good faith. Good faith is however used to exclude action in disregard of the interest of the mortgagor. The foundation of this approach is the High Court decision in Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676. That case involved land in north-western Victoria but the auction was held in Melbourne and advertised only in Melbourne newspapers. The court pointed to defects in the advertisements: The question therefore to be determined in this case is, in my judgment, whether the facts establish that on the sale complained of the defendants by their agent, Gill, “looked after their own interests alone”, and absolutely disregarded the interests of the mortgagor. The advertisement did not indicate the exact [8.165]

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locality of the land, the quality of the soil, whether it was under crop nor its location relative to the irrigation channel. A breach of the duty of good faith was established. 2. English courts once clearly adopted the principle that a mortgagee owes a duty of care to the mortgagor in the exercise of the power of sale: Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949. In New Zealand the English position has been followed, see Nathan Securities Ltd v Stavefield Holding (No 29) Ltd (1993) 6 BCB 227 noted at (1994) 68 ALJ 836. However the English courts now have retreated, see Medforth v Blake [2000] Ch 86 and Silvan Properties Ltd v Royal Bank of Scotland PLC [2004] 1 WLR 1410. They have generally emphasised the principle that the mortgagee is entitled to sell and need not select a time more advantageous to the mortgagor; that principle has been consistently upheld. Impact on third parties

Forsyth v Blundell [8.170] Forsyth v Blundell (1973) 129 CLR 477 High Court of Australia WALSH J: The plaintiffs Roger Gordon Blundell and Joan Blundell brought a suit in the Supreme Court of the Australian Capital Territory against Associated Securities Ltd (ASL), Shell Oil Company of Australia Ltd (Shell) and Walter John Charles Forsyth, in which the plaintiffs claimed (inter alia) a declaration that the sale of certain property at Fyshwick in the Australian Capital Territory by ASL as mortgagee to Forsyth as agent for Shell was not a bona fide exercise of the powers of sale conferred on ASL and that the plaintiffs were entitled to redeem the mortgages over the property. The suit was heard by Fox J who made a declaration that the plaintiff Roger Gordon Blundell (Blundell) was entitled to redeem the mortgages given by him over the property and ordered that ASL be restrained from completing the agreement for sale made by it with Shell on 19th March 1970. An appeal was instituted by ASL against the whole of the judgment and order of the Supreme Court. By a separate notice of appeal Forsyth and Shell instituted an appeal against the whole of the judgment and order and gave notice that they sought an order that the action be dismissed with costs or alternatively that it be dismissed against those defendants, that the claim for injunctive relief be dismissed and that there be an order for an inquiry as to damages and for the taking of an account as between the plaintiffs and ASL The appeals have been heard together. After a review of many cases in which the duty owed by a mortgagee when exercising a power of sale has been discussed, Fox J appears to have accepted the view that there is a breach of duty if the mortgagee fails “to take reasonable steps to obtain the best price available in all the circumstances” (1971) 19 FLR, at 38. His Honour found that ASL had failed to do that. But his findings went further. He said that the conduct of ASL refiected “calculated indifference” to the position of the mortgagor and that in the language used in the authorities it was “reckless” and it “sacrificed” the interests of the mortgagor (1971) 19 FLR, at 38. On those latter findings which, in my opinion, this Court should not disturb, there can be no doubt that there was a breach of duty. I do not doubt that as between himself and his mortgagee who has conducted himself in that way in entering into a contract of sale, a mortgagor is entitled to invoke the aid of the Court to prevent the completion of the contract. As between those parties, the proprietary right of the mortgagor will be protected against such a wrongful alienation by the mortgagee. But the critical question is whether the purchaser under the contract acquires a right which entitles him to have the contract completed and therefore precludes the grant of any injunction to restrain its completion. In dealing with that problem I leave aside for the present the statutory provisions which are said to have a bearing upon it. It has been submitted that a person who has entered into a contract as purchaser cannot be affected in any case by impropriety on the part of the mortgagee, not involving collusion with the 650 [8.170]

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Forsyth v Blundell cont. purchaser. It has been put as an alternative argument that, if a purchaser may be affected by notice of the facts which constitute the impropriety (not involving collusion), he can be affected only if he has such notice at the time when he enters into the contract. In my opinion, if the mortgagee does not exercise the power of sale “in good faith” (in the sense explained above) and the purchaser has knowledge of the facts which show the lack of good faith, the purchaser cannot obtain a right superior to the right of the mortgagor. Even when a contract made in such circumstances is carried to completion, in many cases the transaction may be set aside, or, alternatively, the conveyance or transfer treated as operating only as a transfer of the mortgage and of the debt secured by it, and not as a transfer of the mortgagor’s interest: see Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265 at 274-275. But if the person who agrees to purchase has no notice of any impropriety at the date of contract and continues to have no notice at the time when it is completed, he will obtain a title which cannot be challenged by the mortgagor. (It is here assumed that all statutory and contractual conditions essential to the exercise of the power of sale have been fulfilled.) If the purchaser is without notice of the relevant facts at the date of the contract, but the mortgagor takes action to challenge its propriety before completion and proves that on the part of the mortgagee it was improper, the question is whether the purchaser has a right which prevails over the right which the mortgagor would have, as between himself and the mortgagee, to restrain the completion of the contract. That is the question in this case. The mortgagor’s interest was, of course, prior in time to any interest acquired by the purchaser. The right of the mortgagor was not merely an equity of redemption. The mortgages did not operate as transfers of his title to the land: see the Ordinance, s 93(1). His title could be divested by a transfer in pursuance of a contract of sale made by the mortgagee in the exercise of the power of sale. But until that occurred, he retained a legal interest in the land. Even if the contest between these parties should be resolved on the basis that there is a competition between equitable interests, in my opinion the position of the purchaser, so far as the applicable general principles are concerned, would not be any better. In my opinion, the situation was not one in which it was open to the purchaser to claim that, although it had not acquired a legal estate, it could maintain, against a claim by the mortgagor to prevent the completion of the sale, a defence that it was a purchaser for value without notice. After a consideration of the decision and of the judgments in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, I am of opinion that the circumstances in which the interest of the trustee for the debenture holders in that case was held to prevail over the claim of the mortgagor were so different from those upon which the contest here depends that the case is not an authority upon which Shell can rely. I am of opinion, also, that the contest cannot be resolved in favour of Shell by the application of the principles upon which in Abigail v Lapin (1934) AC 491 and in Breskvar v Wall (1971) 126 CLR 376 the claims of the parties whose interests were first in time were postponed to the claims of the other parties. This is not merely for the reason that in the present case Blundell had more than an equitable interest. If his interest is considered as being for present purposes no more than an equitable interest, his conduct did not contribute in my opinion, to any false assumption or belief upon which Shell acted in entering into the transaction (see Breskvar v Wall (1971) 126 CLR 376), nor did it affect Shell in any other way which would make it inequitable to assert against Shell the interest of Blundell. By executing the mortgages and defaulting in payments under them, Blundell did bring about a situation in which ASL was empowered to sell the property. But if the mortgagee did not act bona fide in the exercise of the power of sale, and the purchaser, being unaware of this, assumed that the mortgagee was acting bona fide, that assumption was not one which any conduct of Blundell caused the purchaser to make. If a contract of sale had been made which was not affected by any impropriety, it would not have been open to the mortgagor to claim that until the contract had been completed his right to redeem [8.170]

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Forsyth v Blundell cont. the mortgage continued notwithstanding the contract and was superior to the right of the purchaser. Although he retained his title to the land this was subject to the power of sale as defined in the Ordinance and as incorporated into the mortgage instruments. In my opinion, a contract of sale properly made in the course of the exercise of that power is binding upon the mortgagor, not because the mortgagee contracts as agent for the mortgagor, but because by entering into a mortgage to which the Ordinance applies the mortgagor makes his own rights subject to its provisions, including those which confer and regulate the power of sale, and, therefore, subject to any action which is properly taken in good faith by the mortgagee. On this question, I regard as applicable and as correct the decision in Waring (Lord) v London and Manchester Assurance Co Ltd (1935) 1 Ch 310, approved in Property & Bloodstock Ltd v Emerton (1968) 1 Ch 94, that a contract by the mortgagee to sell the property is binding, before completion, upon the mortgagor unless it be proved that the mortgagee exercised his power of sale in bad faith. But here it is contended that as a matter of general principle and independently of the meaning and effect of the provisions of s 94(2), 94(3) and 94(5) of the Ordinance, such a contract is binding before completion upon the mortgagor, even if the mortgagee acted in bad faith, unless he acted in collusion with the purchaser, or, alternatively, unless the purchaser had knowledge at the date of the contract of the facts which affected the propriety of the sale. In my opinion, this proposition should not be accepted. If the matter is to be determined in accordance with the general principles by which disputes as to priority between competing claims are resolved, there is no principle which operates to postpone the right of the mortgagor to that of the purchaser. In my opinion, the authorities to which we were referred do not support the foregoing submission. As Fox J said, many of the cases dealing with the matter were cases in which there had been a conveyance or transfer. In Lukass Investments Pty Ltd v Makaroff (1964) 82 WN (Pt 1) (NSW) 226 at 227, Jacobs J said, that he accepted the submission that in that case the relevant time at which a purchaser could be affected by notice of impropriety was the time of the making of the contract. His Honour did not give reasons for that opinion and upon the view that he took of the facts the question did not affect the decision of the case. In Davis v Taylor (1948) 48 SR (NSW) 514, it was not necessary to decide the question now under consideration. The decision in Brigers v Orr (1932) 32 SR (NSW) 634, to which I shall refer again, turned entirely upon the terms of a protection clause in the bill of sale there considered. The observations of Crossman J in Waring’s Case (1935) 1 Ch 310 at 318, are opposed to the submission made on behalf of Shell: see also Holohan v Friends Provident and Century Life Office (1966) IR 1 at 26. It was argued that the position of a purchaser from a mortgagee is analogous to that of a purchaser who makes a contract with an agent acting within his ostensible authority but in breach (unknown to the purchaser) of his duty to his principal. In my opinion, the analogy is not acceptable. The mortgagee in making a sale is acting on his own behalf and primarily in his own interests. The sale is not one by which the mortgagor, through the medium of an agent, is disposing of his own property. It is one by which his property is being divested from him. If the power vested in the mortgagee is properly exercised the mortgagor is bound. But if it is not exercised in good faith there is, in my opinion, no reason that can be derived from any general principle for holding that before completion the purchaser gets a good title as against the mortgagor. It is necessary now to refer to some provisions of the Ordinance. In the Supreme Court it was argued that Shell had a title which was made unimpeachable by s 94(5) of the Ordinance which is in these terms: Where a transfer is made in professed exercise of the power of sale conferred by this Ordinance, the title of the transferee shall not be impeachable on the ground that no case has arisen to authorise the sale or that due notice was not given or that the power was otherwise 652 [8.170]

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Forsyth v Blundell cont. improperly or irregularly exercised, but any person damnified by an unauthorised or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power. In my opinion, his Honour was correct in rejecting that submission, which was not pressed at the hearing of these appeals. The provision applies where a transfer is made and is not applicable in this case. But counsel for Shell relied on s 94(2) which is in these terms: All sales, contracts, matters and things made, done or executed in pursuance of the last preceding subsection shall be as valid and effectual as if the mortgagor or encumbrancer had made, done or executed them, and the receipt or receipts in writing of the mortgagee or encumbrancee shall be a sufficient discharge to the purchaser of the land, estate or interest, or of any portion thereof, for so much of his purchase money as is thereby expressed to be received. In the Supreme Court Fox J said that counsel for Shell mentioned that provision but without making any submission thereon. His Honour then expressed the view that the first part of the provision, which derives from the earliest Real Property Acts, was introduced to ensure that a mortgagee could give title and could contract to do so, although he himself had not title. His Honour said that the purpose was not to give more protection to a purchaser than he had under the general law. I agree with respect with that view. The second part of s 94(2) does give protection to a purchaser in relation to his payment of the purchase money and its subsequent application by the mortgagee. But the first part of the provision should be regarded as supplementary to the powers conferred upon the mortgagee by s 94(1) to sell the estate and interest of the mortgagor and to make and execute all such instruments and documents as are necessary for effecting the sale thereof. A literal reading of the words of s 94(2) might lead to the result that no challenge could be made by a mortgagor to a contract of sale made by a mortgagee after default had occurred for the period mentioned in s 94(1) upon any ground at all relating to the improper conduct of the mortgagee, regardless of whether or not the impropriety was at all times known to the purchaser. Thus, if a contract provided for a sale at such an undervalue as would be regarded, according to the authorities, as being itself evidence of fraud, it could not be said that if an owner had himself entered into such a contract he could have it set aside as fraudulent merely because of the inadequate contract price, without any proof that he was induced by the fraud of the purchaser to enter into it. If s 94(2) is read as rendering such a contract immune from challenge when made by a mortgagee, it goes further in protecting the contract of a purchaser prior to completion than does s 94(5) in protecting a purchaser to whom a transfer has been made. In my opinion, it should not be so read. The protection given by s 94(5) extends, when a transfer has been made, not only to a case where the sale is unauthorised or made without due notice, but also to a case in which the power is being “otherwise improperly or irregularly exercised”. This provision is similar to that contained in subsection (3)(b) of s 112 of the Conveyancing Act 1919 (NSW), as amended, in which subsection (3)(a) provides, also, that a purchaser shall not either before or on conveyance be concerned to see or inquire whether a case has arisen to authorise the sale or due notice has been given or the power is otherwise properly and regularly exercised. That section does not apply, however, to mortgages or encumbrances under the Real Property Act. In s 94(3) of the Ordinance a purchaser is given a limited protection against failure to make inquiries. He is not concerned to inquire as to the fact of any default or notice having been made or given as provided in s 939 But he is not expressly relieved from inquiry as to whether the power is otherwise being properly and regularly exercised. That circumstance has no direct bearing on the present case, where the question is not whether the purchaser has lost, by failure to inquire, a protection to which otherwise it would have been entitled. But the inclusion in s 94 of subsection (3), together with the inclusion of subsection (5), indicates, in my opinion, that one ought [8.170]

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Forsyth v Blundell cont. not to give to subsection (2) an effect which would give a purchaser, before completion, a complete immunity from the intervention of the Court to restrain the completion of a contract made by him with a mortgagee who did not exercise the power of sale in good faith. It was submitted that the immunity of the purchaser (before as well as after completion) afforded by s 94(2) is no greater than the purchaser would have under the general law without its aid. It was said that the subsection is directed only to cases in which the occasion for the exercise of the power of sale has in fact arisen and the formalities for its exercise have been duly carried out, whereas s 94(5) applies if the power of sale has not become exercisable, because some condition upon which the power depends has not been fulfilled. In the former class of case, it was submitted, the purchaser may rely on the contract, against a challenge to its propriety made before completion, except where he has himself been guilty of collusion or fraud. I have already given reasons for rejecting the view that the right of a mortgagor to impugn a contract of sale made by his mortgagee is confined in that way. I cannot accept as correct the narrow limitations placed upon that right in Davis v Taylor (1948) 48 SR (NSW) 514 at 519. In my opinion, if the submission on behalf of Shell as to the effect of s 94(2) were accepted, it would extend greatly the protection to which a purchaser from a mortgagee has been regarded as being entitled, according to general principles and according to the interpretation which has been placed judicially on various protection clauses commonly contained in mortgage instruments or in legislation regulating the exercise by mortgagees of their powers of sale. In particular, the provisions in similar terms, contained in various Acts, which have been in force since the establishment of the Torrens system, have not been interpreted as having the effect which the submission seeks to put upon s 94(2). In my opinion, the submission should not be accepted. [Mason J agreed; Menzies J dissented.]

Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd [8.175] Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd (1981) 28 SASR 214 Full Court of the Supreme Court of South Australia MITCHELL A-CJ: Mr Perry’s second argument concerning s 134 of the Real Property Act was that the section could not operate to give to the purchaser for value an equity which ranked in priority ahead of the equity of the mortgagor where proper notice had not been given. He derived this argument from the reasons for judgment of Walsh J in Forsyth v Blundell (1973) 129 CLR 477. That was a very different case from this. It was one in which Walsh J referred (at 496-497) to impropriety on the part of the mortgagee. I do not agree with the contention of Mr Perry that impropriety includes failure to give the requisite notice. The passage upon which Mr Perry relied particularly was at 498 of the judgment where his Honour said: Even if the contest between these parties should be resolved on the basis that there is a competition between equitable interests, in my opinion the position of the purchaser, so far as the applicable general principles are concerned would not be any better. In my opinion, the situation was not one in which it was open to the purchaser to claim that, although it had not acquired a legal estate, it could maintain, against the claim by the mortgagor to prevent the completion of the sale, a defence that it was a purchaser for value without notice. That statement was made in the context of the particular situation in Forsyth’s case (1973) 129 CLR 477. At 502 Walsh J said: In s 94(3) of the Ordinance a purchaser is given a limited protection against failure to make inquiries. He is not concerned to inquire as to the fact of any default or notice having been made or given as provided in s 93. But he is not expressly relieved from inquiry as to whether 654 [8.175]

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Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd cont. the power is otherwise being properly and regularly exercised. That circumstance has no direct bearing on the present case, where the question is not whether the purchaser has lost, by failure to inquire, a protection to which otherwise it would have been entitled. But the inclusion in s 94 of subsection (3) together with the inclusion of subsection (5), indicates, in my opinion, that one ought not to give subsection (2) an effect which would give a purchaser, before completion, a complete immunity from the intervention of the Court to restrain the completion of a contract made by him with a mortgagee who did not exercise the power of sale in good faith. Subsections (2) and (3) of s 94 of the Ordinance contain all the provisions of s 134 of the South Australian Act. Subsection (5) reads as follows: Where a transfer is made in professed exercise of the power of sale conferred by this Ordinance, the title of the transferee shall not be impeachable on the ground that no case has arisen to authorise the sale or that due notice was not given or that the power was otherwise improperly or irregularly exercised, but any person damnified by an unauthorised or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power. As I understand the passages in the judgment of Walsh J which I have cited they mean that the protection given to a purchaser upon a mortgagee’s sale is not absolute; that it is effectual against the mortgagor notwithstanding that default may not have been made or that the appropriate notice may not have been made or given but that it does not give the purchaser a title superior to that of the mortgagor where some other reason exists to set aside the sale. I do not find anything in Forsyth v Blundell (1973) 129 CLR 477 to suggest that any equity which the mortgagor may have could be in priority to the equity of a bona fide purchaser for value where the only complaint is in relation to the default or the notice. In my opinion, therefore, the appellant cannot support his claim for an injunction against the fourth and fifth named respondents. [Wells and White JJ agreed.]

Note

[8.180]

The legislative provisions are not consistent amongst the jurisdictions and it is unclear where they each fall on the issues of protection for a purchaser before and after registration. Generally a purchaser who has become registered will be protected by indefeasibility. Prior to registration the purchaser is taking from a mortgagee who has a statutory power of sale, not legal title to a fee simple interest; the purchaser will have an equitable interest and commonly a prior owner will have an equitable right of rectification. The issue of protection for a purchaser from a mortgagee and the relevant statutes are discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [7.470]–[7.485].

[8.180]

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PART3

CHAPTER 9 Dispositions of Land and Goods [9.00]

FORMALITIES FOR THE TRANSFER OF LAND ...................................................... 659 [9.00]

Legal interests ...................................................................................... 659 [9.05]

[9.15]

[9.20]

[9.30]

Manton v Parabolic Pty Ltd .................................................... 661

Equitable interests ............................................................................... 663 Wratten v Hunter .................................................................. 664

OVERCOMING A LACK OF FORMALITIES ........................................................... 667 [9.30] [9.35]

[9.45]

Regent v Millett .................................................................... 667 ANZ Banking Group Ltd v Widin ............................................ 669

EFFECT OF CONTRACTS FOR THE SALE OF LAND ............................................ 675 [9.45] [9.65]

[9.75]

Chan v Cresdon Pty Ltd ......................................................... 675 Tanwar Enterprises Pty Ltd v Cauchi ....................................... 682

SALE OF GOODS ................................................................................................... 686 [9.80] [9.90]

[9.100]

GIFTS OF CHATTELS .............................................................................................. 691 [9.100] [9.105] [9.115] [9.125]

[9.135]

691 692 694 696

Corin v Patton ...................................................................... 698

DETRIMENTAL RELIANCE ON A REPRESENTATION ............................................ 708 [9.150] [9.160] [9.170] [9.180]

[9.190]

Re Stoneham ........................................................................ Re Cole ................................................................................. Wrightson v McArthur ........................................................... Jones v Lock ..........................................................................

GIFTS OF LAND ..................................................................................................... 698 [9.135]

[9.145]

Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd .................................. 686 Harrison v Lia ....................................................................... 689

Waltons Stores (Interstate) Ltd v Maher .................................. Maxted v LC Smith & Co Pty Ltd ............................................ Brand v Chris Building Co Pty Ltd ........................................... ER Ives Investment Ltd v High ................................................

709 718 724 726

REGULATION OF LAND SALES DEALINGS .......................................................... 728 [9.190]

Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 ..................................................... 728

FORMALITIES FOR THE TRANSFER OF LAND Legal interests [9.00]

1.

From the 19th century the deed has been the primary method for the conveyance of freehold estates in land outside the Torrens system. Australian legislation followed English legislation providing that freehold estates should lie in grant. Statutory provisions in New South Wales, Victoria, South Australia, Western Australia and Tasmania require that a deed is to be used to create or pass a legal interest in land: [9.00]

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Conveyancing Act 1919 (NSW), ss 23B(1), 23D; Property Law Act 1958 (Vic), s 52(1); Law of Property Act 1936 (SA), s 28(1); Property Law Act 1969 (WA), s 33(1); Conveyancing and Law of Property Act 1884 (Tas), s 60(1); The Victorian provision is typical 51. Lands lie in grant only (1) All lands and all interests therein shall lie in grant and shall be incapable of being conveyed by livery or livery and seisin, or by feoffment, or by bargain and sale; and a conveyance of an interest in land may operate to pass the possession or right to possession thereof, without actual entry, but subject to all prior rights thereto. (2) The use of the word “grant” is not necessary to convey land or to create any interest therein. 52. Conveyances to be by deed (1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed. (2) This section shall not apply to– (a) assents by a personal representative; (b) disclaimers made in accordance with the provisions of any law relating to bankruptcy or insolvency or not required to be evidenced in writing; (c) surrenders by operation of law, including surrenders which may, by law, be effected without writing; (d) leases or tenancies or other assurances not required by law to be made in writing; (e) receipts not required by law to be under seal; (f) vesting orders of the Court or other competent authority; (g) conveyances taking effect by operation of law. 54. Creation of interests in land by parol (1) All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorized in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only. (2) Nothing in the foregoing provisions of this Division shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine. 55. Savings in regard to sections 53 and 54 Nothing in the last two preceding sections shall– (a) invalidate dispositions by will; or (b) affect any interest validly created before the commencement of the Property Law Act 1928; or (c) affect the right to acquire an interest in land by virtue of taking possession; or (d) affect the operation of the law relating to part performance.

As to sealing and delivery requirements see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [8.105]. In Queensland, the Australian Capital Territory and the Northern Territory, writing is required: Property Law Act 1974 (Qld), s 10(1); Civil Law (Property) Act 2006 (ACT), s 201; Law of Property Act (NT), s 9(1). 660 [9.00]

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Manton v Parabolic Pty Ltd [9.05] Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 New South Wales Supreme Court YOUNG J: It seems to be a feature of every legal system that there must be some particular ritual, act or instrument by which a person can notify the community that he most solemnly means what he is doing as being binding on him. In Biblical times, this solemnity was provided by the contracting parties slaughtering an animal, cutting its carcass in two, and together walking between the two halves, see Genesis Ch 15: 10-18. In Roman law there was the stipulatio. Sir Henry Maine in his Ancient Law (Everymans Library Edition at 184) says: That which the law arms with its sanctions is not a promise, but a promise accompanied with a solemn ceremonial. Not only are the formalities of equal importance with the promise itself, but they are, if anything, of greater importance; for that delicate analysis which mature jurisprudence applies to the conditions of mind under which a particular verbal assent is given appears, in ancient law, to be transferred to the words and gestures of accompanying performance. In early land law, the only effective method of conveying was by traditio or as it is usually put, by livery of seisin. It would seem, see Pollock and Maitland, 2nd ed at 82 and following, that originally the two parties to a conveyance attended on the land. The vendor removed his battle glove with which he had defended the land and vested the purchaser with it. It is, of course, from this ceremony that we get the words “vesting in possession” and the like. The vendor then took his knife and dug up a sod and lifted it up and handed it to the purchaser. This lifting up and handing over is the livery. The vendor then handed the purchaser the knife which was usually broken or twisted into a unique shape as a memorial of the transaction. The vendor then publicly quit the land and usually threw to the purchaser a wand or rod or festuca. No-one really knows exactly what the festuca was, but as Pollock and Maitland say (at 85) there is no doubt it had a great contractual efficacy. The parties then repaired to the Church where the knife was usually laid up on the altar. As time went on, a parchment memorial of what had happened was substituted for the knife or the festuca, though for a while, the knives were often incorporated in the wax of the seal that was placed on the deed. By 1600 the parchment which was called “the Charter” or “the Factum” or “the Deed” had entirely replaced the ancient symbols of livery. The word “factum” of course, came from the supine form of the Latin verb “to do” or “to act”, and the factum or deed was the memorial of the most solemn act that a person could do with respect to his land. In truth, whilst originally the parchment was mere evidence of the actual livery of seisin that had taken place on the site, in time it went through the stages of being conclusive evidence of that fact to the stage where the factum itself became the medium by which the conveyance was effected. Thus the substantial requirement of a deed is that it be intended by the party who does it to be the most solemn indication to the community that he really means to do what he is doing. That solemn indication is given by sealing a deed which witnesses to what has been done. Even today, these documents say: “In witness whereof I have hereunto affixed my hand and seal.” So then, a deed is the most solemn act that a person can perform with respect to a particular property or contract involved, and the form of that deed is as laid down by the law from time to time. With Old System land prior to the Conveyancing Act, the solemn act required for a conveyance had to be a feoffment with livery of seisin recorded in a deed, bargain and sale with lease and release or release pursuant to the Conveyancing and Law of Property Act 1898, or one of the other particular ways which the law allowed. The act had to include two sets of magic words, operative words (the necessity for which was removed by the Conveyancing Act 1919, s 46), and words of limitation. With Torrens System land, the solemn act required is different. It is the proper completion of the prescribed form and the registration of that dealing on the Register. With Crown Lands, yet another solemn form is [9.05]

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Manton v Parabolic Pty Ltd cont. prescribed, that is, the form that has been prescribed pursuant to the regulations under the Act. In each case, by completing the appropriate form and having it registered, the conveyor does the most solemn thing possible in order to divest himself of his estate, …

[9.10]

Notes and Questions

1. Formalities are significant to provide evidence of the existence of a transaction and that the parties truly intended to be bound by the transaction. A formal document should ensure that all key terms are set out and particularly that the weaker party has some notice of the obligations being undertaken. Documents lessen the ability to perpetrate fraud by allegations of a transaction that does not exist. Are there arguments for formalities beyond the need for evidence of the existence of the transaction? Do these arguments differ according to the subject matter involved? The common law had a very public process for the transfer of land by feoffment with livery of seisin which is described in the above case. Similarly continental legal systems have required execution of documents before a public notary. 2. However various methods besides feoffment with livery of seisen were adopted as a means of conveying interests in land in a less public manner. These methods were the lease and release and the bargain and sale. 3. There are exceptions to the rule requiring a deed to create or pass a legal estate in land. First, leases for a term not exceeding three years, taking effect in possession, may be created orally (see above, for example s 54(2) of the Victorian Act above). Secondly, various interests which are legal in nature may arise pursuant to possession or long use. (See [3.100]–[3.120].) 4. The requirement of a deed to create or pass a legal estate in land resulted in chains of title (or written records of ownership) being set up in respect of individual pieces of land. The chain of title comprised all documents affecting interests in the land, not just deeds. A further split or fragmentation in estates in land occurred between legal and equitable ownership. A document such as an express trust or a contract of sale affecting equitable title only, may form part of the chain of title. These chains of title comprising documents affecting estates in the land going back where possible to the original Crown grant, form the basis of the general law land conveyancing system. A purchaser who wishes to be satisfied that the vendor has the estate which is being purported to be sold, has to search each individual document in the chain of title to ensure that the “chain” from Crown grant to the vendor remains “unbroken”. The task was, and remains, a long and complicated one. Even where a thorough search was conducted, it was still not possible to declare with complete certainty that the vendor had a clear title. Statutory provisions to limit the searches required of a purchaser were introduced in all States except South Australia. 5. The provisions concerning deeds were enacted before the Torrens system of land registration came into existence in Australia. A deed is not the method by which legal title is passed with respect to Torrens land: it is registration of the appropriate document which passes legal title: Real Property Act 1900 (NSW), s 41; Transfer of Land Act 1958 (Vic), 662 [9.10]

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s 40(1); Land Title Act 1994 (Qld), s 181; Real Property Act 1886 (SA), s 67; Transfer of Land Act 1893 (WA), s 58 Land Titles Act 1980 (Tas), s 49(1); Land Titles Act 1925 (ACT), s 57; Land Title Act (NT), s 184; Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [4.60]. Nevertheless, a registered document under the Torrens system is deemed to be a deed and so property principles that flow from the execution of a deed are equally applicable to a registered instrument under Torrens land. Equitable interests [9.15] An express trust may take the form of a declaration of trust whereby the owner of the land declares himself or herself a trustee of the land for another person. Alternatively, the owner of the land may transfer the title to a trustee to be held on trust for another person. The trust may relate to the whole of the interest in the land or to a lesser or more limited interest. Thus A, the fee simple owner, may declare himself a trustee for B of the whole interest or alternatively A may declare that she holds the estate on trust for B as to a life estate in B. A trust may be made over a legal or equitable interest in land. Although no specific or formal words are required, the language used must demonstrate an intention to create a trust. As Wilson J stated in Bloch v Bloch (1981) 37 ALR 55, 59 “[w]hilst it is true that no particular form is necessary for the creation of an express trust, the intention of the settlor to create a trust must be explicit. In every case it is a question of fact for the court to determine whether an intention to create a trust is sufficiently evinced.” There are statutory provisions in all jurisdictions setting out the formal requirements for the creation of trusts (and thus equitable interests) in relation to land and also for the disposal of equitable interests. The basic requirement is that of writing: Conveyancing Act 1919 (NSW), ss 23C, 23D; 23E; Property Law Act 1958 (Vic), ss 53 – 55; Property Law Act 1974 (Qld), ss 11 – 12; Law of Property Act 1936 (SA), ss 29 – 31; Property Law Act 1969 (WA), ss 34 – 36; Conveyancing and Law of Property Act 1884 (Tas), s 60(2) – (5); Civil Law (Property) Act 2006 (ACT), ss 201 – 203; Law of Property Act (NT), ss 9 – 11. The statutes commonly have three key paragraphs as in the following example: (1) With respect to the creation of interest in land by parol– (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(2)

(b)

a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;

(c)

a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will

This section shall not affect the creation or operation of resulting, implied or constructive trusts.

[9.15]

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Wratten v Hunter [9.20] Wratten v Hunter [1978] 2 NSWLR 367 New South Wales Supreme Court [Before his death, the father transferred land to one of his sons. At the father’s funeral, the son announced to his brothers and sisters – “I promise to live in the home and care for the home and property for us all”. The son died and a declaration was sought that the other brothers and sisters had an equitable interest in the land pursuant to a declaration of trust by the son.] NEEDHAM J: …The parties agreed to litigate a preliminary point before trial of the facts and the preliminary point is whether s 23C(1)(b) of the Conveyancing Act 1919, constitutes a complete defence to the proceedings. The parties have proceeded on the basis that a trust was declared, and the defendant, conceding that for purposes of the argument, relies upon the provision of the Conveyancing Act to which I have referred. Therefore, one can approach the problem on the basis that the facts broadly are as follows: that Ambrose Blanch, the father of Bertram and of the plaintiffs and of the other persons to whom I have referred, conveyed the land to Bertram by memorandum of transfer dated 8th March, 1951. On 11th June, 1951, Ambrose Blanch died. On 12th June, 1951, the day of Ambrose Blanch’s funeral, five daughters and the two sons of the deceased met at a hotel in Raymond Terrace after the funeral. Bertram, in the presence of those persons, made a declaration in words to the following effect: “I promise to live in the home and care for the home and property for us all.” It was said that he made this statement whilst holding in his hand the family bible. After some discussion the other parties present agreed that Bertram Blanch could live in the home for an indefinite period. For the defendant, it is submitted that s 23C(1)(b) plainly applies, that provision reading as follows: Subject to the provisions of this Act with respect to the creation of interests in land by parol– … (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; … Section 23C(2) provides that the section “does not affect the creation or operation of resulting, implied, or constructive trusts”. The plaintiffs submit that the principle of such cases as Rochefoucauld v Boustead [1897] 1 Ch 196 applies just as effectively to a situation such as the present as to the particular types of situation concerned in those cases. There is no doubt, as the plaintiffs submit, that the principle is well established that the Statute of Frauds cannot be used so as to cloak a fraud. Accordingly, in cases where the Court holds that it would be a fraud for the defendant to set up the statute, so as to prevent evidence of a beneficial interest being proved in the plaintiff, the principle is applied and the evidence is admitted to prove the beneficial interest. Mr McLaughlin has taken me through a number of cases settling and illustrating this principle, and has submitted that there is no distinction in principle between the principles settled by those cases and the case where a person who is the owner of land, obtained without reference to any beneficial interest in another, voluntarily declares a trust of that land; and, thereafter, either he, or a person claiming under him, seeks to rely upon the statute so as to defeat the claim of the person or persons in whose favour he made the oral declaration. However, in my opinion, the principle of Rochefoucauld v Boustead [1897] 1 Ch 196 does not apply in such a case. The principle of that case is, I think, adequately set out by Lindley LJ (delivering the 664 [9.20]

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Wratten v Hunter cont. judgment of the Court of Appeal constituted by himself, Lord Halsbury LC, and A L Smith LJ) who said [1897] 1 Ch 196, 206: “It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself.” I could add that the principle applies also where land is conveyed to a person as a mortgagee by absolute conveyance, and he subsequently seeks to rely upon the absolute conveyance so as to deny the equity of redemption of the mortgagor. Many of the different types of case were referred to by Hope J, in Last v Rosenfeld [1972] 2 NSWLR 923. His Honour there applied the principle of Rochefoucauld v Boustead [1897] 1 Ch 196, but recognised that that principle did not apply to a voluntary oral declaration of trust by a person who obtained the full beneficial interest in land, untrammelled by any consideration of trust, or of beneficial interest in any other person. For example, Hope J said [1972] 2 NSWLR 923, 928: “Whilst equity did not prevent the Statute of Frauds applying in those cases where a person had made an oral declaration of trust in respect of land already held by the declaror, it did, at any rate in some cases, give relief, notwithstanding the terms of the statute, in those cases where a person acquired property on terms that he would hold as trustee for the person transferring to him.” Having considered a number of cases, his Honour said [1972] 2 NSWLR 923, 930: “All the above cases are, of course, cases where the person against whom it is sought to enforce a trust had acquired property upon terms that he should hold as trustee; they were not cases where a person holding property, after his acquisition of it, constituted himself as trustee.” Again his Honour said [1972] 2 NSWLR 923, 923, 933: “Although courts of equity would thus not permit the statute to be made an instrument of fraud, ‘By this it cannot be meant that equity will relieve against a public statute of general policy in cases admitted to fall within it’: Maddison v Alderson (1883) 8 App Cas 467, at p 474. Thus it has never been doubted that the Statute of Frauds applies to a mere voluntary declaration of trust by a person who at all material times was the owner of the relevant property: Organ v Sandwell [1921] VLR 622, 630.” In Organ v Sandwell [1921] VLR 622, 630, which was a decision of the Full Court of the Supreme Court of Victoria constituted by Sir William Irvine CJ, Cussen J and Scutt J, the joint judgment, delivered by the Chief Justice, had this to say: “Mr Ham, for the appellant, relied on McKie v McKie (1898) 23 VLR 489. The facts of that case, when examined, have no analogy to the facts of this. It is sufficient to say that in that case no right or property had passed from the son to the father. It has never been doubted that the Statute applies to a mere voluntary declaration of trust.” There are other statements with similar effect in other cases to which I was referred, and the textbooks to which I was referred also recognise the application of the statute to cases such as this. For example in Jacobs on Trusts, 4th ed, par 708, p 83 the authors say: “Equity did not object to reliance upon the Statute where it was relied on by a declarant who had purported to declare himself trustee of land he already held, by oral statement not made for value. But equity does consider it a fraud for a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land as his own.” The latter statement will be recognised as emanating from Rochefoucauld v Boustead [1897] 1 Ch 196. Similarly, Meagher, Gummow and Lehane in Equity – Doctrines and Remedies, par 1223, at pp 307, 308 say: “On the other hand the cases on s 7 (which is the predecessor or antecedent of s 23C(1)(b)) directly counter its provisions and appear authority for the proposition that the Statute may not be pleaded by the party holding the land against a claim that he only acquired the land upon trust for the claimant. These decisions turn upon the fact that but for the conveyee’s acceptance of the trust the [9.20]

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Wratten v Hunter cont. conveyor would never have transferred the land to him; they do not go so far as to waive the statute where A, having acquired land independently, later ineffectively declares himself trustee for a volunteer.” Mr McLaughlin has suggested that these statements are based upon no authority, and that I am free to equate the present case with the type of case dealt with in Rochefoucauld v Boustead [1897] 1 Ch 196. However, it seems to me that the statute itself is ample authority for its application to such a case; and the cases which have declined to permit the statute to be relied upon have produced a principle that, in certain circumstances, the statute is inapplicable. It seems to me that, unless there is some decision binding on me that in the case of a voluntary oral declaration of trust by a person who is the owner of the whole beneficial interest in land the declaration is unaffected by the statute, it is my duty to apply the statute in accordance with its terms. During argument, I asked Mr McLaughlin to indicate what, in his submission, would be the ambit of s 23C(1)(b), if a case such as the present was not within it. Mr McLaughlin did point to some doubts expressed by a court as to the full and proper interpretation of the paragraph, but was unable, I think, to indicate any area of application of s 23C(1)(b), if it did not apply in the present case. In any event it seems to me that the statement of the Full Court of Victoria in Organ v Sandwell [1921] VLR 622, 630 is sufficient authority for me to apply to the circumstances of this case. For those reasons, I think the plaintiffs would not succeed in the proceedings over the defence of s 23C(1)(b) of the Conveyancing Act. It is not necessary for me to consider whether the facts of the case would take it into the provisions of s 23C(1)(a). Accordingly, I think I should dismiss the summons with costs. Exhibits may be returned.

[9.25]

Notes

1. There is some doubt as to whether paragraph (a) of the standard statutory provisions set out in [9.15] applies to only legal interests or to legal and equitable interests. The majority of the High Court in Adamson v Hayes (1973) 130 CLR 276 appeared to take the view that s 53(1)(a) applied to the creation and disposition of equitable interests in land: see Walsh J at 297, Gibbs J at 304 and Stephen J at 319. Cf the view of Menzies J at 292. If paragraph (a) is applicable to the creation or disposition of equitable interests, there is clearly an overlap between paragraphs (a) and (b). In the case of a declaration of trust, for example, must there be compliance with paras (a) and (b) or only para (b)? This may be of importance in the case of a declaration of trust as paragraph (a) requires that the creation or disposition must be in writing whereas paragraph (b) requires only that the declaration be evidenced in writing. 2. There is some uncertainty as to whether paragraph (a) provision (in [9.15]) applies to the creation of equitable interests pursuant to a contract of sale. Different conclusions have been reached in a number of single Supreme Court judgments: see, for example, Redden v Wilks [1979] WAR 161; Abjornson v Urban Newspapers Ltd [1989] WAR 191; Trifid Pty Ltd v Ratto [1985] WAR 19. In Marist Brothers Community Inc v Shire of Harvey [1994] 14 WAR 69, however, the Full Court of the Supreme Court of Western Australia, overruling Redden v Wilks, held that the provision did not apply to contracts for the sale of land on the basis that the Western Australian provision “is essentially directed to the creation of interests in land [by conveyances and other instruments such as express trusts] 666 [9.25]

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and not to agreements as such.” The court contrasted Adamson v Hayes (1973) 130 CLR 276 on the basis that in that case the agreement itself created interests. Baloglow v Konstantinidis (2001) 11 BPR 20,721 (NSW CA) is to a similar effect. See also Honey, “Marist Brothers Community Inc v Shire of Harvey: Formalities Relating to Contracts for the Sale of Land” (1995) 25 UWALR 180. 3. An express trust arises where there is an intention to separate legal and equitable interests. A transfer may be made to a person who is to hold for the benefit of another or a legal owner may undertake to hold for the benefit of another. A constructive trust on the other hand arises by operation of law; a trust is imposed to do justice between the parties. However an express trust may not be articulated as such by the parties; the trust is express in the sense that it is the result of the parties actions, they intend to do what amounts to a separation of legal and equitable title: Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6. French CJ stated: The implication of intention precedes the ascertainment of an express trust. Failure to appreciate that sequence may lead to the imputation of a trust without proper consideration of intention. The ascertainment of an express trust may come to resemble the imposition of a constructive trust, which has been described by this Court as “a remedy which equity imposes regardless of actual or presumed intention”. Although it has been suggested that “unconscious express trusts”, like constructive trusts, are “imposed by the court, in truth, in recognition of a factor affecting the conscience of the common law owner of the property”, ascertainment is not a vehicle for imposition. The boundaries between express and constructive trusts have not always been clear and have sometimes varied according to their significance for particular statutory provisions. But while there may be overlap in their application, the requirement of an imputed intention marks a conceptual distinction between them.

4. Where a transfer is made with a benefit for a third party the existence of a trust in favour of that third party depends on whether the benefit is intended to be by way of an equitable obligation in favour of that third party.

OVERCOMING A LACK OF FORMALITIES Regent v Millett [9.30] Regent v Millett (1976) 133 CLR 679 High Court of Australia GIBBS J: This regrettably protracted litigation arises out of an unfortunate family dispute. The respondents, the plaintiffs in the action are husband and wife. The appellants, the defendants, are the parents of the female respondent. The respondent sought specific performance of an oral agreement for the transfer of a house property at Sefton. According to the findings of the learned trial judge which were not, and could not have been, challenged, the appellants bought the house at Sefton in November 1969 for a purchase price of $4,500. They provided $1,000 of the price in cash and borrowed $3,500 from a bank on mortgage. Some time between November 1969 and April 1970 it was agreed between the appellants and the respondents that in consideration of the respondents agreeing to pay off the whole of the mortgage debt, including the interest thereon, and repaying the appellants the amount of $1,000, which was inaccurately described as a “deposit”, the respondents were to be entitled to live in the house, treat it as their own and have it transferred to them when the mortgage was paid off and the $1,000 repaid to the appellants. [9.30]

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Regent v Millett cont. Subsequently, in April 1970, the respondents went into possession of the property and they were still residing there at the date of the trial. In June 1970 they began paying off the mortgage instalments. Payments had at first been made by the male appellant, but they were thereafter made by the respondents directly to the bank for credit to the appellants’ account. However, the respondents were short of money and at times fell into arrears. Of those arrears some were paid off by the male appellant, and the rest were met by the respondents. Most of the rates and taxes were paid by the male appellant, but in one instance payment was made by the respondents. The house was in bad condition and when the respondents went into possession they effected some repairs to it. In 1972 they were expecting a second child and wished to carry out some renovations and extensions. For this purpose they needed about $3,000 and the male appellant agreed to accompany the male respondent to the bank with a view to increasing the bank loan from $2,000, to which it had by this time been reduced, to $5,000. On 6th December 1972 they saw the bank manager, who suggested that the house property be transferred to the respondents immediately and that the money be advanced to the respondents instead of to the appellants. The male appellant said that he would like to think about this suggestion. Later, however, he led the respondents to believe that he would accept the suggestion of the bank manager and in this belief the male respondent transferred his personal bank account to the mortgagee bank in compliance with the bank’s requirement that he should do so to obtain the loan. During January 1973 work to the value of $5,000 was carried out on the house by the respondents. The male appellant gave the respondents $400 to pay for building materials and in addition provided some secondhand materials. For his part, the male respondent borrowed $2,000 in anticipation of receiving the loan from the bank. However, on 18th January 1973, the male appellant stated that he would not transfer the property to the respondents and he has since refused to do so. In the action the appellants pleaded the Statute of Frauds (whose equivalent in New South Wales is s 54A of the Conveyancing Act 1919, as amended). There is no suggestion that the agreement is evidenced by any note or memorandum in writing and the sole question now raised in the case is whether there was part performance. The acts of part performance on which the respondents relied were (1) the taking of possession; (2) the effecting of repairs before December 1972; (3) the doing of the work on the renovations and additions in January 1973; (4) the making of the mortgage repayments. The learned trial judge held that these acts amounted to sufficient part performance and ordered specific performance of the agreement. His decision was affirmed by the Court of Appeal. The principle upon which the doctrine of part performance rests was stated by Lord Cranworth, Lord Chancellor in Caton v Caton (1866) LR 1 Ch App 137 at 148 in words which appear to have a direct application to the present case. He said: when one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money. The books are full of cases in which it has been held that the entry into possession alone, or the taking of possession coupled with the expenditure of money by one party on the improvement of property, with the cognizance of the other party to the contract, may amount to part performance (see the cases cited in Halsbury’s Laws of England, 3rd ed vol 36, par 416). The argument advanced on behalf of the appellants, when reduced to its essentials, depends upon two propositions. First, it was said that the acts relied on were not unequivocally referable to some such contract as that alleged by the respondents. Indeed, it was submitted that a narrower test should be adopted and that it was necessary to establish “such a performance as must necessarily imply the 668 [9.30]

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Regent v Millett cont. existence of the contract” – to use the words of Lord O’Hagan in Maddison v Alderson (1888) 8 App Cas 467 at 483. However, the test suggested by the Earl of Selborne LC in that case (1888) 8 App Cas at 479, that the acts relied upon as part performance “must be unequivocally, and in their own nature, referable to some such agreement as that alleged”, has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged (see McBride v Sandland (1918) 25 CLR 69 at 78). The second proposition submitted for the appellants was that the acts relied upon must have been done in part performance of the agreement alleged; in other words, the acts must have been done under the terms of that agreement and by force of that agreement. In support of this proposition particular reliance was placed on Cooney v Burns (1922) 30 CLR 216 at 231-232 and McBride v Sandland (1918) 25 CLR, at 79. It may be said immediately that if the reasoning of their Lordships in the recent case of Steadman v Steadman (1976) AC 536 is accepted, the appellants’ arguments must fail. However, it is unnecessary for the present decision to consider the questions that are raised by that case. In the present case the giving and taking of possession by itself was sufficient part performance of the contract and it is therefore unnecessary to consider whether the other acts relied upon would also, either alone or together, amount to part performance. The change of possession of land has been described as “the act of part performance par excellence” – Williams: The Statute of Frauds, Section IV, p 256. Of course, it may be proved that the taking of possession was referable to some other authority than the contract alleged. That was the situation in McBride v Sandland (1918) 25 CLR, at 84-85. However, in the present case the circumstances under which possession was given indicate contract, to echo the words in McBride v Sandland (1918) 25 CLR, at 84-85 and the possession was unequivocally referable to some such contract as that alleged. The taking of possession was pursuant to the contract. It is true that the contract did not require the respondents to take possession, but if it were necessary that the acts of part performance should have been done in compliance with a requirement of the contract, the utility of the equitable doctrine would be reduced to vanishing point, and many cases which have proceeded on the opposite view would have been wrongly decided. The Judicial Committee in White v Neaylon (1886) 11 App Cas 171 indeed appears to have held that the effecting of improvements on property which were neither required nor permitted by the contract may be acts of part performance; but however that may be, it is clear that if a vendor permits a purchaser to take possession to which a contract of sale entitles him, the giving and taking of that possession will amount to part performance notwithstanding that under the contract the purchaser was entitled rather than bound to take possession. For these reasons the Court below was, in my opinion, right in holding that there were sufficient acts of part performance and the appeal should be dismissed. [Stephen, Mason, Jacobs and Murphy JJ agreed.]

ANZ Banking Group Ltd v Widin [9.35] ANZ Banking Group Ltd v Widin (1990) 102 ALR 289 Federal Court of Australia HILL J: The decision appealed against His Honour held that, save as to compliance with the provisions of ss 23C and 54A of the Conveyancing Act 1919 (NSW), what was done on 5 January 1983 had all the elements of an equitable mortgage. In particular, the parties had agreed for value that the bankrupt would grant a mortgage to the bank over [9.35]

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ANZ Banking Group Ltd v Widin cont. his interest in the Bellevue Hill property and had conferred power upon the bank to complete the mortgage which had been signed by him. However his Honour held that the mortgage document at the relevant time, not having been completed as to title details, was not a sufficient memorandum in writing to satisfy the provisions of ss 54A or 23C. His Honour further held that there had not been part performance of the contract, with the consequence that the provisions of s 23C and s 54A not having been complied with, the mortgage was unenforceable until 20 September 1983 when the title particulars were completed. The appellant challenged both of these conclusions. (1) Was there a sufficient note or memorandum in writing? It was submitted for the bank that even if the title details were not included in the mortgage document on 5 January 1983 that document, taken together with the form of authority, constituted a sufficient writing for the purposes of s 23C of the Conveyancing Act. It was not in dispute that, for there to be a sufficient writing either for s 23C or s 54A, that writing must describe the subject matter of the mortgage. A mortgage of land which did not refer at all to the mortgaged property would be unenforceable. Nor could parol evidence be given to fill the gap in the mortgage and supply the missing title reference. That course would be contrary to the policy of the Statute of Frauds from which ss 23C and 54A are derived which Statute is directed at excluding the reception of parol evidence of oral agreements of the kind referred to therein. There can also be no doubt that, in an appropriate case, two or more documents may be read together so as to constitute a sufficient memorandum in writing: Burgess v Cox (1951) 1 Ch 383, Stokes v Whicher (1920) 1 Ch 411, De Leuil v Jeremy (1964) 65 SR (NSW) 137, Timmins v Moreland Street Property Co Ltd (1958) 1 Ch 110, Elias v George Sahely and Co (Barbados) Ltd (1983) AC 646, Grime v Bartholomew (1972) 2 NSWLR 827 and Thomson v McInnes (1911) 12 CLR 562 at 569. There is, however, a difference of principle in the cases as to the circum-stances where it is appropriate to do so and as to the extent to which parol evidence may be adduced to link the one writing to the other. There can be no doubt that, if the note signed by the party to be charged refers expressly to some other document in such a manner as to incorporate it by reference in the note signed, the two documents may be read together: Thomson v McInnes (1911) 12 CLR 562. However, as Griffith CJ with whom Barton and O’Connor JJ agreed, said in that case at 569: But the whole contract must be shown by the writing. The reference, therefore, in the document signed must be to some other document as such, and not merely to some transaction or event in the course of which another document may or may not have been written. It is not now essential that the reference to the second document be express. Rather it is sufficient if the reference arises by necessary implication (cf Timmins v Moreland Street Property Co Ltd (supra) per Romer LJ supra at 134, Stokes v Whicher (1920) 1 Ch 411 at 418). As Griffith CJ pointed out in Thomson v McInnes (supra) at 569: The reference may, of course be made in various ways. Whether there is a reference or not depends, first of all, upon the construction of the document which is signed. The role which parol evidence may play in identifying the other document or documents which may constitute the sufficient writing is a subject of greater difficulty. It was settled in Thomson v McInnes that parol evidence was admissible for the purpose of showing that a word capable of having reference to a particular thing really does have such a reference. This use of parol evidence is, as Griffith CJ points out at 569, but an application of the well known doctrine of “latent ambiguity”. Thus in the case of Ridgway v Wharton 6 HLC 238, cited by his Honour, the word “instructions” could be read as referring to another document the identity of which was proved by parol evidence. 670 [9.35]

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ANZ Banking Group Ltd v Widin cont. However, in Thomson v McInnes their Honours declined to accept that there was a more liberal view to be gleaned from the case law up to that time. Thus Griffith CJ was moved to say at 570: The rule has always been the same. Some Judges may have been more liberal in their application of the rule than others, or may have taken a more liberal view of the words to be construed. The rule is thus stated by Baggallay LJ in Long v Millar (4 CPD 450, at 455): The true principle is that there must exist a writing to which the document signed by the party to be charged can refer, but that this document may be identified by verbal evidence. I think it is unfortunate that any doubt should be entertained as to that doctrine. It is as well settled as any doctrine relating to contracts. Blackburn J in the Supreme Court of the Northern Territory in The Commonwealth v John White and Sons (NT) Pty Ltd (1967) 13 FLR 172 at 177-8 followed Harvey v Edwards, Dunlop and Co Ltd (supra) to permit oral evidence to be given of a transaction to which the note signed by an architect referred so as to connect that note with a Government Gazette notice which identified the vendor, the property to be sold and the laws of sale thereby constituting it a sufficient note in writing, rejecting the approach taken in Thomson v McInnes. It is not necessary in this case to determine whether the more restrictive approach taken in Thomson v McInnes is still good law having regard to Harvey v Edwards, Dunlop and Co Ltd. Even if parol evidence may be given of a transaction, it is a prerequisite of the rule which permits that course, that the document signed by the party to be charged refers to the transaction. In this case the mortgage document does not refer to any transaction. Nor does it refer to another document. Even if it be read with the “authority to complete” (both being signed at the one time, this course would be permissible: Timmins v Moreland Street Property Co Ltd (supra) at 123) the matter is taken no further, because the schedule in the authority is likewise devoid of reference to any property. What the appellant seeks to do here is to read the terms of the conversation, which is presumably summarised in the bank manager’s diary note of 5 January 1983 and which does identify the relevant land into the authority and the mortgage. But that would be to adduce oral evidence, not to clarify an ambiguity but to supply the deficiency in writing; precisely what the Statute of Frauds seeks to prevent. It might be said at this stage that the weight of authority is against the bank diary note itself being treated as a “writing” because it is not a document, the existence and contents of which were known to the signatory at the time he signed the written document: De Leuil v Jeremy (1964) 65 SR (NSW) 137 at 151; Di Biase v Rezek (1971) 1 NSWLR 735 at 747. While Greig and Davis criticise this rule (supra at 701), they do so in relation to the requirement of contemporaneity rather than the requirement of knowledge. To overcome this problem, the appellant submitted that the reference to “Description of Land” in the authority should be read as a reference to “the bankrupt’s land”. If the authority had referred to “my land”, or “my land at Bellevue Hill”, parol evidence could probably have been adduced to identify the land referred to and the combination of the authority and the mortgage would have constituted a sufficient note and memorandum in writing: Shardlow v Cotterell (1881) 20 Ch D 90; Ogilvie v Foljambe (1817) 3 Mer 53; Plant v Bourne (1897) 2 Ch 281, and Auerbach v Nelson (1919) 2 Ch 383, where a note referring to “on account of house being sold for 500” was held to contain a sufficient description of the property. However, there is no basis for such a reading. When a person executes a mortgage it cannot be assumed that it is intended to operate over land presently owned by him. It is an everyday occurrence that mortgages are executed over land about to be acquired, ordinarily by way of security for the purchase price. The present, is merely a case where the only documents to which reference can be made are completely silent as to the property proposed as the subject of the mortgage. It follows therefore, that there was no sufficient note or memorandum in writing to satisfy either s 23C or s 54A of the [9.35]

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ANZ Banking Group Ltd v Widin cont. Conveyancing Act with the result that unless the appellant can show that there has been part performance of the oral agreement to mortgage the property the appeal must fail. Was there part performance? The doctrine of part performance, as an exception to the operation of the Statute of Frauds rendering oral agreements unenforceable, is a result of the intervention of the Court of Chancery to prevent, in keeping with equitable principles, the Statute of Frauds being used as an instrument of fraud: Steadman v Steadman (1976) AC 536 at 540, 551. … The performance which has to be shown must be performance of the person seeking to enforce the contract or, as in the present case, the person seeking to show that the contract was enforceable, notwithstanding the lack of writing. In the present case, the oral contract between the bankrupt and the bank was one whereby, in consideration of the bank agreeing to provide a commercial bill facility and to endorse bills drawn by the bankrupt thereby rendering the bank liable on them, the bankrupt agreed to indemnify the bank against all claims on the bills and to provide a mortgage on the Bellevue Hill property to the bank to secure that indemnity. The bank, the party seeking to enforce the mortgage, performed the whole of its side of the bargain. It may be inferred from the evidence before the trial judge that the bank endorsed (or accepted) bills which were discounted on the market, the bills being for a period of 180 days having a face value of $30,000 and providing to the bankrupt $28,121.10. The bills were thereafter rolled over. The question is therefore whether acceptance and discounting of the bills constituted a sufficient part performance of the oral agreement. In Maddison v Alderson (supra) at 479 the Earl of Selborne LC said: All the authorities shew that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged. The converse of this proposition, as Sir James Wigram VC said in Dale v Hamilton (1846) 5 Hare 369 at 381; 67 ER 955 at 960 is: But an act which, though in truth done in pursuance of a contract, admits of explanation without supposing a contract, is not, in general, admitted to constitute an act of part performance taking the case out of the Statute of Frauds; as, for example, the payment of a sum of money, alleged to be purchase-money. The High Court had cause to consider the doctrine of part performance in a number of early cases: McBride v Sandland (1918) 25 CLR 69, Cooney v Burns (1922) 30 CLR 216 and JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282. In the last mentioned case Dixon J, with whose judgment Gavan Duffy CJ agreed, stated the test at 300 as follows: The acts of part performance must be such as to be consistent only with the existence of a contract between the parties, and to have been done in actual performance of that which in fact existed. But in such a case the equity which so arises is to have the entire contract carried into execution by both sides. Because the acts done upon the faith of the contract could not have taken place if it had not been made, and the contract is of a kind which it is considered equitable to enforce in specie, a party who has so acted in partial execution of the contract obtains an equity to its complete performance. In McBride v Sandland (supra) Isaacs and Rich JJ at 78 made it clear that the contract to which the acts of part performance must unequivocally be referable meant “some contract of the general nature of that alleged”. Knox CJ in Cooney v Burns (supra) thought that by the agreement was meant “some agreement for the disposition of some estate or interest in the land in question” at 222. 672 [9.35]

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ANZ Banking Group Ltd v Widin cont. However, in the United Kingdom a more liberal view was taken in Kingswood Estate Co Ltd v Anderson (supra) and Wakeham v Mackenzie (1968) 1 WLR 1175 and ultimately by the House of Lords in Steadman v Steadman (1976) AC 536. In the last case the House held that a payment of money coupled with the sending of a transfer and the announcement to a magistrate that the parties had agreed to arrears of maintenance being remitted (save for 100) was a sufficient act of part performance of an agreement for the sale of a matrimonial home. The majority of their Lordships accepted that the acts of part performance must, on the balance of probabilities, point to the existence of some such contract as alleged. They approved the decision in Kingswood Estate Co Ltd v Anderson (supra), including the passage from Fry on Specific Performance already set out (see per Viscount Dilhorne at 553, Lord Simon at 561, and per Lord Reid at 542 but see the judgment of Lord Morris, dissenting and Lord Salmon at 569). In Millett v Regent, at first instance (22 July 1974, unreported) Holland J of the Supreme Court of New South Wales applied the rule stated in Kingswood Estate Co Ltd v Anderson. By the time the appeal was heard, the House of Lords had decided Steadman. The New South Wales Court of Appeal (1975) 1 NSWLR 62 expressed differing views as to the applicability of Steadman. Glass JA was of the view that, the High Court having expressed the test in terms of the traditional view in Maddison v Alderson, the Court of Appeal was bound by that formulation and could not apply the more liberal test in Steadman. Neither Hutley nor Mahoney JJA found it necessary to consider whether Steadman was consistent with Australian authority. However, Mahoney JA said at 74: The term “unequivocally”, and the similar terms which have been used in this regard in other cases, do no more than indicate that, in being satisfied that such a contract was made, the Court will require evidence of the appropriate degree of cogency to establish that, eg, the appropriate basis for the intervention of equity against the statute requiring the contract to be in writing is made out. Cf Briginshaw v Briginshaw (1938) 60 CLR 336 at 365. When Regent v Millett went on appeal to the High Court (reported at (1976) 133 CLR 679) the Court was unanimously of the view that part performance was made out. None of the judges found it necessary to consider the questions raised by Steadman. Gibbs J with whose judgment Stephen, Mason, Jacobs and Murphy JJ agreed, said at 683 that the Earl of Selborne’s test in Maddison v Alderson (supra) at 479: has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged (see McBride v Sandland (1918) 25 CLR 69 at 78). … “It may be said immediately that if the reasoning of their Lordships in the recent case of Steadman v Steadman is accepted, the appellants’ arguments must fail. However it is unnecessary for the present decision to consider the questions that are raised by that case.” Subsequently Holland J in Ogilvie v Ryan (1976) 2 NSWLR 504, a case where the proper test to be applied affected the outcome, took the view that he should follow the approach of Glass JA in Millett v Regent and not apply the more liberal approach in Steadman. As to the implications possible to be drawn from Steadman, see Jones G and Goodhart W, Specific Performance (Butterworths 1986, pp 103-106). The liberal approach in Steadman has not been adopted in other States of Australia. Fullagar J in Thwaites v Ryan (1984) VR 65 expressed doubt as to at least part of the formulation but was of the view that the conduct in question did not enable him to say: “… for Ryan to have done all this, I really think there must have been a contract”. In Riley v Osborne (1986) VR 193 Kaye J accepted the test of Fullagar J in Thwaites v Ryan (supra) at 76 expressed in the following terms: [9.35]

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ANZ Banking Group Ltd v Widin cont. In respect of each act of alleged part performance that was actually done, was it on the balance of probabilities unequivocally referable to some act between the actor and the deceased, that is to say, was it such that, on the probabilities, it must have been done with a view to performing such a contract? Subsequently the Full Court of the Supreme Court of Victoria, in McMahon v Ambrose (1987) VR 817 expressed the view that the Court was bound by the orthodox interpretation of Maddison v Alderson adopted by the High Court in McBride v Sandland and Cooney v Burns. See too in Victoria, Butler v Caine (1986) VR 274 at 282, (per Marks J), and in Western Australia in Trifid Pty Ltd v Ratto (1985) WAR 19 at 37. More recently Brennan J in Walton Stores (Interstate) Ltd v Maher (1987-88) 164 CLR 387 at 432 restated the test of part performance consistently with the orthodox view. His Honour made no reference to Steadman. It may be possible to reconcile what is said in Steadman with the orthodox approach taken by the High Court to date and while there is much to be said for the adoption in Australia of Steadman, these are matters for the High Court rather than an intermediate Court of Appeal. In the present case, there is little doubt that, if the Steadman test be applied, the appellant would succeed. The acts of the bank clearly referred to some contract; they could be referred to the alleged one and they indicate on the balance of probabilities the existence of some contract and they are consistent with the contract alleged. However, even on the orthodox view it seems to me that the bank should succeed. Although the acts of part performance relied upon by the bank resulted in the bankrupt recovering a sum of money, the bank does not rely merely on the payment of money. Here, the bank obtained an indemnity agreement, took a mortgage in blank and took an authority to complete it (albeit the last two were deficient in that the title particulars were not completed). It then endorsed or accepted a bill or bills by virtue of which it became liable to holders thereof for the face value of those bills. It went onto the market and sold those bills at a discount, crediting the proceeds to the bankrupt’s account. The acts of the bank, seen in this context, lead to the conclusion that they are unequivocally and in their own nature referable to a contract of the general nature of that alleged by the bank; namely, that there was an oral agreement between the bank and the bankrupt that the bankrupt would grant a mortgage to the bank over the Bellevue Hill property to secure to the bank its right of indemnity. In rendering itself liable on the bills, the bank altered its position on the faith of the oral agreement. It would be a fraud in the bankrupt to set up the legal invalidity of the oral contract on the faith of which he induced the bank to act and expend its money. While the bank does not seek to rest its case on estoppel, the discussion of the principles upon which the present law of estoppel is based by some of the members of the High Court in The Commonwealth of Australia v Verwayen (1990) 64 ALJR 540 lends further support to the view that the doctrine of part performance should be applied in the present case in favour of the appellant. It would be unconscionable to permit the bankrupt or the trustee claiming through him to rely upon the legal invalidity of the contract on the faith of which the bankrupt induced the bank to become liable on the bills. In my view the bank has established sufficient acts of part performance prior to 24 February 1983 to render the agreement to grant the mortgage enforceable in equity and thereby to constitute an enforceable equitable mortgage over the Bellevue Hill property. 674 [9.35]

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ANZ Banking Group Ltd v Widin cont.

Accordingly I am of the view that the appeal should succeed. The orders made by Davies J should be set aside, and, in lieu thereof it should be ordered that the application be dismissed. The respondent should pay the appellants’ costs of the appeal and the proceedings below. [Wilcox and Foster JJ agreed.]

[9.40]

Notes and Questions

1. The above case recognises the existence of much learning as to what constitutes part performance and as to what constitutes a sufficient memorandum in writing of a contract for the sale of land. The House of Lords in Steadman v Steadman [1976] AC 536 relaxed the rules as to what acts constitute sufficient acts of part performance but Australian courts have been reluctant to follow this relaxation. What are the factors leading to this difference of approach? 2. The issue of reading together separate documents was considered by Doyle CJ in Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd [1997] SASC 6391. Doyle CJ held that where a document referred to an earlier transaction, that transaction could be identified by oral evidence and the document setting out the transaction admitted in evidence. Doyle CJ also considered the issue of part performance and adopted what he described as the orthodox view rather than the approach of Steadman v Steadman. In the case there was an oral agreement for a mortgage and a loan made without any deposit of title documents. The acts constituting the loan were equally referable to an unsecured loan transaction and did not of themselves point to a mortgage and thus they were insufficient to render the agreement enforceable.

EFFECT OF CONTRACTS FOR THE SALE OF LAND Chan v Cresdon Pty Ltd [9.45] Chan v Cresdon Pty Ltd (1989) 89 ALR 522 High Court of Australia MASON CJ, BRENNAN, DEANE AND McHUGH JJ: The appellants were parties to an agreement for lease executed in March 1984 pursuant to which the respondent agreed to lease for a term of five years certain land in Queensland to Sarcourt Pty Ltd (Sarcourt), and the appellants were named as guarantors of Sarcourt. The agreement provided that the parties would execute a lease in the form which was annexed to the agreement. The form of lease contained a further guarantee by the appellants of the obligations of Sarcourt as lessee. A lease in that form was executed simultaneously with the agreement for lease, but was not registered with the Registrar of Titles notwithstanding that the land was under the Real Property Act 1861 (Qld) (the Act). The respondent brought proceedings against the appellants and Sarcourt claiming a sum of $28,877.70, being the total amount payable by Sarcourt as lessee for rent and other charges and interest. Sarcourt did not appear in the action and the respondent proceeded against the appellants and a third person also named as a guarantor. The appellants successfully contended in the District Court that there had been a total failure of consideration on the part of the respondent as lessor [9.45]

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Chan v Cresdon Pty Ltd cont. because it had been required to grant to Sarcourt a legal lease for a term of five years, and that accordingly the appellants were relieved of their obligations as guarantors described in the executed instruments. In the Full Court of the Supreme Court of Queensland, the respondent’s appeal was allowed on the grounds that there was no failure of consideration and that the lease was good in equity despite being “void at law” due to the failure of the respondent to see to its registration. The guarantee was held to extend to obligations under that equitable lease. From that decision the appellants now appeal. The agreement for lease recited that the respondent had agreed at the request of Sarcourt and the appellants to grant, and Sarcourt had agreed to accept, a lease of specified premises “at the rent and for the term and subject to the covenants and conditions set forth” in the agreement. Clause 2.1 stated that the respondent would grant and Sarcourt would accept a lease of the premises “upon the terms and conditions set out in the Annexed Lease”. Clause 2.2 authorised the respondent to complete the lease, which had been executed by the other parties along with the agreement, then to execute it and arrange for its stamping and registration, once certain matters were clarified or established. Clause 4.10 contained a guarantee of Sarcourt’s “obligations contained in or implied by” the agreement. That guarantee is not relevant to the present appeal. The “Annexed Lease” referred to in cl 2.1 was in the same form as the lease which the parties other than, or perhaps including, the respondent had executed simultaneously with the agreement for lease. The lease was in Form E pursuant to the Act and was certified as correct for the purposes of registration by the solicitors for the respondent and Sarcourt respectively. The relevant part of the lease for present purposes is cl 23 which provided, so far as is relevant: 23.0 GUARANTEE AND INDEMNITY The (appellants) in consideration of the (respondent) entering into this lease at the (appellants’) request jointly and severally GUARANTEES to the (respondent) due and punctual performance by (Sarcourt) of the obligations on its part to be performed under this lease AND INDEMNIFIES and agrees to indemnify the (respondent) against all loss damage costs and expenses suffered or incurred by the (respondent) as a result of any failure by (Sarcourt) to pay any moneys under this lease or any breach by (Sarcourt) of any of the covenants and conditions contained or implied in the Lease … It is the guarantee set out above upon which the respondent sued. It was not sought to rely upon the indemnity. The respondent’s claim against Sarcourt and the appellants in the action was for moneys owing to the respondent by Sarcourt but not paid, such moneys being due and payable, so it was alleged, under a covenant to pay rent, a covenant to pay the costs incurred by the respondent in respect of the provision of cleaning and pest control services to the leased premises, a covenant to pay electricity charges and a covenant to pay interest charges on unpaid moneys. Each of these covenants was contained in the lease. Stated more precisely, the issue for decision is whether the moneys said to be owing by Sarcourt represent “obligations on its part to be performed under this lease”. The answer depends upon the construction of the lease, in particular the words which we have emphasized. However, in resolving the question it is also necessary to examine the relevant principles of substantive law applicable to unregistered leases of land under the Act. In saying that the matter turns on the construction of the lease, we reject the suggestion that the lease is to be construed as one with the agreement. The lease was entered into pursuant to the agreement for lease but in the absence of an ambiguity in the lease, there is no warrant for looking to the provisions of the agreement for the purpose of construing the lease. Without looking to cl 2.2 of the agreement for lease, it is obvious that the parties intended that the lease was to be registered. The lease was not, until registration, “effectual to pass any estate or interest in” the land: s 43 of the Act. Moreover, the lease was in the form appropriate for registration (Form E) 676 [9.45]

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Chan v Cresdon Pty Ltd cont. and otherwise complied with the statutory requirements, so that it was in registrable form. In these circumstances the respondent, by executing a lease which was intended to operate as a lease at law, was under an obligation to register, or procure the registration of, the lease: see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 63 ALJR 372; 85 ALR 183. The failure to register the lease did not render it void, unlike the lease for upwards of three years in Hill v Cox (1882) 1 QLJ 78, which was held void because it was not in Form E in the Schedule to the Act, that being the form of lease prescribed by s 52. As the lease was not void, it was capable of being or becoming a source of rights. For example, in appropriate circum-stances the lessee could secure an order in the nature of specific performance requiring the lessor to register, or procure registration of, the lease. Furthermore, as we shall explain in more detail, the existence of the unregistered lease operated to bring into existence or evidence an equitable lease, and occupation and payment of rent under the unregistered lease created an implied tenancy at common law. The respondent’s case is that the liability to pay rent under such an equitable lease or such a common law tenancy was an obligation “under this lease” within the meaning of cl 23. It is convenient to consider, first, the respondent’s argument based on the existence of a common law tenancy. It is well settled that entry into occupation followed by payment of rent under an agreement for a future lease brings into existence a common law tenancy from year to year, so long as the payment of rent is referable to a yearly tenancy, as where it is for an aliquot part of a year: Dockrill v Cavanagh (1944) 45 SR (NSW) 78, at p 80. Such a tenancy determines on the expiration of the lease agreed upon and it is on the terms and conditions of the agreement so far as they are consistent with a tenancy from year to year (Moore v Dimond (1929) 43 CLR 105 at 113, 118-122; York House Pty Ltd v Federal Commissioner of Taxation (1930) 43 CLR 427 at 436; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 25-26). At common law the tenancy from year to year was liable to termination by notice to quit before the expiration of the term contracted for: Moore v Dimond, at 113. A similar tenancy from year to year arises from entry into occupation and payment of rent under an informal lease, including an unregistered lease of land under the provisions of the Act: Moore v Dimond, at 113-114; Carberry v Gardiner (1936) 36 SR (NSW) 559, at 570. This tenancy is an implied or imputed tenancy. As Patteson J noted in Doe d Thomson v Amey (1840) 12 Ad & E 476 at 480 (113 ER 892 at 893-894): (T)he terms upon which the tenant holds are in truth a conclusion of law from the facts of the case, and the terms of the articles of agreement. In Moore v Dimond, Knox CJ, Rich and Dixon JJ (at 114) cited this statement with evident approval. Section 43 is not a bar to the creation of a lease or tenancy for a term of less than three years otherwise than by registration of a memorandum of lease: see Property Law Act 1974 (Q), ss 5(1)(b), 10(1), 10(2)(c). The section does not prevent a common law tenancy coming into existence in accordance with the principles stated above. However, account must be taken of s 129(1) of the Property Law Act. In terms it is identical with s 127(1) of the Conveyancing Act 1919 (NSW). It has been held that the effect of s 127(1) is that, where conditions would previously have brought into existence a tenancy from year to year, they shall instead bring into existence a lease at will terminable by a month’s notice expiring at any time: Burnham v Carroll Musgrove Theatres Ltd (1928) 41 CLR 540 at 565-566; Dockrill v Cavanagh, at 83-84. Section 129(1) has the same effect. Its operation in no way affects the correctness of the statement that a tenancy at will under s 129(1) arising from entry into occupation and payment of rent is an implied or imputed tenancy. Accordingly, in the present case, once Sarcourt entered into possession of the shop premises, which were the subject of the lease, and paid rent, a common law tenancy at will terminable on one month’s notice came into existence. There was imported into that tenancy a covenant to pay rent in the terms [9.45]

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Chan v Cresdon Pty Ltd cont. of the covenant in the unregistered lease, as well as the other covenants in that instrument so far as they were consistent with such a tenancy. Furthermore, the covenant to pay rent under s 105(1)(a) of the Property Law Act was implied in the tenancy. However, the obligation to pay rent under that covenant in the common law tenancy at will was not, in our opinion, an obligation “under this lease” within the meaning of that expression in cl 23.01. The implied or imputed common law tenancy at will was distinct from the unregistered lease which, as will be seen, s 43 rendered ineffectual as a tenancy at common law. The word “under”, in the context in which it appears, refers to an obligation created by, in accordance with, pursuant to or under the authority of, the lease. The obligation which arose under the common law tenancy at will does not answer this description. Nor, for that matter, would the obligation have been a covenant or condition “contained or implied in the lease”, to use the language of the indemnity in cl 23.01. The respondent’s next contention is that the unregistered lease amounts to an equitable lease to which the relevant covenants may be related. The argument, which invokes the doctrine in Walsh v Lonsdale (1882) 21 ChD 9, is that the lease, though ineffective to create a “legal” lease until registration, was effective to bring into existence an equitable lease for a term of five years on the footing that equity regards as done what ought to be done. The most favourable statement of the position, from the respondent’s viewpoint, was that made by Sir George Jessel MR in Walsh v Lonsdale (at 14-15): There is an agreement for a lease under which possession has been given. Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance. These remarks were made in an appeal from an order granting interlocutory relief to a landlord who had been sued by a tenant after purporting to levy a distress for unpaid rent under an agreement to grant a lease for a term of seven years, the right to specific performance of that agreement being conceded. Jessel MR appears to have regarded the agreement as amounting to an equitable lease which was the equivalent of a lease at law so as to give rise to a liability for rent for which the common law remedy of distress could be levied. Cotton and Lindley LJJ expressed themselves more cautiously, with Lindley LJ observing (at 18) that at the hearing of the suit a proper form of lease would be settled. On the other hand, there was the view, championed by Lord Lindley and Lord Parker, that a lease and an agreement for lease are two different things which can only be equated in equity for certain purposes if equity would decree specific performance of the agreement: see Holroyd v Marshall (1862) 10 HLC 191 at 209-211; Swain v Ayres (1888) 21 QBD 289 at 295; Manchester Brewery Company v Coombs (1901) 2 Ch 608, at p 617; Howard v Miller (1915) AC 318 at 326; Central Trust and Safe Deposit Company v Snider (1916) 1 AC 266 at 272. As to the general topic see the discussion by Gardner, “Equity, Estate Contracts and the Judicature Acts: Walsh v Lonsdale Revisited” (1987) 7 Oxford Journal of Legal Studies 60; Sparkes, “Walsh v Lonsdale: The Non-Fusion Fallacy” (1988) 8 Oxford Journal of Legal Studies 350; Sparkes, “Back-dating Specific Performance” (1989) 10 The Journal of Legal History 29. The weight of English authority is against Sir George Jessel: but cf United Scientific Holdings Ltd v Burnley Borough Council (1978) AC 904 at 924-925, 944-945. No doubt that was one reason why the view of Lord Lindley and Lord Parker attracted support in Australia: see, for example, Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 96. Another reason was that under the legislation implementing the system of Torrens title the separation of legal and equitable estates became accepted in the absence of merger. And it is possible that the delayed introduction of the 678 [9.45]

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Chan v Cresdon Pty Ltd cont. Judicature system in New South Wales served to emphasize the separation of legal and equitable interests and rules and thus contributed towards a climate in this country which favoured the approach insisted upon by Lord Lindley and Lord Parker. Be that as it may, this Court, while acknowledging that an agreement for a lease will be treated as giving rise to a lease in equity in accordance with the doctrine in Walsh v Londsale, has always rejected the notion that the lessee has a legal interest in the term. For present purposes these authorities establish two propositions. First, the court’s willingness to treat the agreement as a lease in equity, on the footing that equity regards as done what ought to be done and equity looks to the intent rather than the form, rests upon the specific enforceability of the agreement. Secondly, an agreement for a lease will be treated by a court administering equity as an equitable lease for the term agreed upon and, as between the parties, as the equivalent of a lease at law, though the lessee does not have a lease at law in the sense of having a legal interest in the term. The first proposition requires some elaboration or qualification in order to accommodate what has been said in later cases. Although it has been stated sometimes that the equitable interest is commensurate with what a court of equity would decree to enforce the contract, whether by way of specific performance (Connolly v Ryan (1922) 30 CLR 498 at 506-507; Brown v Heffer (1967) 116 CLR 344 at 349; Chang v Registrar of Titles (1976) 137 CLR 177 at 184-185, 189-190), injunction or otherwise (Tailby v Official Receiver (1888) 13 App Cas 523 at 546-549; Redman v Permanent Trustee Co, at p 96; Legione v Hateley (1983) 152 CLR 406 at 446, 456), the references in the earlier cases to specific performance should be understood in the sense of Sir Frederick Jordan’s explanation adopted by Deane and Dawson JJ in Stern v McArthur (1988) 165 CLR 489 at 522: “Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties”: … “Chapters on Equity in New South Wales”, Select Legal Papers, 6th ed (1947), p 52, n(e). In relation to the second proposition stated above Maitland, in his Lectures on Equity, 2nd ed (1936), at p 158, in a statement quoted by Latham CJ in Williams v Frayne (at p 720), commented: An equitable right is not equivalent to a legal right; between the contracting parties an agreement for a lease may be as good as a lease. But introduce the third party and then you will see the difference. The operation thus attributed to the Judicature Acts had the effect of enabling a party to an agreement to enforce, against another party to the agreement, legal remedies in respect of equitable rights and interests. In this respect the English cases referred to in the preceding paragraph proceed on the footing that the Judicature Acts have a procedural operation. This can be demonstrated by reference to the fact that, although there is no recorded instance of a court of equity exercising a jurisdiction to make an order for the payment of rent under an equitable lease, there was a jurisdiction to backdate specific performance to enable an action to be brought at law on the covenants in the lease. As Mr Sparkes observes, “… before the Judicature Acts, equity did not recognise rent due under an agreement for a lease. Rent was recoverable by action only in the common law courts” (1988) 8 Oxford Journal of Legal Studies 356. Before the Judicature Acts, the jurisdiction to backdate specific performance of an agreement for a lease in order to enable an action at law to be brought on covenants in the lease seems to have been exercised in one case only, Mundy v Joliffe (1839) 9 LJ Ch 95 at 97-98, and then only as between the lessor and the lessee: see Sparkes, (1989) 10 Journal of Legal History 33. The pre-Judicature Acts cases have a dual importance. They indicate that there was a jurisdiction to backdate specific performance and that it was a jurisdiction to be exercised sparingly. The existence of that jurisdiction supports the view that, notwithstanding the broad language of Jessel MR, the decision [9.45]

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Chan v Cresdon Pty Ltd cont. in Walsh v Lonsdale involved no more than giving the Judicature Acts a procedural operation. But the fact that the jurisdiction was exercised so sparingly demonstrates that in the present case it would be imprudent to assume that specific performance would be awarded as a matter of course. As Evatt J observed in Dimond v Moore (1931) 45 CLR 159 at 186, with reference to suits for specific performance: Many circumstances may prevent a plaintiff from succeeding in such a suit, although there was originally a binding agreement for a lease and the plaintiff entered into possession under such agreement. Great difficulties will arise if, in Courts where the judicature system is adopted, a person in possession of land under an agreement is to be treated for all purposes as though specific performance has been decreed from the moment of entry, and the agreement has already been converted into an actual lease on the terms of the agreement. The respondent’s failure to register, or procure registration, of the lease, which may have been due to the respondent granting a mortgage to Citibank Limited which was registered in 1987, was a factor which would require to be taken into consideration in deciding whether to award or refuse specific performance. So would the question whether the lease came to an end before the expiration of the term by reason of Sarcourt’s default. But even if it be assumed that specific performance would be awarded in favour of the respondent, that is not enough, in our opinion, to establish liability on the part of the appellants as guarantors. What they guaranteed was the “obligations (of Sarcourt) under this lease”, that is, the instrument of lease in its character as a lease. In our view, only a lease at law would meet this description for the purposes of the guarantee. In Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, Mason ACJ, Wilson, Brennan and Dawson JJ observed (at 561): At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. In the light of this settled principle governing the interpretation of contracts of guarantee, there is no justification for reading cl 23.01 as extending to obligations which, at best, as between the landlord and the lessee, arise, not under the lease at law but under an equitable lease which is the equivalent of the lease at law. In any event, s 43 of the Act presents an insuperable obstacle to the respondent’s success. The section provides, in relation to land under the Act, that, until registration, no instrument of transfer shall be effectual to pass an estate or interest in the land. Notwithstanding this provision, it has been said from time to time that unregistered instruments may confer equitable estates and interests: see Boyd, at 81-82; York House, at 435-436; Progressive Mailing House, at 26-27. These statements need to be read in conjunction with the remarks of Isaacs J in Barry v Heider (1914) 19 CLR 197. His Honour, in the context of s 41 of the Real Property Act 1900 (NSW), the counterpart of s 43 of the Act, said (at 216): Section 41, in denying effect to an instrument until registration, does not touch whatever rights are behind it. Parties may have a right to have such an instrument executed and registered; and that right, according to accepted rules of equity, is an estate or interest in the land. Until that instrument is executed, s 41 cannot affect the matter, and if the instrument is executed it is plain its inefficacy until registered – that is, until statutory completion as an instrument of title – cannot cut down or merge the pre-existing right which led to its execution. The point made in this passage is that, though the unregistered instrument is itself ineffective to create a legal or equitable estate or interest in the land, before registration, the section does not avoid contracts or render them inoperative. So an antecedent agreement will be effective, in accordance with the principles of equity, to bring into existence an equitable estate or interest in the land. But it is 680 [9.45]

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Chan v Cresdon Pty Ltd cont. that antecedent agreement, evidenced by the unregistered instrument, not the instrument itself, which creates the equitable estate or interest. In this way no violence is done to the statutory command in s 43. In Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555, Latham CJ, in dissent, though not on this point, speaking with reference to s 41 of the Real Property Act (NSW), said (at 581): “Thus the instrument of transfer in itself cannot be effectual to vest in the defendant either a legal or an equitable interest in the land (See Williams v Papworth (1900) AC 563 at 568). But where there is a transaction for value which is recorded in a contract followed by an instrument of transfer, or where there is a transaction for value which itself is recorded in a transfer (Mathieson v Mercantile Finance and Agency Co Ltd ((1891) 17 VLR 271), then ‘the transaction behind the instrument’ and upon which it rests may create an equitable interest in the land which will be recognised in the courts …” See also at 599, per Dixon J (with whom Rich J concurred); Currey v Federal Building Society (1929) 42 CLR 421, at 448-449; Carberry v Gardiner, at 569. If we assume that the agreement for lease would have been specifically enforced in equity and that, as a result, an equitable lease for a term of five years came into existence between the respondent as lessor and Sarcourt as lessee, that equitable lease is a thing different from the unregistered form of lease executed by the parties. Although such an equitable lease would incorporate the terms of the unregistered lease, by virtue of s 43 it necessarily arises not from the instrument but from the agreement which lies behind it. On this score alone, it would be impossible to conclude that a liability to pay rent under the equitable lease was an obligation “under this lease” within the meaning of cl 23.01. In the result, for the foregoing reasons, we would allow the appeal. Toohey J dissented.

[9.50]

Notes and Questions

1. The issue in the case as to the nature of obligations under a second agreement has similarities to that in cases of the impact of indefeasibility of a registered mortgage upon obligations in a separate loan agreement; see [5.115] and [8.75]. 2. This case highlights the differences between a formal legal interest and one arising in equity because of specific performance. Although the interpretation of the words “obligations arising under this lease” may seem technical, the interpretation reflects the approach that obligations under a guarantee should be construed strictly. Is there in substance a windfall gain for the guarantor? 3. Many contracts for the sale of land are subject to conditions other than the performance of obligations by the parties. The most common condition is the provision of finance on specified terms by a credit provider. Does such a condition provide a opening for a purchaser to escape a contract? The grant of permission by a government authority may be necessary, for example approval for subdivision of land, and the gaining of that permission made a condition of the contract. It is not clear whether equitable remedies are available with respect to such a contract prior to the fulfilment of such conditions. See the discussion of the duties to seek to have the conditions fulfilled in McWilliam v McWilliams Wines Pty Ltd (1963) 114 CLR 656. [9.50]

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4. One remedy of a beneficiary of a trust is to apply for an order vesting trust property in the beneficiary. In Chang v Registrar of Titles (1925) 137 CLR 177 purchasers applied for an order vesting property in them. The High Court held that such an order should not be made in a case in which it was not clear that any order for specific performance would be made. 5. The duty of a vendor on settlement is to produce documents which will enable a purchaser to obtain good title to the land. Prior to the Torrens System these documents involved a chain of dealings starting from a good root of title. Under the Torrens System it seems that a registerable instrument from the current registered proprietor is required. In Rands Development Pty Ltd v Davis (1975) 133 CLR 26 the High Court explained the obligation as follows: The procedure to be adopted on settlement must be such that it gives to the purchaser the fullest protection which is consonant with a settlement of transactions without undue delay or expense. The purchaser is entitled to all reasonable protection. Once a purchaser or transferee is registered as proprietor no substantial problems can arise, particularly when the proprietor obtains the wide protection enunciated in Frazer v Walker (1967) 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376.

6. Apart from the obligation to provide good title, at common law a seller of land was under no other implied obligations, in particular the condition of any improvements to the land was a matter for the buyer. Today duties of disclosure in many jurisdictions do mean that information about improvements must be supplied to the buyer (see [9.190] and Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [8.275] –[8.345].

Tanwar Enterprises Pty Ltd v Cauchi [9.65] Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 High Court of Australia GLEESON CJ, McHUGH, GUMMOW, HAYNE AND HEYDON JJ. This is an appeal from the New South Wales Court of Appeal (Handley and Beazley JJA, Mathews AJA)[1]. That Court dismissed an appeal by the present appellant (“Tanwar”) from orders by a judge in the Equity Division of the Supreme Court(Windeyer J)[2] dismissing an application by Tanwar for specific performance of three contracts dated 19 October 1999 under which Tanwar was the purchaser. The subject-matter of the contracts was three adjoining parcels of land at Glenwood near Blacktown. Two of the parcels were owned by one or more of the first, second and third respondents, members of the Cauchi family, and the third by the fourth respondent, Julian Dalley. The vendor under the first contract was Joseph Cauchi. The vendors under the second were Joseph, Angelo and Mary Cauchi. The vendor under the third contract was Julian Dalley. The total purchase price was$4,502,526.90. The history of the litigation The vendors’ solicitor issued notices of termination of the contracts on the afternoon of 26 June 2001. The Equity proceedings were instituted on the next day and heard on 2 August. Windeyer J delivered his judgment on 9 August. By its amended summons, Tanwar sought declarations that the three contracts were still on foot and had not been validly terminated and orders for specific performance or, in the alternative, orders for specific performance consequent upon orders for relief against forfeiture of the contracts. An order also was sought, pursuant to s 55(2A) of the Conveyancing Act 1919 (NSW) (the “Conveyancing Act”), for a return to Tanwar of the deposits. The primary judge refused any relief and dismissed the amended summons. 682 [9.65]

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Tanwar Enterprises Pty Ltd v Cauchi cont. Tanwar, by seeking relief against the termination of the contracts with a declaration that the contracts were still on foot, proceeded on the basis that, as a necessary preliminary, it was essential to reinstate the contracts[3]. In Stern v McArthur[4], Gaudron J left that matter open, and it is unnecessary to say any more here respecting it. … But what, if any, was the interest in the land enjoyed by Tanwar as purchaser? If there was such an interest, did it attract the exercise of the jurisdiction to relieve against forfeiture? What is the relationship between, on the one hand, the attitude of equity respecting forfeiture, and, on the other hand, the attitude of equity respecting the observance of express time stipulations? Without answers to these questions, the significance for this appeal of the basic issue expressed in Legione, and thus the relevance of the five “subsidiary questions”, cannot be assessed. But the answers are to be supplied only by a patient examination of several fundamentals, the understanding of which by equity courts has changed across time…One commences by identifying the “interest” of a purchaser in the land the subject of an uncompleted contract. In Lysaght v Edwards[42], Sir George Jessel MR described the position of the vendor at the moment of entry into a contract of sale as “something between” a bare trustee for the purchaser and a mortgagee who in equity is entitled to possession of the land and a charge upon it for the purchase money; in particular, the vendor had the right in equity to say to the purchaser “[e]ither pay me the purchase-money, or lose the estate”. This way of looking at the relationship in equity between vendor and purchaser before completion appeared also in the works of eminent writers of the period in which the Master of the Rolls spoke[43]. Later, Kitto J[44] and Brennan J[45] preferred to treat what was said in Lysaght as indicating that “to an extent” the purchaser acquired the beneficial ownership upon entry into the contract. This analogical reasoning in turn suggested (i) the purchaser had before completion an equitable estate in the land which would be protected against loss consequent upon termination of the contract by the principles developed inequity for relief against forfeiture and (ii) in the same way as failure to redeem a mortgage upon the covenanted date for repayment did not destroy the equity of redemption without the proper exercise of a power of sale[46] or a foreclosure suit in equity[47], failure to complete the contract on the due date did not bar the intervention of equity to order specific performance. But what, on this way of looking at the matter, was the significance of a contractual stipulation specifying a date for completion as essential? The treatment by the English equity judges of this subject developed in the course of the nineteenth century, as Justice Lindgren has detailed in his extrajudicial writing on the subject[48]. While Lord Thurlow would have pushed the mortgage analogy to the extreme that a time stipulation in equity could never be essential unless there was something in the nature of the subject-matter of the contract, such as its fluctuating or depreciating value[49], to give it that quality, his view was doubted by Lord Eldon in Seton v Slade[50] and rejected by Sir Lloyd Kenyon MR in Mackreth v Marlar[51]. If the express contractual stipulation fixing time as an essential matter was not to be disregarded, how did that attitude stand with the analogy drawn from the relief against forfeiture cases? The answer given by Pomeroy[52],with reference to In re Dagenham (Thames) Dock Co, Ex parte Hulse[53], was that equity would relieve the purchaser from the operation of an essential time stipulation, “and from the forfeiture”, if the provision was inserted as a penalty to secure completion of the contract at the purchaser’s risk of loss of the equitable interest in the land under the executory contract…That reasoning, together with the authority of Dagenham, was relied upon in the majority judgments in Legione[54]. What the Court of Appeal in Chancery decided in Dagenham, and on what facts and grounds, is not fully apparent from the abbreviated report[55]. But it must be remembered that in Dagenham there had been forfeiture of a payment of half the purchase price, so that it was not surprising that the forfeiture was treated as penal[56]. [9.65]

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Tanwar Enterprises Pty Ltd v Cauchi cont. It should be added that, in Dagenham, as in Stern and other instalment contract cases, there would have existed an equitable lien securing for the purchaser the payments so made[57]. It has been held in this Court that the lien may been forceable even though there may be a good defence to a claim to specific performance of the contract[58]. It is the payment and retention of the moneys, not the availability of specific performance, which is critical[59]. But there remains the question, unnecessary to decide here, whether the lien of the purchaser necessarily is lost upon termination of the contract for breach by the purchaser of an essential time stipulation[60]. At all events, the analogies drawn over a century ago in Lysaght[61] with the trust and the mortgage are no longer accepted. Jacobs J observed in Chang v Registrar of Titles[62] that: [w]here there are rights outstanding on both sides, the description of the vendor as a trustee tends to conceal the essentially contractual relationship which, rather than the relationship of trustee and beneficiary, governs the rights and duties of the respective parties. Subsequently, in Kern Corporation Ltd v Walter Reid Trading Pty Ltd, Deane J said[63]: [I]t is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser. In Stern, Gaudron J points out consistently with authority in this Court[65], that the “interest” of the purchaser is commensurate with the availability of specific performance. That availability is the very question in issue where there has been a termination by the vendor for failure to complete as required by the essential stipulation. Reliance upon the “interest” therefore does not assist; it is bedevilled by circularity. There is the further point subsequently made by Lord Hoffmann in Union Eagle concerning the adaptation here of the principles respecting penalty and forfeiture, even allowing the existence of a pre-completion equitable interest in the land. His Lordship distinguished the well established jurisdiction in equity to relieve against forfeiture of part-payments and amounts in excess of a “reasonable deposit”, matters not involved in Tanwar’s appeal to this Court. He then proceeded: But the right to rescind the contract, though it involves termination of the purchaser’s equitable interest, stands upon a rather different footing. Its purpose is, upon breach of an essential term, to restore to the vendor his freedom to deal with his land as he pleases. In a rising market, such a right may be valuable but volatile. Their Lordships think that in such circumstances a vendor should be able to know with reasonable certainty whether he may resell the land or not.

Notes

[9.70]

1. The above decision is a restatement of the relationship of a seller and buyer of land. In particular it is a qualification of the broad statement of Jessell MR in Lysaght v Edwards (1876) 2 Ch D 499. That statement was: It appears to me that the effect of a contract for sale has been settled for more than two centuries; certainly it was completely settled before the time of Lord Hardwicke, who speaks of the settled doctrine of the Court as to it. What is that doctrine? It is that the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser, the vendor having a right to the purchase-money, a charge or lien on the estate for the security of that purchase-money, and a right to retain possession of the estate until the purchase-money is paid, in the absence of express contract as to the time of delivering possession. In other words, the position of the vendor is something between what has been 684 [9.70]

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called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz, possession of the estate and a charge upon the estate for his purchase-money.

2. The High Court does not seem to be denying that a purchaser has some form of equitable interest but is asserting that, at least prior to the time for settlement, the interest is less than full beneficial ownership. That interest may be more like a lien on the land, such as an unpaid vendor has after transfer of legal title to a purchaser. A contract for the sale of land involves a number of steps between the making of the contract and the final execution of that contract. Today commonly a buyer has a limited period in which cooling off rights may be exercised; in effect the decision to enter the contract may be reconsidered. Secondly a contract may be subject to pre-conditions; a sale may be subject to the approval of finance or to a satisfactory report on aspects of the building. Then, because of the seller’s obligation to make good title, a buyer must be satisfied as to the title. Lysaght v Edwards (1876) 2 Ch d 499 purports to provide that in equity property passes despite all these impediments to a binding sale. Finally the decision is stated to rely on the maxim that equity deems to be what ought to be. However the parties do seem to intend to separate the contract from completion of the transfer. Under a standard contract of sale in the period prior to settlement have the parties any intention of passing any interest? 3. One consequence of the decision in Lysaght v Edwards (1876) 2 Ch D 499 that continues to have an impact is as to the passing of risk. Jessell MR stated: “If anything happens to the estate between the time of sale and the time of completion of the purchase it is at the risk of the purchaser. If it is a house that is sold, and the house is burnt down, the purchaser loses the house. He must insure it himself if he wants to provide against such an accident. If it is a garden, and a river overflows its banks without any fault of the vendor, the garden will be ruined, but the loss will be the purchaser’s.” 4. This rule has created many problems with respect to claims on insurance policies. The buyer is a third party to an insurance policy between the seller and an insurance company. If the seller claims against the insurer, the insurer is subrogated to the rights of the seller and may enforce the contract of sale. The rule has been subject to statutory change, so that in New South Wales, for example, s 66K of the Conveyancing Act 1919 (NSW) provides that risk is not to pass until completion of the sale or at an earlier time stipulated by the parties where that earlier time is one by which the buyer has become entitled to possession. See further [9.190] and [9.195]. Is there any justification for the rule today other than a benefit for insurance companies? 5. A person interested in buying a parcel of land may wish to take rights over the land without the commitment to buying. Such a person may take an option or right of pre-emption over the land; an option entitles the person to force a sale, a right of pre-emption entitles the person to a right of first refusal should the owner decide to sell. In Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70, Kourakis J held that both rights conferred equitable interests in the land. Where a later equitable interest was created and the interests were of equal standing, priority would be lost only by some disbarring conduct on the part of the holder of the option or the right of pre-emption. [9.70]

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Kourakis J recognised that the decision in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 impacted on priority disputes by its classification of a buyer’s interest as something less than a full equitable interest. 6. Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 recognises the equitable jurisdiction to grant relief against forfeiture. However the case limits its operation more than had been previously assumed. This issue is further discussed at [10.130].

SALE OF GOODS [9.75] Contracts for the sale of goods are not subject to the same formalities as those for the sale of land. Indeed such contracts often occur without even a word being spoken by either party. However it was only in the latter half of the twentieth century that a requirement for all executory contracts with a price exceeding $20 to be evidenced in writing. Without written evidence of the contract, it was unenforceable. The requirement was part of the Statute of Frauds of 1667 and the amount (with a change to decimal currency) had remained constant throughout that time. Rules governing contracts for the sale of goods are set out in legislation that was originally enacted as part of the late 19th century consolidation of commercial law; today the statutes are: Sale of Goods Act 1923; Goods Act 1958; Sale of Goods Act 1896; Sale of Goods Act 1895; Sale of Goods Act 1895; Sale of Goods Act 1896; Sale of Goods Act 1954; Sale of Goods Ordinance 1972. Although contracts for the sale of goods are often instantaneous, they may be more complex and are subject to statutory rules as to the passing of property. A distinction is drawn between the passing of property which is described as the entitlement to the goods as between seller and buyer and the passing of title which concerns entitlement in relation to third parties. Claims to title have been considered at [4.30]–[4.100]. Two main rules govern the passing of property in the absence of an intention of the parties. They relate to specific goods which are goods which are those marked out and agreed upon as the subject matter of the contract and unascertained goods which comprise all other goods. In the case of specific goods, property passes when the contract is made; in the case of unascertained goods, property passes when the goods to be provided are unconditionally set aside. The passing of property results in the buyer becoming the owner with the legal entitlements of an owner but more significantly affects the passing of risk of loss and remedies for breach of the contract. Again until late in the twentieth century, the right to reject goods in breach of contract was lost on the passing of property but today rejection can occur until the time of acceptance. The rules do mean that property passes at probably the earliest possible time; because the rules are subject to a contrary intent a later time is often inferred as the intention of the parties.

Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd [9.80] Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd [1951] HCA 15; (1951) 82 CLR 621 High Court of Australia LATHAM CJ This is an appeal from a judgment of the Supreme Court of South Australia. Servicemen’s Co-operative Joinery Manufacturers Limited and G. T. Clarke, sued for the return of certain wood-working machinery or for damages for its conversion. The plaintiff Clarke is a trustee for debenture holders who have security over all chattels belonging to the plaintiff company. Judgment was given for the plaintiffs for 4,897 pounds 10s. 8d. (at p 631) 686 [9.75]

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Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd cont. 2. The machinery in question belonged to the Commonwealth. It was in buildings belonging to the Commonwealth at Salisbury, South Australia, which had been a large munitions plant during the recent war. The plaintiff company took a lease of portion of the premises known as the carpenter’s shop. Most of the machinery in question was in that shop at the time when the agreement for the lease was made. Some of the machinery was in another building at Salisbury - a paint shop, of which the company also had a lease. The company wished to buy the machinery and negotiations took place with the Commonwealth for the purchase. 9. The rights and obligations under the contract are clear enough. The terms of the contract exclude the ordinary rule that payment and delivery are concurrent conditions - Sale of Goods Act (S.A.) 1895-1943, s. 28. Payment, by this contract, has been made a condition precedent to delivery. The vendor becomes bound to deliver under the contract only after the price has been paid. Then delivery is to take place at the carpenters’ shop. Most, but not all, of the machinery was in the carpenters’ shop, and was in the possession of the company as bailee. As bailee the company could do no more than use the machinery in the place where it was, subject to the right of the Commonwealth to terminate the bailment at any time. The company had no right to remove or dispose of the machinery. If delivery were made under the contract the company would become the owner of the goods and could do as it pleased with them. No physical change in the locality of the goods in the carpenters’ shop would be required in order to change the possession of the company as bailee into possession as owner. It would be sufficient for the Commonwealth to agree that the company should hold the goods in the capacity of owner and no longer as bailee. (at p 634). 10. In order to make delivery of the machinery which was in the paint shop, the Commonwealth was bound, but only after payment of the price, to deliver it at the carpenters’ shop. Such physical delivery would change the possession of the company from possession as bailee to possession as owner. (at p 634). 11. The contract plainly contemplates (1) that the first thing to be done is for the company to pay the price; (2) that then, and then only, the Commonwealth must make delivery at the carpenters’ shop. These acts are to be performed in the future and there is no difficulty in understanding, or applying to the existing facts, the terms of the contract which relate to them. (at p634). 12. But, the plaintiffs contend, delivery had already been made to the company in March 1946 and therefore the provision in the sales advice “net cash before delivery” and the provision as to obtaining delivery at the carpenters’ shop had no application to the actual transaction. It is argued that the position was that there was a sale of specific goods for a stated price, that the contract was unconditional, that the property in the goods passed to the plaintiff company when the contract was made, and that the goods were actually delivered to the company. 13. Section 18 provides as follows:- “Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer:- Rule 1. Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both be postponed.” (at p634). 14. It is contended for the plaintiff that these provisions are applicable to the present case and that therefore the property in the goods passed to the buyer when the contract was made, that is, on 3rd October 1946. (at p635). 15. Section 18, however, is introduced by the words ″Unless a different intention appears″. The parties are at liberty to make their own contract as to the time at which the property in goods is to pass. The Sale of Goods Act does not impose any particular contract upon parties to a contract of sale. In the present case the contract included an express term that net cash was to be paid before delivery. This was a condition of the contract, which therefore was not unconditional. The delivery to [9.80]

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Minister for Supply & Development v Servicemen’s Co-operative Joinery Manufacturers Ltd cont. which reference is made was (1) a delivery under the contract of sale; (2) a delivery which was to take place in the future, after the price had been paid. The meaning of this provision, therefore, is that no delivery was to take place under the contract of sale until net cash had been paid. Nothing was paid at any time and no delivery under the contract took place. The fact that the buyer was in possession as a bailee has no significance in relation to delivery under the subsequent contract of sale. There could be a delivery under that contract only if there was a change in the character of the possession - i.e., from possession as bailee to possession in pursuance of the contract of sale: Pollock & Wright, Possession in the Common Law (1888), pp. 57, 74, 75. There was no such change in the character of the company’s possession and therefore ″net cash before delivery″ was completely applicable to the circumstances of the case. The inclusion of this term in the contract shows an intention that the property in the goods was not to pass until they were paid for. (at p635). 18. It is contended that the Commonwealth, by making a demand for the price in 1946 and 1947 and later, adopted a position which was consistent only with the property having passed, because if the property had not passed the right of the Commonwealth would have been only a right to sue for damages and not a right to sue for the price of the goods. But whether this is the case depends entirely upon the terms of the contract of sale. The price may be made payable at a time before delivery and an action for the price may then be maintained though the property has not passed: see notes to Pordage v. Cole (1669) 1 Wms Saund 319 (85 ER 449) ; Dunlop v. Grote [1845] EngR 1197; (1845) 2 Car & K 153 (175 ER 64) ; Halsbury’s Laws of England, 2nd ed., vol 27, p. 151; see also Benjamin on Sale, 7th ed. (1931), p. 861: “A seller may well say to a buyer: ’I want the money on such a day, and I will not sell unless you agree to give me the money on that day, whether you are ready or not to accept the goods’; and if these terms be accepted, the seller may recover the whole price of goods although the property remains vested in himself.” (at p636). 19. In the present case there was an express contract that the price should be payable before the delivery of the goods and the Commonwealth was therefore entitled to demand, and, if it chose to do so, to sue for, the price before any delivery of goods had been made under the contract. (at p636). 20. The company was apparently always in financial difficulties, and meetings of its creditors were held in May and August 1947. The Commonwealth was recorded as a creditor by the company. All creditors except the debenture holders were represented as being unsecured. A Commonwealth officer attended each meeting but took no part in the proceedings. It was argued for the respondents that the Commonwealth was therefore estopped from denying that the property in the machinery had passed to the company. In my opinion none of the requirements of an estoppel are shown to have existed. No representation was made on behalf of the Commonwealth and neither plaintiff acted upon any such representation. (at p637). 21. The appeal should be allowed, the judgment of the Supreme Court set aside, and judgment should be given for the defendants. (at p637).

[9.85]

Notes and Questions

1. The rules as to the passing of property are set out in the Sale of Goods Act 1923 (NSW), s 23; Goods Act 1958 (Vic), s 23; Sale of Goods Act 1896 (Qld), s 23; Sale of Goods Act 1895 (SA), s 18; Sale of Goods Act 1895 (WA), s 18; Sale of Goods Act 1896 (Tas), s 18; Sale of Goods Act 1954 (ACT), s 23; Sale of Goods Act 1923 (NT), s 23.

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2. The rules may be regarded as setting the time for the passing of property at the earliest possible time. As the above case recognises one consequence is that the early passing of property means that a seller can sue for the price rather than having to establish damages for failure by the buyer to complete. What difficulties attach to a claim by a seller of goods for damages?

Harrison v Lia [9.90] Harrison v Lia [1951] VLR 470 Supreme Court of Victoria SHOLL J read the following judgment: This was an order to review the decision of a Court of Petty Sessions at Pakenham, dismissing an information by the informant, Harrison, against the defendant, Lia. The defendant was charged that on the 22nd January 1951, at Nar Nar Goon, he was guilty of an offence against Part XII of the Health Act 1928 in that he did sell a certain food, to with, milk, which said food was adulterated. The charge was laid under sec 215 of the Health Act, the term “adulterated” being expanded by sec 216 (c) so as to include non-compliance with standards prescribed by or under the Act. In this case the standard relied on was that prescribed for milk by the Food and Drugs Standards Regulations 1939, made under the Act. It appeared in evidence that on the date in question a driver named Cussen pulled into the unloading platform of the Bayles Milk Depot. The truck was loaded with cans. The informant, a dairy supervisor employed by the Department of Agriculture, was there with two colleagues. Senior supervisor Clark at once interviewed Cussen and, according to the informant, Cussen then placed a can (apparently identified by him as the defendant’s supply) on one side of the platform. According to Clark himself, it was Clark who, after a conversation with Cussen, placed the can aside on the platform. I should think Clark would be the more likely to know who did the act in question, but assuming the informant to be correct, his evidence indicates that the unloading and setting aside of the can was done immediately the truck pulled in, and at the direction and for the purposes of the inspectors. A sample of the milk was taken, and evidence was given (which was not challenged) that the sample was later found to be below the standard prescribed. The defendant was interviewed the same day by Clark. He stated that he had a milk contract with the Bayles Depot, that he had sent one can that morning, and that it was collected by Cussen about 8.45 a.m. Consequently, I turn to the question whether in fact, at the time the inspector procured the sample in this case, the property in the milk had passed to the depot. Mr. Anderson argued that the provisions of the Goods Act 1928 were irrelevant, as the parties’ agreement must be taken to have been exhaustively defined by the form in the schedule to the Regulations under the Milk Board Acts. But the form says nothing about the passing of the property. No one doubts that at some stage it must pass. When it passes must depend on the application of recognized legal principles. If the Goods Act did not apply, the common law would. But the Goods Act in the main codifies the common law. In any case I can see no reason why the Goods Act should not apply. Dr. Woinarski relies on sec. 23, rule 5, and especially sub-rule (2). Here, he says, there was a contract for the sale of unascertained or future goods by description, and on January 22 goods of that description, milk, in a deliverable state, were unconditionally appropriated to the contract by the seller with the implied assent of the buyer, and in particular were delivered to a carrier (O’Connor, whose servant Cussen was) for the purpose of transmission to the buyer, without the seller reserving the right of disposal. Consequently, he says, no contrary intention appearing, the property then passed to the depot. It is true that O’Connor carted “for the Depot”″, ie, he was employed and paid by it. It is further true that in the contract between the defendant and the depot, clause 2 (a), providing for delivery by the defendant to the depot, is deleted, and clause 2 (b), the optional alternative, is left to operate. Under that, the depot provides the transport service and charges the defendant a deduction which the Milk Board fixes in writing by endorsement on the contract. But in my opinion that clause does not [9.90]

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Harrison v Lia cont. make the carrier the purchaser’s agent. It must be read in the light of clause 7, dealing with times of delivery to the depot. That provides (inter alia): “When the transport service for such milk is provided or arranged for by the purchaser on behalf of the vendor”, the responsibility for delivery times shall be regulated as there prescribed. That can only refer back to clause 2 (b), and amounts, in my opinion, to a provision that, in this particular case, O’Connor’s service was provided by the depot to carry the defendant’s milk to the depot on behalf of the defendant. Since there is not, and could not be, any similar reference to clause 3 (b), that sub-clause, in my opinion, does not tell against the construction I put on the document. Of the additional terms and conditions on the back of the contract, those referring to “warranty”, “consignment of milk”, and “provision of cans” are at least consistent with the view that “delivery” under this contract is to be at the depot. The “warranty” is perhaps neutral on the point, but the other two clauses, when read together, in my opinion are not only consistent with the view stated, but strongly support it. Thus the defendant’s obligation was to deliver, by his own agent, at the depot. What, then, is the effect of this construction of the contract on the passing of the property. In my opinion, the authorities show that where the seller appropriates goods to the contract and entrusts them to his own agent for delivery to the purchaser, under an agreement with the buyer for delivery by the seller at their destination, the property, unless something more appears, does not pass; see Benjamin on Sale (7th ed.), p.358; Badische Anilin, etc, v. Basle Chemical Works, [1898] A.C.200, especially per’ Lord Herschell at p. 207; Dunlop v Lambert (1839), 6 C1&F 600, per Lord Cottenham L.C. at pp. 620-1, 626-7. Whether the seller ″reserves the right of disposal″ within the meaning of rule 5 (2) of sec. 23 of the Goods Act, or a “different intention appears” within the meaning of the introductory words of sec. 23 does not perhaps matter; though Benjamin, loco cit., takes the latter view. I do not think there is anything in.the discussion by Dixon J. of the passing of property under contracts for the sale of goods, in Jarnes v The Commonwealth (1939), 62 CLR 339, at pp. 376-94, which is inconsistent with the view I have taken, but rather that it supports it. This case resembles more the fifth case of consignment by the plaintiff there considered, at pp 376, 393-4, where the goods were in course of carriage by the plaintiff’s own servant for delivery at Broken Hill, and the property was held not to have passed, than the cases of the consignments by sea. In this case, it is, in my opinion, clear on the terms of the contract that the defendant, if he had so desired, could have intercepted the can of milk at any time before delivery at the depot and substituted another, without any breach of contract. For these reasons I am of opinion that on the assumed narrow meaning of the grounds taken in it, the order nisi should be made absolute. The information will be remitted to the magistrate with a direction to convict the defendant.

[9.95]

Note

The case is one involving the issue of ownership for the purposes of criminal liability and the relevant statute was expressed in what today would be viewed as a narrow basis of liability in that ownership of the milk by the defendant had to be established. Nonetheless it is an illustration of the application of the rules as to passing of property alongside the construction of the terms of the contract.

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GIFTS OF CHATTELS Re Stoneham [9.100] Re Stoneham [1919] 1 Ch 149 Chancery Division ADJOURNED SUMMONS: The question raised by the summons was whether certain chattels, comprising old oak furniture, arms and armour, belonged to the plaintiff Robert Stoneham for his own use, or whether the chattels passed under a general bequest of furniture and effects in the will of the testator to his trustees upon certain trusts. On July 3, 1914, the testator made his last will and thereby, after confirming the gift he had made to plaintiff Robert Stoneham “of the furniture and effects in his possession at Beredens”, gave all his furniture and effects … (or such of them or such parts thereof as he might not have given away, sold or disposed of in his lifetime or by that his will) to his executors upon certain trusts, and appointed his son, the defendant Frederick Stoneham, his grandson, the plaintiff Robert Stoneham, and two other persons his executors all of whom proved the will. The testator died in February, 1915. On February 18, 1916, an order was made on originating summons for the administration of the testator’s real and personal estate, and one of the inquiries thereby directed was whether the old oak furniture, arms and armour, which formerly belonged to the testator, and were then in the possession of the plaintiff Robert Stoneham (hereinafter called the claimant), were given by the testator in his lifetime to the claimant and did not belong to the testator at the time of his death. On July 15, 1918, the master certified in answer to the inquiry that the chattels in question belonged to the claimant. Thereupon the defendant Frederick Stoneham (hereinafter called the applicant) took out a summons for an order to vary the master’s certificate by finding that the chattels in question were not given by the testator in his lifetime to the claimant but belonged to the testator at the time of his death. It appeared that the testator owned two residences, one at Brighton and the other, known as “Beredens”, in Essex, and that the chattels in question originally belonged to the testator and were kept by him at Beredens. In February, 1910, the claimant went with his family to Beredens, and had resided there ever since. He did this at the request of the testator, who spent the greater part of each year at Brighton, but generally visited Beredens during some part of each year. The claimant alleged that the testator in the spring of 1913, when at Beredens, verbally gave him the chattels in question, and he also relied on the confirmation in his will and his appointment as one of the executors. The applicant alleged that the confirmation in the will referred to a gift of other chattels at Beredens, which the testator verbally gave the claimant in 1911, and he relied on a certain incident which occurred in November, 1914, after the date of the will as tending to negative any gift in 1913 by the testator to the claimant. PO LAWRENCE J: The next point taken on behalf of the applicant is a point of law. It is contended that, even if the testator purported to make the gift as stated by the claimant, yet the gift was not effectual to pass the property in the chattels, because it was not accompanied or followed by delivery nor by any change in the possession of the chattels. This contention raises the question whether a gift per verba de praesenti of chattels in the possession of the intended donee is effectual to pass the property in such chattels without more, or whether it is an essential constituent of such a gift that the donor should first regain possession of the chattels and then hand them back to the donee, or should do some other act equivalent to a further delivery of such chattels. Having regard to the fact that the testator by his last will and testament appointed the claimant as one of his executors and confirmed the gift to him of the furniture and effects in his possession at “Beredens”, I am by no means convinced that this question really arises; but as it has been fully argued before me I think it desirable that I should express my opinion on it. The applicant relies upon the decision of the Court of Appeal in Cochrane v Moore 25 QBD 57, and submits that it is conclusive in his favour. This submission renders it necessary for me to consider that [9.100]

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Re Stoneham cont. case carefully, because, if it covers the contention of the applicant, I am bound to give effect to that contention, whatever my own opinion may be. That case, in my judgment, clearly affirms the proposition that where chattels capable of delivery are not in the possession of the donee a parol gift of such chattels is not effectual to pass the property in the chattels to the donee unless accompanied or followed by delivery. The subject-matter of the gift in Cochrane v Moore 25 QBD 57 was an undivided fourth part of a horse; and although the facts in that case rendered it unnecessary for the Court of Appeal to decide the general question whether delivery is necessary in the case of a parol gift of an ordinary chattel, yet the Court thought the question of such importance that it felt bound to express an opinion upon it. In the result, after an exhaustive examination of the authorities, the Court came to the conclusion that Irons v Smallpiece (1819) 2 B & Al 551 was rightly decided, and had not been overruled by In re Harcourt (1883) 31 WR 578 or by In re Ridgeway (1885) 15 QBD 447, and that delivery was necessary to pass the property in the case of a parol gift of an ordinary chattel. On behalf of the claimant, however, it is contended that the rule thus affirmed by the Court of Appeal does not involve the proposition that where the chattel the subject-matter of the parol gift is already in the possession of the donee at the time when the gift is made, a further delivery or a change of possession is necessary in order to render the gift effectual. In my judgment this contention of the claimant is sound, and I will now proceed to state my reasons for coming to this conclusion. In Cochrane v Moore the subject-matter of the gift was never in the possession of the donee, and I cannot find anything in the report to suggest that the Court, in affirming the proposition that delivery was necessary in the case of a parol gift of ordinary chattels, intended to hold that where the chattels had already been delivered to the donee any further delivery was necessary; no argument, so far as I can see, was addressed to the Court as to any distinction between a gift of chattels previously delivered to the donee and then in his possession, and a gift of chattels not in the possession of the donee at the time of the gift; nor in my judgment was the Court considering any such question. From a common-sense point of view it seems to me strange that articles already in the possession of an intended donee could not be effectually given by word of mouth without first removing them from the possession of the intended donee and then handing them back to him. In my judgment the foundation of the rule affirmed by the Court of Appeal in Cochrane v Moore 25 QBD 57 is that in order to constitute a perfect gift by word of mouth of chattels capable of delivery the donee must have had the chattels delivered into his possession by the donor or by someone on his behalf. In principle I see no distinction between a delivery antecedent to the gift and a delivery concurrent with or subsequent to the gift. Nor can I see any reason in principle why the rule should not apply to a case where chattels have been delivered to the donee before the gift as bailee or in any other capacity, so long as they are actually in his possession at the time of the gift to the knowledge of the donor.

Re Cole [9.105] Re Cole [1964] Ch 175 English Court of Appeal HARMAN J: We first hear of the bankrupt and his wife in 1937, when they were living in a modest rented house at Hendon which, as well as its furniture, was the bankrupt’s property. In July, 1940, the bankrupt, being Austrian by nationality, was apprehensive of internment as an enemy alien, and he executed a deed of gift transferring the house to the applicant and also gave her the furniture. The method of this latter gift is not known and is not in question. The family then moved to Clitheroe in Lancashire, where they rented a house which was furnished largely from the Hendon house. The activities of the bankrupt during the war, apparently in the textile trade, resulted in his becoming before its end a very rich man indeed. In July, 1945, the war being over, he acquired a long lease of a large mansion at Hendon, which he proceeded to furnish. A few articles were sent down from 692 [9.105]

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Re Cole cont. Clitheroe, three or four thousand pounds’ worth was bought from the vendor, and the rest, to the tune of some £20,000, the bankrupt purchased himself and caused to be installed in the new house, to which he, together with one child and its nannie, removed in September, 1945, leaving the applicant and another child, who was unwell, at Clitheroe. In December, 1945, however, she came down to London with the other child and the bankrupt met her at the station and took her to the new home. He brought her into the house, took her into a room, put his hands over her eyes and then uncovered them saying “Look”. He then accompanied her into other rooms on the ground floor where she handled certain of the articles; next she went upstairs by herself and examined the rest of the house. When she came down again he said: “It’s all yours”. She now says that this was a gift to her of the furniture in the house, though apparently not of the house itself, and the judge accepted the evidence of the bankrupt and the applicant that they had since believed that this was the position. We must accept the judge’s finding in this respect notwithstanding that the house and its contents and also £20,000 worth of furs and jewellery, said to have been other presents to the applicant, remained insured in the bankrupt’s name. Until the mid-fifties the bankrupt lived the life of a very rich man owning, among other things, a villa at Cannes and a fleet of cars, but the death of one of his associates, a Mr Littman, was followed by a judgment against him by Mr Littman’s executors for a very large sum which remained unsatisfied, and in 1961 bankruptcy ensued and there is a very large deficiency. The trustee on behalf of the creditors resists the applicant’s claim to the furniture in the house, except the small items from Clitheroe, and that was the question tried on this motion. The learned judge acceded to the applicant’s claim: the trustee now appeals. Counsel on behalf of the applicant boldly put forward an entirely novel proposition to the effect that a perfect gift of chattels is constituted by showing them to the donee and speaking words of gift. It is enough, he says, that the donee should be brought to the chattels rather than the chattels to the donee, and that she should be “near” the chattels (though what degree of proximity is needful remained vague) when the words of gift are spoken. This amounts to a change of possession, says counsel for the applicant, particularly if one is dealing with a collection of chattels, a fortiori if the chattels are, or come, under the physical control of the donee, and the case is strengthened if the donee handles some of the chattels in the donor’s presence. This remarkable submission is unsupported by authority and is, in my judgment, entirely heterodox. It is, I think, trite law that a gift of chattels is not complete unless accompanied by something which constitutes an act of delivery or a change of possession. If the chattels be many or bulky, there may be symbolical delivery, as, for instance, of a chair – Lock v Heath (1892), 8 TLR 295, or as in the case about the gift of a church organ – Rawlinson v Mort (1905), 93 LT 555, where the donor put his hand on it in the presence of the donee and accompanied his gesture with words of gift. The question, therefore, for our decision is whether there has been anything here which amounts to an act of delivery or a change of possession either preceding or following or coincident with the words of gift so as to make it perfect. The learned judge dealt with this point very briefly. He assumed that there must be delivery and that words of gift alone are not enough, but he said that he could not decide in the trustee’s favour without deciding that a husband cannot give his wife the contents of the matrimonial home without executing a deed of gift. He said that he did not see what more the bankrupt could have done to put the applicant into the possession of the gift which he thought that he was making. It seems to me that this was in fact a reliance on the word or words of gift which was the very thing which the judge said that he could not do. I cannot find that there was any change of possession here. It is argued that a wife living in her husband’s house, and, therefore, having control to some extent of the furniture in it, is in possession of it, but this, I think, does not follow. In the ordinary case where a wife lives with her husband in a house owned and furnished by him, she has the use of the furniture by virtue of her position as wife, but that [9.105]

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Re Cole cont. gives her no more possession of it than a servant has who uses the furniture. As to this, see Goddard LJ, in Youngs v Youngs [1940] 1 KB 760 at 770; [1940] 1 All ER 349, CA. It is true that it may be doubtful who is in possession of the furniture and that one must look to the title, as in Ramsay v Margrett [1894] 2 QB 18; but in the absence of delivery there is no title in her, as was pointed out by Lord Evershed MR, in Hislop v Hislop [1950] WN 124, CA. I conclude, therefore, although I feel considerable sympathy with the applicant who has believed this furniture to be hers, that it never became so, because the gift was never perfected, and that, therefore, she has no answer to the trustee’s claim. I would allow the appeal. [Pearson LJ and Pennycuick J agreed.]

Note and Question

[9.110]

Argument against a gift of personal property to a spouse will commonly be made by persons (other than the spouse) named by the donor as beneficiaries in a will, or creditors of the donor where the donor is subsequently unable to pay all the donor’s debts. The transfer of property to family members has been a cause for concern in publicity surrounding some of the collapses of personal empires at the end of the 1980s. The Bankruptcy Act 1966 (Cth) does permit a trustee in bankruptcy to set aside transactions made by the bankrupt within prescribed periods prior to the coming into effect of bankruptcy. However only transactions falling within defined circumstances may be set aside and the power only arises if bankruptcy has been declared. Should transactions in favour of a family member be subject to more general scrutiny where a person subsequently fails to meet financial obligations?

Wrightson v McArthur [9.115] Wrightson v McArthur [1921] 2 KB 807 King’s Bench Division The following statement of facts is taken from the judgment: The defendant company were minded, for reasons and under circumstances which I need not go into, to give the plaintiff security on goods of their own against loss which he might suffer owing to the non-performance by the defendant McArthur of the contract in respect of which I have just assessed damages against him. Under these circumstances there was a series of interviews between the plaintiff and, in the first instance, the whole board of directors of the defendant company and later representatives of the board who acted for the others, at which the necessary arrangements were made. What took place was faithfully recorded in writing in two letters of August 25 and one of August 30, 1920. The first of these documents, a letter by the managing director of the defendant company to the plaintiff, was handed to him in order that he might consult his bank upon it. The next letter from the plaintiff to the company on the same day records that he has done so, and that he is able to agree to the proposal. This proposal was that in consideration of two months’ further time the company would lay aside 5000l. worth of goods as security for the due performance of the contract, and in the second of the two letters above mentioned, in which the plaintiff accepts it, he suggests that a valuer should be agreed to approve the security, and that arrangements will have to be made to remove the goods to an approved warehouse. On August 30 the plaintiff and his valuer went to the company’s offices where they saw the stock sheets containing the goods – namely, a quantity of sylko, some buttons and thread-intended to form the security. This having been approved the plaintiff his valuer and the managing director went into the basement and saw the sylko in a compartment there. The door of the compartment had no key and was 694

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Wrightson v McArthur cont. apparently broken, but it was arranged that the door should be repaired, a key provided, and that the goods should be locked up in the compartment and the key handed to the plaintiff’s valuer on his behalf. This was duly done in the course of a day or two. The parties than went to some other premises of the company and in a room there saw the buttons and thread which had been mentioned in the stock sheets. The door of that room was locked and the key handed to the plaintiff or his valuer. There were no other goods locked up either with the sylko or with the buttons and the thread. It will be observed that the parties had abandoned the idea of removing the goods to an approved warehouse and had substituted this plan of locking them up in separate compartments on the defendants’ premises. It was to save trouble in the event of the company being able to redeem the goods in whole or in part. After this the parties returned to the offices and then – namely, after this transaction-the letter of August 30 was given by the managing director to the plaintiff. The terms of the letter treat the setting aside of the goods, and so on, as things to be done in the future. In fact they had already taken place. The last words of this letter are “you to have the right to remove some [ie, goods] as desired”. The defendant company went into voluntary liquidation and the liquidator refused to allow the plaintiff to enter the rooms and remove the goods. He alleged that the agreement, if made with the company, was invalid as against him under s 93, sub-s 1(c), of the Companies (Consolidation) Act, 1908, as being a charge created on evidence by an instrument which if executed by an individual would required registration as a bill of sale. … ROWLATT J: For the above reasons it seems to me that if the delivery of the keys of the rooms in which the goods now in question were locked up is to be regarded as passing the possession the security intended to be created is valid, and the question in the case is whether possession did pass. The point to which this case is not reduced is whether the circumstances that the rooms, the keys of which were delivered, were within the defendants’ premises, prevents the delivery of the keys conferring possession of the contents of the rooms. If the keys delivered had been the outside key of the whole warehouse containing these goods I should have felt no difficulty, nor should I have felt any difficulty had the key been of an apartment or receptacle in the premises of a third party as was the case in Hilton v Tucker 39 Ch D 669 at 676. On the other hand if, the rooms being in the defendants’ premises, the keys had been given without the licence to go and remove the goods at any time I should have thought it clear that possession of the goods did not pass. It would be merely a case of the goods remaining in the defendants’ possession with the security that they should not be interfered with, but without any power of affirmative control at the free will of the plaintiff. It would be like the case of furniture left in a locked room in a house that is let furnished, where the lessor has not right to enter except upon reasonable notice and at reasonable times. The actual question has to be considered in the light of the principle that delivery of a key has effect not as symbolic delivery, but as giving the actual control. This was the view expressed by Lord Hardwicke in Ward v Turner (1710) Prec in Ch 300, where he says the key is the means of coming at the possession. The matter was fully discussed in the light of all the cases in Pollock and Wright on Possession in the Common Law, p 61 and following pages. In Hilton v Tucker, already referred to, in a judgment delivered since the date of that work, Kekewich J observes “that the delivery of the key in order to make constructive possession must be under such circumstances that it really does pass the full control of the place to which admission is to be gained by means of the key.” If I might criticise that statement my criticism would only be as to the propriety of the use of the word “constructive” in the connection in question. I think therefore there can be no doubt as to the true principle, and the difficulty is in its application. There are two cases in which delivery of the key of a box in a house has been to confer possession of the contents. The first was Jones v Selby (1710) Prec in Ch 300, referred to by Lord Hardwicke in Ward v Turner 2 Ves Sen 431 at 441 above mentioned, the other was Mustapha v Wedlake [1891] WN 201, [9.115]

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Wrightson v McArthur cont. but in both cases both parties were living in the house and therefore the person receiving the delivery could not be expected to take away the box, but could hold possession of it in the house. It has never been held, so far as I know, that delivery of the key of a box which the deliverer retains in his own house, where the other party does not live, passes possession of the contents. Upon the whole, however, I think that in the case before me the possession was transferred, having regard to the fact that a licence to come and make the necessary entry to use the key was also conferred, a licence which it seems to me could not be revoked. The door into the building would be open in business hours, and the mere fact that the plaintiff might wrongfully be excluded from the whole building does not, I think, affect the matter. If the key had been given him with intention to pass to him the possession of the room itself upon a demise of it, I cannot doubt that possession would pass. I see no difference when the key is given to pass possession not of the room, but of the chattels. The key guards both in the same way.

[9.120]

Note

The concept of possession is analysed in detail at [3.05]–[3.70]. In essence possession is a relationship between a person and a thing which is dependent upon a number of factors. As soon as an object is not physically held by a person the temptation arises to use phrases such as “legal possession” or “constructive possession”. What is clear from the case is that a handing over of possession involves more than a symbolic act: emphasis is placed on control of the goods.

Jones v Lock [9.125] Jones v Lock (1865) 1 Ch App 21 Court of Chancery Appeals Robert Jones was an ironmonger at Pembroke, and had children by a first wife, and one son, an infant about nine months old, by a second wife. It appeared from the affidavits, as to which there was no contradiction, that Robert Jones went to Birmingham for a few days on business, and returned on the 12th of September, 1863. On the day of his return he was in the kitchen of his house with his wife and infant child and the child’s nurse, and the nurse said, “You have come back from Birmingham, and have not brought baby anything;” on which he said, “Oh, I gave him a pair of boots, and now I will give him a handsome present.” He then went up-stairs, and brought down a piece of paper, which was a cheque for £900, and said, “Look you here, I give this to baby; it is for himself, and I am going to put it away for him, and will give him a great deal more along with it. He then placed the cheque in the baby’s hand, whereupon his wife said, ‘Don’t let him tear it,’ and he answered, ‘Never mind if he does; it is his own, and he may do what he likes with it.’ He then took the cheque away from the child, and said to the nurse, ‘Now, Lizzie, I am going to put this away for my own son,’ and locked it in an iron safe. He had received this cheque in payment of a mortgage a short time before, and he had expressed to Mr Lock, his solicitor, his intention of adding £100 to it, and investing it for the benefit of the infant. On the 18th of September he met Mr Lock, and said, ‘I shall come to your office on Monday to alter my will, that I may take care of my son.’ On the same day he died. Mr Lock, one of the executors, found the cheque in the safe, and obtained payment of the money as part of the estate.” Robert Jones had made a will before the birth of the infant, leaving an annuity to his wife, and giving the rest of his property for the benefit of his other children. A suit was instituted for the 696 [9.120]

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Jones v Lock cont. administration of his estate, and a claim was carried in against the estate by the mother, on behalf of the infant, for the £900 as having been given to the infant. The cheque was not produced or made evidence. The Vice-Chancellor Stuart held that there had been a valid declaration of trust by the father for the infant, and that the claim must be allowed. LORD CRANWORTH LC: This is a special case, in which I regret to say that I cannot bring myself to think that, either on principle or on authority, there has been any gift or any valid declaration of trust. No doubt a gift may be made by any person sui juris and compos mentis, by conveyance of a real estate or by delivery of a chattel; and there is no doubt also that, by some decisions, unfortunate I must think them, a parol declaration of trust of personalty may be perfectly valid even when voluntary. If I give any chattel that, of course, passes by delivery, and if I say, expressly or impliedly, that I constitute myself a trustee of personalty, that is a trust executed, and capable of being enforced without consideration. I do not think it necessary to go into any of the authorities cited before me; they all turn upon the question, whether what has been said was a declaration of trust or an imperfect gift. In the latter case the parties would receive no aid from a Court of equity if they claimed as volunteers. But when there has been a declaration of trust, then it will be enforced, whether there has been consideration or not. Therefore the question in each case is one of fact; has there been a gift or not, or has there been a declaration of trust or not? I should have every inclination to sustain this gift, but unfortunately I am unable to do so; the case turns on the very short question of whether Jones intended to make a declaration that he held the property in trust for the child; and I cannot come to any other conclusion than that he did not. I think it would be of very dangerous example if loose conversations of this sort, in important transactions of this kind, should have the effect of declarations of trust. It was all quite natural, but the testator would have been very much surprised if he had been told that he had parted with the £900, and could no longer dispose of it. It all turns upon the facts, which do not lead me to the conclusion that the testator meant to deprive himself of all property in the note, or to declare himself a trustee of the money for the child. I extremely regret this result, because it is obvious that, by the act of God, this unfortunate child has been deprived of a provision which his father meant to make for him. Costs of all parties out of the estate.

[9.130]

Notes and Questions

1. A declaration of trust is different from a transfer of the whole of the interest in an object in that it involves the separation of the beneficial from the legal ownership. The oft-stated principle is that from Milroy v Lord (1862) 4 De G F & J 264; 45 ER 1185 that there is no equity to perfect an imperfect gift. In relation to a declaration of trust what this principle means is that a declaration is not to be inferred because an attempted gift has not been completed. An intention to separate beneficial and legal ownership is the crucial element for a declaration of trust. In respect of goods no requirement of writing exists for the validity or enforceability of such a declaration. The case extracted seems to be one where separation of legal and equitable ownership would have been logical. Such a separation would have maintained the father’s ability to sue on the cheque, for instance, but hold the proceeds for the benefit of the baby. The case seems therefore to turn on the ruling that the expressions used did not make the father’s intention sufficiently explicit. What clearer indications could be expected? [9.130]

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2. Who was claiming the benefit of the cheque from the child?

GIFTS OF LAND Corin v Patton [9.135] Corin v Patton (1990) 92 ALR 1 High Court of Australia MASON CJ AND McHUGH J: The respondent, Ronald John Patton, and his wife were joint registered proprietors of land under the Real Property Act 1900 (NSW). On about 6 July 1984 Mr Smallwood, a solicitor, received instructions to take the steps required to sever the joint tenancy. It is not altogether clear from whom those instructions were in fact received. Mr Smallwood prepared documents which he took on 12 July 1984 to the Pattons’ house where Mrs Patton was terminally ill. John Jeffrey Corin, the first appellant, who was Mrs Patton’s brother, also went to the house. Mr Smallwood produced and explained the documents, which were a form of memorandum of transfer and a declaration of trust. They were then executed by Mrs Patton and Mr Corin and taken away by Mr Smallwood, who was to do what was necessary to complete the transaction. The certificate of title was held by the State Bank of New South Wales as unregistered mortgagee of the property. Mrs Patton took no action to procure the production of the certificate of title so as to enable the transfer to be registered. Mrs Patton died on 17 July 1984. She left a will in which she appointed Mr Corin and the second appellant, Judith Jones, as executors. The instrument of transfer was in the prescribed form and expressed to be subject to the bank’s mortgage. In the instrument the printed provisions concerning consideration had been deleted and the following words substituted: In consideration of and pursuant to the terms of a Deed of Trust between the Transferor and Transferee of even date transfers her estate and interest as joint tenant in the said land to [John Jeffrey Corin]. The deed of trust stated, so far as is relevant: WHEREAS: 1 The beneficiary is the registered proprietor as joint tenant with her husband RONALD JOHN PATTON of the property known as 19 Wyatt Avenue, Belrose and being the whole of the land contained in Certificate of Title Volume 11010 Folio 202 (such land being hereinafter referred to as “the property”). 2 The beneficiary desires a severing of the joint tenancy over the said property. 3 The beneficiary has contemporaneously herewith executed a form of Transfer of her estate in interest in the said property to the Trustee to hold as tenants in common with the said Ronald John Patton. 4 Such Transfer as aforesaid is made to the Trustee for the beneficiary and the Trustee has agreed to execute the declaration of Trust hereinafter contained. NOW THIS DEED WITNESSETH AS FOLLOWS: 1. The Trustee HEREBY DECLARES that subject to the provisions contained herein he holds an interest as tenants in common with the said Ronald John Patton in the said property UPON TRUST for the beneficiary and further that, subject to the provisions contained herein, he agrees to deal with that interest in the said property in such manner as the beneficiary shall from time to time direct or in accordance with the direction or order of any relevant Court of law. At first instance, McLelland J held that the joint tenancy had not been severed and that Mr Patton was therefore entitled to the whole of the property. In his Honour’s view, any equitable interest which may 698 [9.135]

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Corin v Patton cont. have become vested in Mr Corin would have been held on trust for Mrs Patton. In these circumstances, Mr Corin could not have invoked the assistance of equity to claim his equitable interest as against Mrs Patton and there was therefore no effective alienation either at law or in equity of Mrs Patton’s interest in the land and the joint tenancy was not severed. McLelland J made a declaration accordingly in favour of Mr Patton. The Court of Appeal dismissed an appeal against this decision for reasons different from those advanced by McLelland J. Hope JA (with whom Priestley and Clarke JJA agreed) held that the question to be decided was whether by her acts Mrs Patton had placed Mr Corin in such a position that under the Real Property Act he had a right to have the transfer registered, a right which Mrs Patton or her executors could not defeat or impair. His Honour found that it was open to Mrs Patton at any time before her death to recall the transaction, since it had not been made for valuable consideration and under the terms of the deed of trust, to which the transfer was expressed to be subject, Mrs Patton could have withdrawn Mr Corin’s power to register the transfer. For this reason, no interest in the property was transferred to Mr Corin and the joint tenancy was not severed. In this Court, Mr Bennett QC for the appellants argued that Mrs Patton had done all that was in her power to effectuate a gift of her interest in the property, so that there was a transfer of the interest in equity. Mr Bennett submitted that Mrs Patton could not have recalled the gift except in her capacity as beneficiary under the trust, whereas it was only relevant to consider how she could have acted in her capacity as donor. He also argued that the transfer had operated as a declaration of trust itself and that an interest in the land had passed in this way. In the alternative, he suggested that the severance of a joint tenancy in equity does not require an actual transfer of property, but may be achieved by any act showing an intention to deal with the property in a manner inconsistent with the continuation of the joint tenancy. Mr Bennett said that, if these submissions failed, the Court should nonetheless endorse a test for determining whether there had been an effective transfer for the purposes of severing a joint tenancy which is less stringent than the gift rule. Finally, he contended that in the present case special rules needed to be developed to recognise the situation where a person conveys property to himself, a transaction made possible by s 24 of the Conveyancing Act 1919 (NSW). It is convenient to begin by considering the various ways in which a joint tenancy can be severed. The starting point is inevitably the judgment of Page Wood V-C in Williams v Hensman (1861) 1 J & H 546 (70 ER 862), in which his Lordship said, at 557-558 (867 of ER): A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund-losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. In the present case, the second and third of these means are clearly not relevant. But there is the question whether a unilateral declaration of intention or other act inconsistent with the continuation of a joint tenancy may suffice for the purposes of the first method of severance. That question was answered firmly in the negative long before Page Wood V-C came to express the general principles already outlined. In Partriche v Powlet (1740) 2 Atk 54 at 55 (26 ER 430 at 431), Lord Hardwicke LC stated: [9.135]

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Corin v Patton cont. This is not a severance; for, first, here is no agreement for this purpose; secondly, if no agreement, then there must be an actual alienation to make it amount to a severance; the declaration of one of the parties that it should be severed, is not sufficient, unless it amounts to an actual agreement. That statement of the law is consistent with the statement by Page Wood V-C that an intention “declared only behind the backs of the other persons interested” was insufficient to effect a severance. Lord Hardwicke’s view has been consistently adopted in Australia: see Lyons v Lyons (1967) VR 169 at 170-172; In the Marriage of Pertsoulis (1980) 6 Fam LR 39 at 43-47; McNab v Earle (1981) 2 NSWLR 673 at 675-676; Freed v Taffel (1984) 2 NSWLR 322 at 324-325; Patzak v Lytton (1984) WAR 353. In Wright v Gibbons (1949) 78 CLR 313, Latham CJ stated (at 322) that the agreement of some but not all tenants would not suffice to sever a joint tenancy. In England, however, a different approach has been taken. Thus, in Burgess v Rawnsley (1975) Ch 429, Lord Denning MR said (at 439): It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common. I emphasise that it must be made clear to the other party. Sir John Pennycuick, at 447-448, appeared to agree with this statement of the law, while Browne LJ expressed no final opinion. There is no evidence in the present case of Mrs Patton’s intention to sever the joint tenancy having been communicated to Mr Patton. But in any event there are powerful reasons for declining to adopt in Australia the approach which was taken in Burgess v Rawnsley. First, as the judgment of Sir John Pennycuick makes clear (at 447), the decision turned on the construction of s 36(2) of the Law of Property Act 1925 (UK), which permits the severance of a joint tenancy by notice in writing by one joint tenant to the other, rather than on the state of the pre-existing law. Secondly, as a matter of history and principle, the severance of a joint tenancy can only be brought about by the destruction of one of the so-called four unities: see Blackstone, Commentaries on the Law of England (1778), vol 2, pp 185-186. Unilateral action cannot destroy the unity of time, of possession or of interest unless the unity of title is also destroyed, and it can only destroy the unity of title if the 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. Thirdly, if statements of intention were held to effect a severance, uncertainty might follow; it would become more difficult to identify precisely the ownership of interests in land which had been the subject of statements said to amount to declarations of intention. Finally, there would then be no point in maintaining as a separate means of severance the making of a mutual agreement between the joint tenants. Accordingly, it is necessary in this case for the appellants to demonstrate that Mrs Patton effectively alienated the property in equity. Although this may involve questions of whether or not Mrs Patton could have withdrawn from the transactions, the issue is primarily whether or not the property was alienated. Mr Bennett contended that the rules for determining whether there has been an effective transfer should be relaxed in a case, such as the present, where the purpose of asking the question is to determine whether or not a joint tenancy has been severed. But such an approach cannot be reconciled with principle and would be productive of great uncertainty. Once it is accepted that a transfer is required, it is the general rules relating to transfers of land which must be applied. This particular case involved a voluntary transaction. In this respect we agree with Hope JA that the consent or agreement of Mr Corin to act as trustee did not constitute valuable consideration, and in any event it was not seriously suggested otherwise. Indeed, in the famous case of Milroy v Lord (1862) 4 De GF & 700 [9.135]

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Corin v Patton cont. J 264 (45 ER 1185), in very similar circumstances, the consent or agreement of the transferee to act as trustee was not regarded as constituting valuable consideration. Two propositions emerged from the observations of Turner LJ. First, the donor must have done everything necessary to be done, according to the nature of the property, in order to transfer the property and render the gift binding. Secondly, if the gift was intended to have been effectuated by one means, the court will not give effect to it by another means. However, as the later cases were to reveal, there was an element of uncertainty in the first proposition. Did it require that the donor must have done himself all that was necessary to be done in order to transfer the property or did he only have to do all that was necessary to be done by him in order to achieve that result? This question clearly emerged for the first time in Anning v Anning (1907) 4 CLR 1049. There the donor executed a voluntary deed conveying real and personal property to his wife and children, including mortgages of land under the Torrens system and a Crown lease. Although the deed was executed and delivered, the mortgages were transferable under the Real Property Act 1900 (NSW) only by a transfer in the prescribed form and by registration of the transfer. No such transfer was executed. Likewise, the donor did not execute an instrument of transfer of the lease in the prescribed form, the registration of such an instrument being necessary to transfer title to the Crown lease. Each member of the Court held that the transfers of the donor’s estate and interest in the real property were void because they were not in the forms prescribed by statute. But each member of the Court had a different understanding of the principle to be applied. Griffith CJ said (at 1057): I think that the words “necessary to be done”, as used by Turner LJ in Milroy v Lord, mean necessary to be done by the donor … If, however, anything remains to be done by the donor, in the absence of which the donee cannot establish his title to the property as against a third person, the gift is imperfect, and in the absence of consideration the Court will not aid the donee as against the donor. But, if all that remains to be done can be done by the donee himself, so that he does not need the assistance of the Court, the gift is, I think, complete. Isaacs J took a stricter view of the matter. His Honour said (at 1069): If the legal title is assignable at law it must be so assigned or equity will not enforce the gift. If for any reason, whether want of a deed by the assignor, or a specifically prescribed method of transfer, or registration, or statutory notice, the transfer of the legal title is incomplete when the law permits it to be complete, equity regards the gift as still imperfect and will not enforce it. In such a case, the fact that the assignor has done all that he can be required to do is not applicable. Higgins J (at 1081-1082) appeared to adopt an intermediate position. His Honour stated that the word “necessary” refers to the nature of the property, not to any obligation upon the donor, and went on to say (at 1082): What the Courts look at is what the donor might have done. This point has been put so fully in the judgment of Mr Justice Isaacs that I need not deal with it further. Despite the reference to the judgment of Isaacs J, it seems that Higgins J would have been prepared to recognise in equity a gift which the donor could have done no more to perfect, for example, a gift incomplete simply because the transfer, lodged for registration, remained unregistered, the donor having done all that he could do. Isaacs J would not have recognised such a gift because the transfer of the legal title was incomplete. Isaacs J’s approach gave full effect to the related maxims “equity will not assist a volunteer” and “equity will not perfect an imperfect gift”. Moreover, this approach was entirely consistent with the statutory provisions regulating the transfer of title to Torrens system land. These provisions provide that an instrument shall not be effectual to pass an estate or interest in land until registration: see Barry [9.135]

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Corin v Patton cont. v Heider (1914) 19 CLR 197. That is not to say that the approaches taken by Griffith CJ and Higgins J were inconsistent with the two maxims and the statutory provisions. We shall discuss this aspect of the judgments in Anning v Anning later. In Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555, the donor executed in favour of his housekeeper a voluntary transfer of an estate in remainder expectant on his death of Torrens system land. He handed the executed transfer to a Mr Fuller who was a friend of both the donor and the housekeeper. The trial judge found that Mr Fuller had held the transfer as the donor’s agent at the time of the donor’s death. The transfer made no mention of a mortgage to which the land was subject, since the donor apparently wished his housekeeper to take the property free from the mortgage. After the death of the donor, Mr Fuller handed the transfer to the donee’s solicitors who inserted particulars of the mortgage and sought to register the transfer. The mortgagee at all times held the certificate of title. The Court, Latham CJ dissenting, held that there had been no gift of any interest in the land and that the transfer was void and of no effect. Latham CJ, after noting that the Torrens system did not prevent the creation and recognition of equitable interests in land, found that the donee was not prevented by the absence of the certificate of title or the alteration of the transfer from presenting the transfer for registration. His Honour rejected (at 589) the trial judge’s finding that Mr Fuller had held the transfer as the donor’s agent at the time of the donor’s death. In a passage in his judgment which is somewhat difficult to follow (at 588-590), he found that Mr Fuller had been acting in accordance with the donor’s wishes when he handed the transfer to the donee’s solicitors after the donor’s death and, that being so, also found that the donor had placed the donee in a position to obtain a legal title by the donee’s own action without further action by the donor. Since the donee was in a position to seek registration, the assistance of the Court was not required to enforce the gift. The Chief Justice distinguished the statement by Isaacs J in Anning v Anning (at 1069) on that basis and clearly preferred the approach of Griffith CJ, without acknowledging that the approach of Isaacs J differed from that of Griffith CJ. He finally found that the alteration to the transfer did not affect the validity of the instrument and that the absence of the certificate of title did not necessarily prevent the donee from obtaining registration. Dixon J (with whom Rich J agreed) found that the alteration to the transfer had not been authorised and that the donor gave no authority for it to be handed to the donee’s solicitors or presented for registration. However, his Honour also considered the rights of the donee in terms not dissimilar to the language used by Latham CJ. After stating that the donor had manifested no intention to create a trust and that an intended donee cannot obtain equitable remedies compelling the donor to give legal effect to his intention to give, Dixon J said (at 599-600): But, under the system of the Real Property Act, a transferee may be in a position by registering an instrument to obtain a legal estate, although prior to registration neither the legal nor any equitable estate was vested in him. If that system allows a volunteer to acquire an indefeasible right to the registration of an instrument in his favour, then, although it would remain true that before registration he had neither a legal nor an equitable estate in the land, yet he would be entitled to a right of a new description arising under the statute, and by its exercise he could vest the legal estate in himself. There is no a priori reason why statutory provisions making title depend upon registration should not confer upon a person in whose favour a registrable instrument has been made, a right to procure its registration, notwithstanding that it is voluntary, and no reason why it should not leave the transferor powerless to countermand his instrument. Such a right would not depend upon the doctrines or remedies of a court of equity, and, pending actual registration, the transferee could not be considered entitled to an equitable interest any more than to a legal interest in the land. After referring to Milroy v Lord, his Honour gave his own view of the appropriate question (at 602): 702 [9.135]

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Corin v Patton cont. [The question] is not whether the intending donor has divested himself of his estate or interest in the land, or has done all that lies in his legal power to do so. For obviously it was within his legal power himself to cause the immediate registration of the transfer. The question is whether by his acts he has placed the intended donee in such a position that under the statute the latter has a right to have the transfer registered, a right which the donor, or his executors, cannot defeat or impair. On this view of the matter it was necessary to determine whether property in the actual instrument of transfer had passed to the donee. If a registrable instrument had been delivered to the donee, then the donee had a right to have it registered, as against the donor. The absence of the certificate of title did not necessarily defeat the donee, because the Registrar-General could dispense with its production. In fact, however, the transfer was not given to the donee or to Mr Fuller as bailee for her “and, therefore, never became her property and was not placed by the deceased in her possession or control” (at 605). Accordingly, the property in it had not passed to the donee. McTiernan J found (at 609) that the donor had not taken any irrevocable step by executing the transfer. He did not give the transfer to the donee and his death had revoked any authority to perfect the intended gift by registration. His Honour therefore did not find it necessary to consider the significance of the certificate of title or the meaning of Milroy v Lord. Accordingly, Brunker did not answer the questions presented by the judgments in Anning v Anning. Although the judgment of Dixon J is consistent with the view of Isaacs J that no interest in land passes by way of gift prior to the registration of a transfer, the right recognised by Latham CJ accords with the approach taken by Griffith CJ. Subsequently, in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, a case which did not involve a transfer of land, Windeyer J, consistently with the view stated by Griffith CJ in Anning v Anning, said (at 28-29) that: “in equity there is a valid gift of property transferable at law if the donor, intending to make, then and there, a complete disposition and transfer to the donee, does all that on his part is necessary to give effect to his intention and arms the donee with the means of completing the gift according to the requirements of the law”. Evidently Dixon CJ was not “disposed to disagree” with that statement (at 16). The other members of the Court did not consider the question. Next, in Cope v Keene (1968) 118 CLR 1, the issue was whether a deceased person had made a completed gift of Torrens system land in his lifetime. Kitto J (with whom McTiernan J agreed) said (at 6): To complete the gift the testator had to do all that, according to the nature of the property as land under the provisions of the Real Property Act, was necessary to be done by him in order to transfer the property: Anning v Anning. What this involved is shown by the judgment of Dixon J in Brunker v Perpetual Trustee Co (Ltd). His Honour said that this required property in the instrument of transfer to pass to the intended donees, and probably also involved production by or on behalf of the donees of the certificate of title. The instrument of transfer was not delivered to the donees with the intention that property in it should pass to them and so the intended gift failed. Two cases remain for consideration. The first is Olsson v Dyson (1969) 120 CLR 365, a case involving a purported oral assignment of a debt. The Court held that the assignment failed at law for the absence of writing as required by the Law of Property Act 1936 (SA). In holding that there was no assignment in equity, Kitto J (with whom Barwick CJ (on this aspect of the case), Menzies and Owen JJ agreed) spoke in terms similar to those of Isaacs J in Anning v Anning: Property which is assignable at law but is not assigned in the manner which the law requires for a legal assignment of it cannot be held in equity to be assigned unless by reason of some fact or circumstance which a court of equity regards as binding the legal owner in conscience [9.135]

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Corin v Patton cont. to hold the property upon trust for the assignee … But there is no equity to perfect an imperfect gift: because of the absence of consideration a purported assignment, if incomplete as a legal assignment, effects nothing in equity (at 375-376). Windeyer J (at 386-387) reiterated the views he had expressed in Norman. The final case is Taylor v Deputy Federal Commissioner of Taxation (1969) 12 CLR 206. There the question for determination was whether certain land remained in the hands of the executors of a deceased estate or had passed to the relevant beneficiary. The executors had consented in writing to the transmission of the land, delivered the certificate of title to the beneficiary and caused the instrument of probate to be produced to the Registrar-General. It was held by the Court (Barwick CJ, Taylor and Menzies JJ) that the executors could no longer prevent registration by the beneficiary and that the property was accordingly no longer in the hands of the executors. The Court referred to Milroy v Lord and the observations of Griffith CJ in Anning v Anning, then quoted from the judgment of Dixon J in Brunker. Their Honours found that nothing remained for the executors to do to enable the beneficiary to become registered as proprietor of the land. Equally, nothing could be done by them to prevent or obstruct registration. As in Cope v Keene, the test of Dixon J in Brunker was applied. It was applied in a manner which involved recognition of an interest in land in a volunteer prior to registration. Further, the judgment reflects the approach of Griffith CJ, in contrast to the decision in Olsson v Dyson which draws on the view of Isaacs J. In both Cope v Keene and Taylor, the Court used the language of Dixon J in Brunker as a test for ascertaining the existence of equitable interests in property in accordance with the principle enunciated in Milroy v Lord, rather than for the purpose of ascertaining whether a personal statutory right to registration has come into existence. In this way it has become clear that, in the subsequent cases, the Court has not endorsed the personal statutory right favoured by Dixon J. That the Court has taken this course is not surprising. The legislation is silent as to the supposed statutory right. Given that the rule in Milroy v Lord is part of the law, the statute provides scant support for the concept of a personal right mirroring that rule in scope but differing in effect. All that can be said is that the legislation enables a donee to secure registration of a transfer of the donor’s interest when he is armed with an instrument of transfer in registrable form and he can produce, or arrange for the production of, the appropriate documents (which include the certificate of title). If the donor lacks the power to recall his transfer, that lack of power stems not from the statute, but from the principles of equity. Once it is recognised that Dixon J’s formulation no longer represents a correct statement of the law in this area, it becomes necessary to consider the authority and force of the three judgments in Anning v Anning. The view of Higgins J, to the extent that it differs from that of Isaacs J, has not found support in the later cases. Moreover, the difficulties which would be presented by an inquiry into what was within the power of the donor to achieve in a particular case constitute a sufficient reason for discarding his Honour’s view. The stricter approach of Isaacs J is consistent with the historic attitude of equity in developing rules applicable to intended gifts where no means of effecting a transfer at law were available: see William Brandt’s Sons & Co v Dunlop Rubber Company (1905) AC 454, per Lord Macnaghten at 461-462. There is also perhaps a conceptual difficulty in accepting, in accordance with the broader view, that a donor has done everything necessary to be done by him to complete a legal transfer in a case where the donor could in fact have procured a legal transfer, for example by seeing to registration personally. And, as we have already noted, Isaacs J’s view conforms to the notion, underpinned by the two equitable maxims, that equity will not assist a volunteer to perfect a title which is incomplete. Equity’s refusal may be justified on the footing that the donor should be at liberty to recall his gift at any time before it is complete. 704 [9.135]

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Corin v Patton cont. Although Griffith CJ did not expressly advert in Anning v Anning to the maxim that equity will not assist a volunteer (cf Isaacs J at 1063), the divergent approaches adopted by Griffith CJ and Isaacs J in that case may be taken to imply different understandings of the maxim. Isaacs J considered that equity would pay no regard at all to voluntary transactions which were insufficient to create proprietary or contractual rights at law. Thus, equity would not heed the volunteer’s plea for recognition of his interest. On the other hand, Griffith CJ must be taken to have regarded the maxim as an injunction against equity making its remedies available to perfect an imperfect gift. On this footing the recognition of the volunteer’s interest did not amount to the provision of assistance in violation of the maxim. Of course it would be a mistake to set too much store by the maxim. Like other maxims of equity, it is not a specific rule or principle of law. It is a summary statement of a broad theme which underlies equitable concepts and principles. Its precise scope is necessarily ill-defined and somewhat uncertain. It is subject to certain clearly established exceptions such as the rule in Strong v Bird (1874) LR 18 Eq 315 and the doctrine of equitable estoppel, where an equity arises in favour of an intended donee from the conduct of the donor after the making of the voluntary promise by the donor: see Olsson v Dyson, at 378-379. These exceptions have no bearing on the present case except in so far as they demonstrate that the maxim does not enunciate an inflexible or universal rule. What is of importance is that this and the related maxim that equity will not perfect an imperfect gift are primarily associated with the rule that a voluntary covenant is not enforceable in equity, a rule which itself has become the subject of critical scrutiny in some of its applications: see Macnair, “Equity and Volunteers”, (1988) 8 Legal Studies 172. Thus, a volunteer who is the object of an intended trust will only succeed if the trust has been completely constituted. This means, so it is said, that the trust must be constituted by a present declaration of trust or by a transfer by the settlor of the legal title to the intended trustee. And that brings us back to the statement of principle by Turner LJ in Milroy v Lord. But there is a distinction between the enforcement of a voluntary covenant to create a trust and the enforcement of a transfer by way of intended gift when the donor has done all that was within his power to vest title to the property in trustees for the donee or in the donee. In the first case, equity will not compel specific performance of the voluntary covenants, there being no completely constituted trust; in the second case, as the transaction is complete as far as the donor is concerned, no question of withholding specific performance can arise and equity will hold the donor to the completed transaction on the footing that title has been divested: see Ellison v Ellison (1802) 6 Ves Jun 656 at 662 (31 ER 1243 at 1246); Ex parte Pye (1811) 18 Ves Jun 140 at 149 (34 ER 271 at 274) (where Lord Eldon LC observed “if the act is completed, though voluntary, the Court will act upon it”); Fletcher v Fletcher (1844) 4 Hare 67 at 74 (67 ER 564 at 567) (where the covenant being “complete”, the court was “not called upon to do any act to perfect it”, in the words of Wigram V-C). The point is, as Page Wood V-C noted in Donaldson v Donaldson (1854) Kay 711 at 718 (69 ER 303 at 306), that where there is an imperfect gift “which requires some other act to complete it on the part of the assignor or donor, the Court will not interfere to require anything else to be done by him”. These specific statements, which necessarily circumscribe the area of operation of the equitable maxims, were apt to apply to those situations in which legal title passed not on the delivery of an executed conveyance or transfer of property but subsequently on registration of a transfer, as is the case with stocks and shares in companies. The statements are equally apt to apply to the transfer of estates in land under the Torrens system. The rationale for refusing to complete an incomplete gift is that a donor should not be compelled to make a gift, the decision to give being a personal one for the donor to make. However, that rationale cannot justify continued refusal to recognise any interest in the donee after the point when the donor has done all that is necessary to be done on his part to complete the gift, especially when the instrument of transfer has been delivered to the donee. Just as a manifestation of intention plus [9.135]

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Corin v Patton cont. sufficient acts of delivery are enough to complete a gift of chattels at common law, so should the doing of all necessary acts by the donor be sufficient to complete a gift in equity. The need for compliance with subsequent procedures such as registration, procedures which the donee is able to satisfy, should not permit the donor to resile from the gift. Once the transaction is complete so far as the donor is concerned, he has no locus poenitentiae. Viewed in this light, Griffith CJ’s approach has the advantage that it gives effect to the clear intention and actions of the donor rather than insisting upon strict compliance with legal forms. It is a reflection of the maxim “equity looks to the intent rather than the form”. By avoiding unnecessarily rigid adherence to the general rule and endeavouring to give effect to the donor’s intention, the law avoids unjust and arbitrary results. See Zines, “Equitable Assignments: When Will Equity Assist a Volunteer?”, (1965) 38 Australian Law Journal 337. In any event there is stronger support in the later cases for the view of Griffith CJ than that of Isaacs J. That support is found in the judgment of Latham CJ in Brunker, those of Dixon CJ and Windeyer J in Norman, the joint judgment in Cope v Keene, and the judgment of the Court in Taylor. Furthermore, the view of Griffith CJ is supported by the decision of the English Court of Appeal in Re Rose Rose v IRC (1952) Ch 499 at 510-511. Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognise the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. “Necessary” used in this sense means necessary to effect a transfer. From the viewpoint of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part. Although Griffith CJ did not explicitly say so, his proposition implicitly recognizes that the donee acquires an equitable estate or interest in the subject matter of the gift once the transaction is complete so far as the donor is concerned. So much was acknowledged by the English Court of Appeal in Re Rose. There the Court concluded that the donor had executed and delivered transfers and share certificates to the donee with the intention of transferring title to the shares to him and had placed him in a position to secure the legal title to the shares by registration subject to an exercise by the directors of their discretion to register the transfers. In this situation the donor could not recall the gift or invoke the aid of the court to prevent registra-tion: see at p 516. The Court held that the donor had parted with his beneficial interest and had become a constructive trustee for the donee. This conclusion did not affect the second proposition in Turner LJ’s judgment in Milroy v Lord. As Evershed MR stated (at 510): if a document is apt and proper to transfer the property – is in truth the appropriate way in which the property must be transferred-then it does not seem to me to follow from the statement of Turner LJ that, as a result, either during some limited period or otherwise, a trust may not arise, for the purpose of giving effect to the transfer. See also per Jenkins LJ at 517-518. The course of reasoning pursued by Evershed MR and Jenkins LJ within the framework of the statement of principle by Turner LJ in Milroy v Lord bears a marked similarity to the reasoning of Dixon J in Brunker which was, of course, directed to establishing the conditions on which a statutory right might be exercised. However, if we accept that in Re Rose correctly states the consequences of the approach taken by Griffith CJ in Anning v Anning, there remains the problem of accommodating that approach to the injunction contained in s 41 of the Real Property Act to the effect that, until registration, an instrument of transfer shall be ineffectual to pass an estate or interest in the land. Although that injunction applies to equitable as well as legal estates, it “does not touch whatever rights are behind” the instrument, as Isaacs J pointed out in Barry v Heider, at 216; see also Chan v Cresdon Pty Ltd (1989) 64 ALJR 111, at 117; 89 ALR 522, at 531-532. Where a donor, with the intention of making a gift, delivers to the donee an instrument of transfer in registrable form with the certificate 706 [9.135]

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Corin v Patton cont. of title so as to enable him to obtain registration, an equity arises, not from the transfer itself, but from the execution and delivery of the transfer and the delivery of the certificate of title in such circumstances as will enable the donee to procure the vesting of the legal title in himself. Accordingly, s 41 does not prevent the passing of an equitable estate to the donee under a completed transaction. The question is then whether Mrs Patton did all that it was necessary for her to do in order to effect a transfer. Two obstacles are suggested to completion of the gift. First, the certificate of title remained throughout with the mortgagee and Mrs Patton took no steps to arrange for its production for the purposes of registration. Secondly, it is not clear whether or not Mr Smallwood held the executed transfer on Mrs Patton’s instructions or those of Mr Corin. Whether or not it is correct to say that the production of a certificate of title is “necessary” to achieve registration of a transfer of Torrens system land, it is apparent that a gift of such land cannot be regarded as complete in equity while the donor retains possession or control of the certificate of title: Dixon J in Brunker, at 600-605; Scoones v Galvin and the Public Trustee (1934) NZLR 1004. That is because it can scarcely be said that the donor has done everything necessary to be done by him if he has retained the certificate of title, by virtue of the possession of which the gift might well be thwarted. In the present case Mrs Patton gave no authority for the mortgagee bank to hand the certificate of title to Mr Corin for the purposes of registration. At least, if she authorised Mr Smallwood to obtain the certificate, there is no clear evidence to that effect. In response to the difficulty this presents to the appellants, it was suggested that s 96 of the Conveyancing Act would have entitled Mr Corin to compel the bank to produce the certificate of title. Section 96 is in these terms: (1) A mortgagor, as long as his right to redeem subsists, shall by virtue of this Act be entitled from time to time at reasonable times on his request … to inspect and to be supplied with copies or abstracts of, or extracts from, the documents of title … in the custody or power of the mortgagee. (2) This section applies to mortgages under the Real Property Act 1900, and in such case the mortgagor shall be entitled to have the relevant certificate of title … lodged at the office of the Registrar-General, to allow of (sic) the registration of any authorised dealing by the mortgagor with the land … Section 7(1) defines “mortgagor” to include a person entitled to redeem a mortgage. The section is of no assistance to the appellants. Mr Corin was not a person entitled to redeem the mortgage unless and until there had been a transfer of Mrs Patton’s interest. Further, subs (2) concerns the entitlement to the certificate of title of a mortgagor seeking registration of any authorised dealing by that mortgagor, that is, in this case, Mrs Patton. Although she could, in relation to an authorised dealing, have compelled production of the certificate of title, Mr Corin could not: Brunker, at 604. Accordingly, the transactions failed to pass the equitable property in the land to Mr Corin, and it is unnecessary to consider under whose control the instrument of transfer was after execution. Further, because the gift was incomplete, Mrs Patton could have recalled the transfer at any time. But it is not strictly relevant to ask whether or not Mrs Patton could have recalled the gift; that is not a criterion but rather a result of the efficacy or otherwise of the gift. Before turning to Mr Bennett’s final contention, it should be observed that the instrument of transfer cannot take effect in equity as a declaration of trust. Mrs Patton clearly did not intend to constitute herself trustee for Mr Corin and the terms of the instrument provide no support for such an interpretation, notwithstanding the element of flexibility introduced by Re Rose. The final matter to consider is whether a special approach should be taken to the rules concerning severance of joint tenancies, or those concerning gifts, in the situation where there is an attempted conveyance to oneself, as permitted by s 24 of the Conveyancing Act. Mr Bennett suggested that the rationale for the gift rules is inapplicable in that situation and so a different approach is required. He [9.135]

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Corin v Patton cont. drew attention to the statement of Varny MR in Cray v Willis (1729) 2 P Wms 529 (24 ER 847) that a joint tenant “may sever the joint tenancy by a deed granting over a moiety in trust for himself”. But the Master of the Rolls was there doing no more than demonstrating that “survivorship can be no hardship, where either side may at pleasure prevent it”. The case does not suggest that a joint tenant can sever the tenancy by executing a document purporting but failing to pass his interest in the property. It was accepted in Re Murdoch and Barry (1975) 64 DLR (3d) 222 that a transfer to oneself could sever a joint tenancy. Whether or not that is so, there was in this case no transfer from Mrs Patton to herself, and no transfer to Mr Corin on trust for herself. There was an attempted transfer to Mr Corin followed by a purported declaration of trust over the property the subject of that attempted transfer: see DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 442, 443, 449-451, 460, 463-464, 473-474. The terms of the instruments are not consistent with an intention to transfer merely a legal interest to Mr Corin, but even if they were, this would not amount to a conveyance of the equitable estate from Mrs Patton to herself. The appeal must be dismissed. [Brennan, Deane and Toohey JJ agreed.]

[9.140]

Notes

1. The above case is significant with respect to the means whereby a joint tenancy can be severed (ie converted into a tenancy in common) and in this respect relevant at [12.170]. 2. The judgment of Dixon J in Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 had always been regarded as an insurmountable obstacle to the proposition that an intended donee could obtain an equitable interest prior to the complete execution of the gift. Dixon J clearly stated that the intended donee does not obtain any legal or equitable interest prior to the execution of the gift but might be in a position where the donee had a right to registration of a transfer and would thus be able to complete the gift. The above case seems to have surmounted the obstacle and hold that a donee has an equitable interest when the donor has done all necessary to be done by the donor to give effect to the gift. The position with respect to interests in land under the Torrens system has also been made the same as with the seemingly parallel position of company shares and other choses in action requiring an act of recording to complete the transfer of a legal interest.

DETRIMENTAL RELIANCE ON A REPRESENTATION [9.145] The doctrine of estoppel as discussed in the following cases prevents a person from

going back on a representation where that representation has been acted upon to the other’s detriment. The relevant principle has been complicated by a supposed difference between representations concerning land (described variously as proprietary estoppel or the equity of acquiescence) and contractual estoppel. Traditionally contractual estoppel was confined to situations where it was inequitable for a party to rely on strict contractual rights (estoppel as a shield not a sword). Proprietary estoppel was viewed as different as the doctrine could give existence to an interest. Today there is but one doctrine, but as that doctrine can lead to the existence of rights, it is properly part of this chapter. 708 [9.140]

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Waltons Stores (Interstate) Ltd v Maher [9.150] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 High Court of Australia MASON CJ AND WILSON J: The issue in this appeal is whether, in the light of the facts, the appellant is estopped from denying the existence of a binding contract that it would take a lease of the respondents’ premises at Nowra and, if so, whether the respondents can support the order made by the primary judge (Kearney J), affirmed by the New South Wales Court of Appeal, that the appellant pay to the respondent damages in lieu of specific performance of an agreement for a lease. Kearney J found that exchange was a prerequisite to the creation of a concluded contract between the parties. The respondents did not appeal against this finding so that its correctness is not an issue in this Court. However, the existence of the finding has some relevance to the question of estoppel, an issue on which the respondents succeeded at first instance and in the Court of Appeal. The primary judge found that the appellant was estopped from denying that a concluded contract by way of exchange did exist between the parties, whereas Priestley JA, with whom Glass and Samuels A agreed, found that the appellant was estopped from denying the existence of a binding contract. The justification, if there be one, for finding an estoppel depends on a course of events which commenced with discussions and correspondence between the solicitors for the parties in the first two weeks in November 1983. In the two preceding months the appellant, which was bound to give up possession of its existing commercial premises in Nowra in January 1984, had been negotiating with the respondents with a view to taking a lease of their property in the business district of Nowra. The respondents proposed to demolish an old building on the site and to erect a new building having an area of 14,000 square feet. The appellant required that plans and specifications be prepared to suit its purposes and that the new building be completed by 15 January 1984. On 21 October 1983 Dawson Waldron, solicitors for the appellant, sent to Morton & Harris, solicitors for the respondents, a form of Deed of Agreement for Lease to which was annexed a form of Lease. By their covering letter Dawson Waldron reserved the right to make amendments to the Lease and pointed out that a Schedule of Finishes remained to be annexed to the Deed. The parties had already agreed on the term of the Lease and the rent. Discussions then ensued between the solicitors. On 1 November Mr Elvy of Morton & Harris informed Mr Roth of Dawson Waldron that the respondents had begun to demolish the old building on the site. Amendments to the Lease were discussed. On 2 November Mr Elvy requested an extension of time for completion of the work. This led ultimately to an agreement that the building should be available for fitting out by 15 January and completed by 5 February 1984. The critical conversation took place between Mr Elvy and Mr Roth on 7 November. The primary judge accepted Mr Elvy’s account of that conversation because it was in greater detail, there being substantial agreement between the solicitors as to what was said. Mr Elvy pointed out that “the agreement must be concluded within the next day or two otherwise it will be impossible for Maher to complete”. Mr Elvy said that unless agreement was reached Maher would be unable to organize labour and order supplies within the next couple of days before suppliers stopped taking orders and shut down until late January. Mr Elvy also stated that Maher did not wish to demolish a new brick part of the old building until it was clear that there were no problems. In response to Mr Elvy’s inquiry Mr Roth said: I have received verbal instructions from Waltons that the amendments are acceptable, even the plate glass insurance. I’ll do the amendments and send them down to you in the DX tonight. In the meantime I’ll get formal instructions from Waltons. On the same day Dawson Waldron sent to Morton & Harris fresh documents incorporating the agreed amendments. The covering letter stated: [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. You should note that we have not yet obtained our client’s specific instructions to each amendment requested, but we believe that approval will be forthcoming. We shall let you know tomorrow if any amendments are not agreed. We also believe a Schedule of Finishes should be annexed to the Deed prior to exchange. At no time before the despatch of Dawson Waldron’s letter of 19 January 1984 to Morton & Harris was there any indication by the appellant or its solicitors that the amendments or any of them were unacceptable or that the respondents would not exchange contracts. On 11 November 1983 Morton & Harris forwarded to Dawson Waldron “by way of exchange” the documents executed by the respondents along with a Schedule of Finishes for approval and to be annexed to the Deed prior to exchange. The letter and documents were received by Dawson Waldron on or about 14 November. Thereafter the respondents began to demolish the new brick portion of the old building. The primary judge found that the appellant became aware of this fact on 10 December, this finding being specifically affirmed by the Court of Appeal. As a result of a projected alteration in its retailing policy, having ascertained from Mr Roth that, as contracts had not been exchanged, it was not bound to proceed, the appellant decided not to commit itself to the proposed arrangements with the respondents and instructed Dawson Waldron to “go slow”. In consequence of that instruction, Mr Roth made no response to the letter from Morton & Harris dated 11 November 1983 until 19 January 1984. In the meantime he retained possession of the documents executed by the respondent. In early January the respondents commenced to build in accordance with the plans and specifications submitted to, and approved by, the appellant. By the time Dawson Waldron, in its letter dated 19 January, informed Morton & Harris that the appellant did not intend to proceed with the matter the building was complete as to 40 per cent approximately. In the light of this history of events, especially the conversation on 7 November, Dawson Waldron’s letter of the same day and Morton & Harris’ letter of 11 November, it is impossible to sustain the finding that the respondents were labouring under a misapprehension that contracts had been exchanged when they embarked upon the demolition of the new brick portion of the building. At no time did Morton & Harris inform the respondents that the appellant had executed the documents or that exchange had actually taken place. On 14 November Morton & Harris wrote to the respondents stating that the amended Agreement for Lease duly executed by the respondents had been sent to Dawson Waldron for execution by the appellants and for exchange. The letter went on to note that the respondents would commence work in accordance with the Agreement immediately as it was to be completed on or by 5 February, the appellant having a right to rescind if it were not completed by 31 March. And that was where progress towards a completed agreement halted. Mr Elvy’s evidence, as well as his correspondence, indicates that he regarded an exchange of contracts as an essential prerequisite to the creation of a binding contract between the parties and his letter of 14 November communicated his understanding to them. The evidence does not reveal precisely what the solicitors had in mind by the references to exchange of contracts. As Dawson Waldron did not inform Morton & Harris on 8 November or immediately thereafter that the amendments discussed on 7 November were not acceptable to the appellant, Mr Elvy and the respondents were entitled to assume, in consequence of the statement in Dawson Waldron’s letter of 7 November, that the appellant accepted the amendments and that exchange of contracts was a mere formality. The primary judge certainly took this view of the matter. After stating that the respondents “believed that they had an agreement”, his Honour continued: They were entitled, in my view, to assume that the exchange would be duly completed by the (respondents) and in those circumstances properly considered that they were bound to proceed with the greatest expedition with the building project. 710 [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. However, he went further when he said that when Morton & Harris sent the executed document “by way of exchange” on 11 November, the respondents: … were entitled to infer the acceptance of the document so forwarded “so as to hold reasonably the belief that a contract by way of exchange had in fact been concluded” (our emphasis). Perhaps the difficulty of sustaining the passage in the primary judge’s reasoning which we have underlined was a reason why Priestley JA concluded that the mistaken assumption adopted by the respondents was that there was a binding agreement between the parties. Be this as it may, the conclusion reached by the Court of Appeal, though not as specific as that of the primary judge, suffers from the same difficulty. The facts justify the weaker inference drawn by the primary judge that the respondents assumed that the amendments were acceptable to the appellant so that the exchange of contracts was only a matter of formality. This assumption was a reasonable assumption because the terms of Dawson Waldron’s letter of 7 November coupled with the failure to communicate any refusal by the appellant to agree to the amendments justified the inference that the appellant agreed to the amendments with the result that exchange would follow as a matter of course. Kearney J and the Court of Appeal considered that the appellant was under a duty to inform the respondents that their assumption that contracts had been exchanged or that there was a binding contract was incorrect. Kearney J thought that the appellant, acting as a reasonable person would honestly and responsibly have done in the circumstances, should have told the respondents that it did not intend to exchange at all or until it made a final decision on its retailing strategy, when it discovered on 10 December that the demolition was proceeding further. The Court of Appeal was of the same opinion. The estoppel set up by the respondents and found by the primary judge was a common law estoppel in the form of a representation by the appellant constituted by its silence in circumstances where it should have spoken. Likewise, the Court of Appeal based the estoppel on common law principles as explained by Dixon J in Thompson v Palmer (1933) 49 CLR 507 at 547 and Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-676. Priestley JA regarded the present case as an instance of the third class of estoppel in pais enumerated by Dixon J in Thompson, at 547, that is, where a party is required to abide by an assumption made by the other “because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so”. Our conclusion that the respondents assumed that exchange of contracts would take place as a matter of course, not that exchange had in fact taken place, undermines the factual foundation for the common law estoppel by representation found by Kearney J and the common law estoppel based on omission to correct a mistake favoured by the Court of Appeal. There is, as Mason and Deane JJ pointed out in Legione v Hateley (1983) 152 CLR 406, at p 432, a long line of authority to support the proposition that, to make out a case of common law estoppel by representation, the representation must be as to an existing fact, a promise or representation as to future conduct being insufficient: Jorden v Money (1854) 5 HLC 185; 10 ER 868; Maddison v Alderson (1883) 8 App Cas 467 at 473; Chadwick v Manning [1896] AC 231; George Whitechurch Ltd v Cavanagh [1902] AC 117 at 130; Craine v Colonial Mutual Fire Insurance Ltd (1920) 28 CLR 305 at 324; Yorkshire Insurance Ltd v Craine (1922) 31 CLR 27 at 38; Ferrier v Stewart (1912) 15 CLR 32 at 44. It was pointed out in Legione, at 432, that, although in Thompson Dixon J did not distinguish between an assumption founded upon a representation of existing fact and an assumption founded upon a representation as to future conduct, at the time the doctrine of consideration was thought to be a significant obstacle to the acceptance of an assumption founded upon a representation (or promise) as to future conduct as a basis for common law estoppel by representation. That this was so appears most clearly from the judgment of Isaacs J in Ferrier, at 44. There, his Honour observed that estoppel refers “to an existing fact, and not to [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. a promise de futuro, which must rest, if at all, on contract”. However, he went on to say “But a person’s conduct has reference to an existing fact, if a given state of things is taken as the assumed basis on which another is induced to act”. Because estoppel by representation is often treated as a separate category, it might be possible to confine the distinction between a representation as to existing fact and one as to future conduct to that category. The adoption of such a course would leave an estoppel based on an omission to correct a mistaken assumption free from that troublesome distinction. However, the result would be to fragment the unity of the common law conception of estoppel and to confine the troublesome distinction at the price of introducing another which is equally artificial. And the result would be even more difficult to justify in a case where, as here, the mistaken assumption as to future conduct arises as a direct consequence of a representation. If there is any basis at all for holding that common law estoppel arises where there is a mistaken assumption as to future events, that basis must lie in reversing Jorden v Money and in accepting the powerful dissent of Lord Leonards in that case. The repeated acceptance of Jorden v Money over the years by courts of the highest authority makes this a formidable exercise. We put it to one side as the respondents did not present any argument to us along these lines. This brings us to the doctrine of promissory estoppel on which the respondents relied in this Court to sustain the judgment in their favour. Promissory estoppel certainly extends to representations (or promises) as to future conduct: Legione, at 432. So far the doctrine has been mainly confined to precluding departure from a representation by a person in a pre-existing contractual relationship that he will not enforce his contractual rights, whether they be pre-existing or rights to be acquired as a result of the representation: Ajayi v Briscoe (1964) 1 WLR 1326 at 1330; 3 All ER 556 at 559; Bank Negara Indonesia v Philip Hoalim (1973) 2 MLJ 3 at 5; State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 193, per McHugh JA. But Denning J in Central London Property Trust Ltd v High Trees House Ltd (1947) KB 130 at 134-135, treated it as a wide-ranging doctrine operating outside the pre-existing contractual relationship; see the discussion in Legione, 432-435. In principle there is certainly no reason why the doctrine should not apply so as to preclude departure by a person from a representation that he will not enforce a non-contractual right: Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd (1968) 2 QB 839 at 847, per Donaldson J; Attorney-General v Codner (1973) 1 NZLR 545 at 553. There has been for many years a reluctance to allow promissory estoppel to become the vehicle for the positive enforcement of a representation by a party that he would do something in the future. Promissory estoppel, it has been said, is a defensive equity (Hughes v Metropolitan Railway (1877) 2 App Cas 439 at 448; Combe v Combe (1951) 2 KB 215 at 219-220) and the traditional notion has been that estoppel could only be relied upon defensively as a shield and not as a sword: Perpetual Trustee Ltd v Pacific Coal Pty Ltd (1953) 55 SR (NSW) 495 at 508, 518-519 (reversed on appeal on other grounds, (1954) 91 CLR 486; (1955) 93 CLR 479); Gray v Lang (1955) 56 SR (NSW) 7 at 13; NSW Rutile Mining Pty Ltd v Eagle Metal and Industrial Products Pty Ltd (1959) 60 SR (NSW) 495 at 503, 510, 517. High Trees itself was an instance of the defensive use of promissory estoppel. But this does not mean that a plaintiff cannot rely on an estoppel. Even according to traditional orthodoxy, a plaintiff may rely on an estoppel if he has an independent cause of action, where in the words of Denning LJ in Combe v Combe, at 220, the estoppel “may be part of a cause of action, but not a cause of action in itself”. But the respondents ask us to drive promissory estoppel one step further by enforcing directly in the absence of a pre-existing relationship of any kind a non-contractual promise on which the representee has relied to his detriment. For the purposes of discussion, we shall assume that there was such a promise in the present case. The principal objection to the enforcement of such a promise is that it would outflank the principles of the law of contract. Holmes J expressed his objection to the operation of promissory estoppel in this situation when he said “It would cut up the doctrine of 712 [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. consideration by the roots, if a promisee could make a gratuitous promise binding by subsequently acting in reliance on it”: Commonwealth v Scituate Savings Bank (1884) 137 Mass 301 at 302. Likewise, Sir Owen Dixon considered that estoppel cut across the principles of the law of contract, notably offer and acceptance and consideration: “Concerning Judicial Method” (1956) 29 Australian Law Journal 468 at 475. And Denning LJ in Combe v Combe, after noting that “The doctrine of consideration is too firmly fixed to be overthrown by a side-wind”, said (at 220) that such a promise could only be enforced if it was supported by sufficient consideration. Moreover, it has been suggested that the enforcement of a promise given without consideration is by no means consistent with Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 and Maybury v Atlantic Union Oil Ltd (1953) 89 CLR 507: see Finn, “Equitable Estoppel” in Finn, (ed), Essays in Equity (1985), 59, at p 75, and Greig and Davis, The Law of Contract (1987), pp 146-149, 175; but cf Seddon, “A Plea for the Reform of the Rule in Hoyt’s Pty Ltd v Spencer” (1978) 52 Australian Law Journal 372, and Law Com 154 pars 2.35 and 2.36. There is force in these objections and it may not be a sufficient answer to repeat the words of Lord Denning MR in Crabb v Arun District Council (1976) Ch 179 at 187, “Equity comes in, true to form, to mitigate the rigours of strict law”. True it is that in the orthodox case of promissory estoppel, where the promisor promises that he will not exercise or enforce an existing right, the elements of reliance and detriment attract equitable intervention on the basis that it is unconscionable for the promisor to depart from his promise, if to do so will result in detriment to the promisee. And it can be argued (see, for example, Greig and Davis, The Law of Contract, p 184) that there is no justification for applying the doctrine of promissory estoppel in this situation, yet denying it in the case of a non-contractual promise in the absence of a pre-existing relationship. The promise, if enforced, works a change in the relationship of the parties, by altering an existing legal relationship in the first situation and by creating a new legal relationship in the second. The point has been made that it would be more logical to say that when the parties have agreed to pursue a course of action, an alteration of the relationship by non-contractual promise will not be countenanced, whereas the creation of a new relationship by a simple promise will be recognised: see Jackson D, “Estoppel as a Sword” (1965) 81 Law Quarterly Review 223, at p 242. The direct enforcement of promises made without consideration by means of promissory estoppel has proceeded apace in the United States. The Restatement on Contracts 2d §90 states: (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. This general proposition developed from the treatment in particular situations of promissory estoppel as the equivalent of consideration. Thus in Allegheny College v National Chautauqua County Bank (1927) 246 NY 369, Cardozo CJ said (at p 374): “Certain … it is that we have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with our law of charitable subscriptions.” See Farnsworth, Contracts (1982) 2.19; Gilmore, The Death of Contract (1974), p 129. However, we need to view the development of the doctrine in the United States with some caution. There promissory estoppel developed partly in response to the limiting effects of the adoption of the bargain theory of consideration which has not been expressly adopted in Australia or England. It may be doubted whether our conception of consideration is substantially broader than the bargain theory (see Australian Woollen Mills Pty Ltd v The Common-wealth (1954) 92 CLR 424 at 456), though we may be willing to imply consideration in situations where the bargain theory as implemented in the United States would deny the existence of consideration: see Atiyah, Consideration in Contracts: A Fundamental Restatement (1971), pp 6-7, 27, fn 35; Treitel, “Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement” (1976) 50 Australian Law Journal 439, at pp 440 et seq. It is perhaps [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. sufficient to say that in the United States, as in Australia, there is an obvious interrelationship between the doctrines of consideration and promissory estoppel, promissory estoppel tending to occupy ground left vacant due to the constraints affecting consideration. The proposition stated in §90(1) of the Restatement seems on its face to reflect a closer connection with the general law of contract than our doctrine of promissory estoppel, with its origins in the equitable concept of unconscionable conduct, might be thought to allow. This is because in the United States promissory estoppel has become an equivalent or substitute for consideration in contract formation, detriment being an element common to both doctrines. Nonetheless the proposition, by making the enforcement of the promise conditional on (a) a reasonable expectation on the part of the promisor that his promise will induce action or forbearance by the promisee and (b) the impossibility of avoiding injustice by other means, makes it clear that the promise is enforced in circumstances where departure from it is unconscionable. Note that the emphasis is on the promisor’s reasonable expectation that his promise will induce action or forbearance, not on the fact that he created or encouraged an expectation in the promisee of performance of the promise. Crabb was an instance of promissory estoppel. It lends assistance to the view that promissory estoppel may in some circumstances extend to the enforcement of a right not previously in existence where the defendant has encouraged in the plaintiff the belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief. There the defendants, knowing of the plaintiff’s intention to sell his land in separate portions, encouraged the plaintiff to believe that he would be granted a right of access over their land and, by erecting gates and failing to disabuse him of his belief, encouraged the plaintiff to act to his detriment in selling part of the land without reservation of a right of way. This raised an equity in favour of the plaintiff which was satisfied by granting him a right of access and a right of way over the defendants’ land. The Court of Appeal deduced from the circumstances an equity in the plaintiff to have these rights without having to pay for them. As Oliver J pointed out in Taylors Fashions Ltd v Liverpool Victoria Trustees Ltd (1982) QB 133 at 153, the Court of Appeal treated promissory estoppel and proprietary estoppel or estoppel by acquiescence as mere facets of the same general principle, a point also made by Lord Denning MR in Texas Bank, at 122, and seemingly accepted by the Privy Council in Attorney-General of Hong Kong v Humphreys Estate Ltd (1987) 1 AC 114 at 123-124. In Taylors Fashions Oliver J also remarked (at 153) that what gave rise to the need for the court to intervene was the defendants’ unconscionable attempt to go back on the assumptions which were the foundation of their dealings. Indeed, Scarman LJ in Crabb saw the question in terms of whether an equity had arisen from the conduct and relationship of the parties (at 193-194), concluding that the court should determine what was “the minimum equity to do justice to the plaintiff” (at 198). See also Pascoe v Turner (1979) 1 WLR 431 at 438; 2 All ER 945 at 951. The decision in Crabb is consistent with the principle of proprietary estoppel applied in Ramsden v Dyson (1866) LR 1 HL 129. Under that principle a person whose conduct creates or lends force to an assumption by another that he will obtain an interest in the first person’s land and on the basis of that expectation the other person alters his position or acts to his detriment, may bring into existence an equity in favour of that other person, the nature and extent of the equity depending on the circumstances. And it should be noted that in Crabb, as in Ramsden v Dyson, although equity acted by way of recognizing a proprietary interest in the plaintiff, that proprietary interest came into existence as the only appropriate means by which the defendants could be effectively estopped from exercising their existing legal rights. One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has “played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it”: per 714 [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. Dixon J in Grundt, at 675; see also Thompson, at 547. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption. Because equitable estoppel has its basis in unconscionable conduct, rather than the making good of representations, the objection, grounded in Maddison v Alderson, that promissory estoppel outflanks the doctrine of part performance loses much of its sting. Equitable estoppel is not a doctrine associated with part performance whose principal purpose is to overcome non-compliance with the formal requirements for the making of contracts. Equitable estoppel, though it may lead to the plaintiff acquiring an estate or interest in land, depends on considerations of a different kind from those on which part performance depends. Holding the representor to his representation is merely one way of doing justice between the parties. The foregoing review of the doctrine of promissory estoppel indicates that the doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party. Humphreys Estate referred in terms to an assumption that the plaintiff would not exercise an existing legal right or liberty, the right or liberty to withdraw from the negotiations, but as a matter of substance such an assumption is indistinguishable from an assumption that a binding contract would eventuate. On the other hand the United States experience, distilled in the Restatement (2d 90), suggests that the principle is to be expressed in terms of a reasonable expectation on the part of the promisor that his promise will induce action or forbearance by the promisee, the promise inducing such action or forbearance in circumstances where injustice arising from unconscionable conduct can only be avoided by holding the promisor to his promise. The application of these principles to the facts of the present case is not without difficulty. The parties were negotiating through their solicitors for an agreement for lease to be concluded by way of customary exchange. Humphreys Estate illustrates the difficulty of establishing an estoppel preventing parties from refusing to proceed with a transaction expressed to be “subject to contract”. And there is the problem identified in Texas Bank (at 107) that a voluntary promise will not generally give rise to an estoppel because the promisee may reasonably be expected to appreciate that he cannot safely rely upon it. This problem is magnified in the present case where the parties were represented by their solicitors. All this may be conceded. But the crucial question remains: was the appellant entitled to stand by in silence when it must have known that the respondents were proceeding on the assumption that they had an agreement and that completion of the exchange was a formality? The mere exercise of its legal right not to exchange contracts could not be said to amount to unconscionable conduct on the part of the appellant. But there were two other factors present in the situation which require to be taken into consideration. The first was the element of urgency that pervaded the negotiation of the terms of the proposed lease. As we have noted, the appellant was bound to give up possession of its existing commercial premises in Nowra in January 1984; the new building was to be available for fitting out by 15 January and completed by 5 February 1984. The respondents’ solicitor had said to the appellant’s solicitor on 7 November that it would be impossible for Maher to complete the building within the [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. agreed time unless the agreement were concluded “within the next day or two”. The outstanding details were agreed within a day or two thereafter, and the work of preparing the site commenced almost immediately. The second factor of importance is that the respondents executed the counterpart deed and it was forwarded to the appellant’s solicitor on 11 November. The assumption on which the respondents acted thereafter was that completion of the necessary exchange was a formality. The next their solicitor heard from the appellant was a letter from its solicitors dated 19 January, informing him that the appellant did not intend to proceed with the matter. It had known, at least since 10 December, that costly work was proceeding on the site. It seems to us, in the light of these considerations, that the appellant was under an obligation to communicate with the respondents within a reasonable time after receiving the executed counterpart deed and certainly when it learnt on 10 December that demolition was proceeding. It had to choose whether to complete the contract or to warn the respondents that it had not yet decided upon the course it would take. It was not entitled simply to retain the counterpart deed executed by the respondents and do nothing: Thompson, at 547; Olsson v Dyson (1969) 120 CLR 365 at 376. The appellant’s inaction, in all the circumstances, constituted clear encouragement or inducement to the respondents to continue to act on the basis of the assumption which they had made. It was unconscionable for it, knowing that the respondents were exposing themselves to detriment by acting on the basis of a false assumption, to adopt a course of inaction which encouraged them in the course they had adopted. To express the point in the language of promissory estoppel the appellant is estopped in all the circumstances from retreating from its implied promise to complete the contract. Also, as the other judgments demonstrate, there is no substance in the argument based on s 54A of the Conveyancing Act 1919 (NSW). We therefore think that the Court of Appeal was correct in its conclusion. We would dismiss the appeal. BRENNAN J: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs. This is such a case, as a brief recapitulation of the facts will show. The terms of the proposed contract had been agreed between the solicitors and set out in the counterpart Deed executed and delivered to Waltons’ solicitor by way of exchange. In the days immediately following Mr Roth’s receipt of the executed counterpart Deed, Waltons could properly have had the document returned and could have withdrawn from the negotiations. But the counterpart Deed was not returned; it was retained presumably on the terms on which it had been delivered, that is, by way of exchange. The retention of the counterpart Deed and the absence of any demur as to the schedule of finishes or terms 716 [9.150]

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Waltons Stores (Interstate) Ltd v Maher cont. of the Deed was tantamount to a promise by Waltons that it would complete the exchange. That would not have sufficed to raise an equitable estoppel unless the Mahers acted on the promise to their detriment. But, after Waltons knew that Mr Maher had commenced work and (as it must have known) that Mr Maher had done so in the expectation that Waltons would execute and deliver the original Deed, Waltons remained silent in order to have the benefit of the proposed contract if and when Waltons should decide to execute and deliver the original Deed. As Waltons (by its solicitor) knew that Mr Maher (by his solicitor) had said that he would commence the work only if an agreement was concluded, Waltons must have known that Mr Maher either assumed that the contract had been made or expected that it would be made and that Waltons was not free to withdraw. Waltons intended that Mr Maher should continue to build the store in reliance on that assumption or expectation. Then, if not before, the time had come for Waltons to elect between terminating the negotiations or allowing Mr Maher to continue on the footing that Waltons was bound to enter into the proposed contract. Waltons’ silence induced Mr Maher to continue either on the assumption that Waltons was already bound or in the expectation that Waltons would execute and deliver the original Deed as a matter of obligation. It was unconscionable for Waltons subsequently to seek to withdraw after a substantial part of the work was complete, leaving the Mahers to bear the detriment which non-fulfilment of the expectation entailed. Having elected to allow Mr Maher to continue to build, it was too late for Waltons to reclaim the initial freedom to withdraw which Waltons had in the days immediately following 11 November. As the Mahers would suffer loss if Waltons failed to execute and deliver the original Deed, an equity is raised against Waltons. That equity is to be satisfied by treating Waltons as though it had done what it induced Mr Maher to expect that it would do, namely, by treating Waltons as though it had executed and delivered the original Deed. It would not be appropriate to order specific performance if only for the reason that the detriment can be avoided by compensation. The equity is fully satisfied by ordering damages in lieu of specific performance. The judgment of Kearney J is supported by the first basis of estoppel. [Deane and Gaudron JJ agreed that the appeal should be dismissed.]

[9.155]

Notes and Questions

1. In the above case reference is made to the decision of the Court of Appeal in Crabb v Arun District Council [1976] 1 Ch 179. In that case an equitable right to an easement was held to have arisen because of the conduct of the district council in approving a land subdivision. In the words of Lord Denning: The question then is: were the circumstances here such as to raise an equity in favour of Mr Crabb? True the council on the deeds had the title to their land, free of any access at point B. But they led Mr Crabb to believe that he had or would be granted a right of access at point B. At the meeting of 26th July 1967, Mr Alford and Mr Crabb told the council’s representative that Mr Crabb intended to split the two acres into two portions and wanted to have an access at point B for the back portion, and the council’s representative agreed that he should have this access. In the circumstances it seems to me inequitable that the council should insist on their strict title as they did; and to take the high-handed action of pulling down the gates without a word of warning; and to demand of Mr Crabb £3,000 as the price for the easement. If he had moved at once for an injunction in aid of his equity – to prevent them removing the gates – I think he should have been granted it. But he did not do so. He tried to negotiate terms, but these failing, the action has come for trial. And we have the question: in what way now should the equity be satisfied? [9.155]

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I would, therefore, hold that Mr Crabb, as the owner of the back portion, has a right of access at point B over the verge on to Mill Park Road and a right of way along that road to Hook Lane without paying compensation. I would allow the appeal and declare that he has an easement, accordingly.

2. In the above case what was the detriment suffered by Mr Crabb? Was he not guilty of failing to document properly the relevant transaction? Can concepts of equitable estoppel, promissory estoppel and proprietary estoppel be meaningfully distinguished from one another?

Maxted v LC Smith & Co Pty Ltd [9.160] Maxted v LC Smith & Co Pty Ltd [2008] QSC 165 Supreme Court of Queensland MULLINS J [8] Mr Maxted was born in 1948 and Mrs Maxted was born in 1944. They were married in 1979. The plaintiffs sold one property at Everton Park in 1980 and purchased another property in Everton Park where they resided until they sold it in or about 1990. [9] After the sale of that property, the plaintiffs rented a house property on about two acres of land at Trouts Road, Stafford Heights initially for a period of six months. The plaintiffs were considering the purchase of acreage for a residence. They had funds for that purpose from the sale of the Everton Park property and a capacity to borrow some funds from Mr Maxted’s parents. Mr Maxted had a strategy to improve their financial position by purchasing a more valuable property for their next residence than the property they had last sold. They started inspecting properties available for purchase. They continued renting the Trouts Road property on a month to month basis for about $200 per week. [10] The plaintiffs were particular about the presentation of any property they lived in. Even though the house property at Trouts Road was rented, Mr Maxted went to a great deal of trouble to present the yard as well as he could. The owners of the Trouts Road property were so grateful for the plaintiffs’ care of their property, the plaintiffs were given a rebate of a few weeks rent when they eventually left. [11] Mrs Maxted had a close relationship with her mother and, as a result, the plaintiffs frequently socialised with Mrs Werda and Mr Smith. Mr Maxted considered that he and Mr Smith became friends. Mrs Maxted considered that Mr Smith was like a stepfather to her. [12] Mr Smith was born in 1924. He was a builder and had success as a property developer. Mr Smith had been married and there were three children of that marriage, Mr Leslie Smith Jnr, Raymond and Vanessa. [13] In July 1990 the defendant purchased the property. The property contains about 24.6 hectares and is improved with a highset home. The defendant rented the house on the property (and the house yard) to Raymond until late 1992 for $160 per week. Mr Smith had wanted to convert the downstairs room of the house into an entertainment area or guest room. This proposal was raised by Mr Smith at the commencement of the tenancy in favour of Raymond, but Raymond was unhappy about it and Mr Smith did not undertake the renovation that he was considering at that time. According to Raymond, Mr Smith and Mrs Werda did visit the property whilst Raymond and his family lived there. They visited about every second weekend, but did not stay overnight. [14] Mr Smith complained to the plaintiffs about how Raymond looked after the property. Raymond was unaware of any complaints his father had about his tenancy of the property and made the point in his evidence that he was responsible only for the house and the yard immediately surrounding the house. Mr Smith suggested to the plaintiffs that they should rent the property when Raymond left it and look after the property for him. He conveyed to the plaintiffs that he wanted to rent the property to someone he could rely on. [15] Raymond eventually left the property in or about December 1992, because it was too far for him to travel to work. The plaintiffs moved to the property on the day that Raymond and his family 718 [9.160]

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Maxted v LC Smith & Co Pty Ltd cont. moved out. The plaintiffs rented the house and all the land that comprises the property for $160 per week, and understood that they were to look after the house and the adjacent yard as they would a residential property, but supervise and take care of the balance of the property for the defendant. The defendant admits that the arrangement when the plaintiffs initially moved into the property was that they would take care of the property and pay rent of $160 per week and that Mr Smith and Mrs Werda would stay at the property on weekends and at other times when they wished to do so. [16] The plaintiffs continued looking at acreage properties after they moved to the property with a view to making their own purchase of acreage. The plaintiffs had Mr Smith look at some of the acreage properties they were considering both before and after they moved to the property. The plaintiffs respected Mr Smith’s success as a property developer and sought his advice. The plaintiffs recalled that Mr Smith always found some disadvantage with each acreage property they inspected with him. In cross-examination, however, Mr Maxted accepted (at Transcript p 101) the suggestion put to him that Mr Smith was merely giving general advice about the properties he inspected with Mr Maxted. [17] The plaintiffs threw themselves into cleaning up the house on the property and the adjacent yard and showed any tradesmen sent to the property by Mr Smith where they were to work and reported back to Mr Smith on the activities of those tradesmen. Mr Smith went ahead with his plans for making a bedroom out of one of the downstairs rooms of the house. Mr Smith and Mrs Werda stayed most weekends at the property. About three years after moving to the property, Mr Maxted sustained an injury in the course of his employment at the airport as a baggage handler for which he received compensation. He left this employment. [18] The plaintiffs had the same approach to the presentation of the house and the adjoining yard, as they had for their previous residences. They took pride in presenting them well. Mr Maxted accepted in cross-examination (at Transcript p 100) that the plaintiffs wanted to “create a very good impression” on Mr Smith and Mrs Werda about the manner in which they looked after the property. Mr Smith also accepted that he did jobs at the property without being asked to do so by Mr Smith. Mr Maxted explained (at Transcript p 100): Mr Smith, had a view that people did something or showed what they did do first before there was - there was any further discussions on your future. In other words, you had to show you at least did something on your own behalf and his - his idea was you showed first and you discussed future at a later date. Your work first showed that you had initiative to do something, without being told to do it. [19] Mrs Maxted was a director of the defendant from about 1991 until about 2001. In that capacity, she signed documents at the request of Mr Smith. Mrs Maxted was given the use of a car belonging to the defendant which she used to drive her mother and Mr Smith to medical appointments, for errands for her mother and Mr Smith and for personal use. The defendant did not dispute the assistance that was provided by Mrs Maxted to her mother and Mr Smith, although Vanessa’s acknowledgement was begrudging (at Transcript p 219). [20] Mr Smith had some person complete Part 1 of a residential tenancy agreement under the Residential Tenancies Act 1994 (RTA) which provided for a tenancy of the property in favour of the plaintiffs for a term of 20 years commencing on 22 October 1996 for $160 per week. The agreement was dated 22 October 1996. It was signed by Mr Smith on that day. The witness to his signature was not identified in this proceeding. Mrs Maxted signed the agreement on 22 October 1996 in the presence of Mrs McMillan. Mrs Maxted knew that she was signing a lease of the property as tenant, but was not aware of the details of the lease at the time. The plaintiffs were not provided with a copy of that tenancy agreement at that time. Mrs Maxted said that Mr Smith said that he needed the lease for taxation purposes. As Mr Campbell confirmed in his evidence, the defendant’s taxation obligations in relation to the income from the property were the same, whether or not there was a lease signed by the plaintiffs. [9.160]

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Maxted v LC Smith & Co Pty Ltd cont. [21] During the first few years that the plaintiffs were on the property, Mr Smith had some of his trotting horses “spelling” there. He did not continue with his interest in trotting and the horses were taken away from the property. One of the neighbours, Mr Olsson, approached Mr Maxted about agisting his Clydesdale horses on the property in exchange for Mr Olsson using his tractor/slasher to slash the paddocks that were used for his horses once each year. Mr Maxted referred Mr Olsson to Mr Smith who agreed with this arrangement. Mr Olsson said that after dealing with Mr Smith for a while, Mr Smith told him to deal directly with Mr Maxted in relation to the property. [22] Mr Smith had a bout of ill-health in 2000 and Mrs Werda’s health also declined from about that time. Their visits to the property became less frequent and then stopped. [23] Mr Campbell received a handwritten note from Mr Smith dated 10 May 2002 which was not signed, but Mr Campbell recognised the handwriting as that of Mr Smith. The note stated: Will you please extend the lease on my property at 417 Narangba Road Kurwongbah 4503 The expiry date will be 21/10/2031 The lease will include the house and the land 24.61Ha The lease of the property can not be transferred to anybody else, and the house or land can not be leased or rented to anybody else. The use of the house and land is for the sole use of the present tenants Mr Campbell did not do anything in relation to that request. There is no suggestion from the plaintiffs that the proposal in this note had been conveyed to them by Mr Smith. [24] The last time that the plaintiffs saw or spoke to Mr Smith was on the day of Mrs Werda’s funeral. Vanessa assisted Mr Smith with the management of the defendant after Mrs Werda’s death. It is remarkable that after the relatively close relationship between the plaintiffs and Mr Smith during the time that Mrs Werda was alive, even allowing for some drawing away on Mr Smith’s part with his ill health from 2000, that there was no personal contact whatsoever between Mr Smith and the plaintiffs after Mrs Werda’s funeral. [56] On the basis of the plaintiffs’ evidence, it was about three years after they had been renting the property that statements were made to them by Mr Smith in response to the concerns they raised about their future and that they might purchase their own property and therefore leave the property. I will refer to the time at which these statements were made by Mr Smith as “the critical time”. These statements were to the effect that the plaintiffs did not need to worry about the future or would be “taken care of” and created an expectation that the defendant would take action to give the plaintiffs certainty about their future in relation to the property. [57] Although the plaintiffs did not receive a copy of the tenancy agreement from Mr Smith at any time, they were aware that they had entered into a lease of the property at the same rental that they had been paying from the commencement of their occupation of the property. The plaintiffs did not complain to Mr Smith in terms that the lease was not sufficient or satisfactory. After the tenancy agreement was executed, both parties proceeded on the basis that the tenancy agreement was effective and gave the plaintiffs the benefit of the long term lease of the property. The plaintiffs accepted what was offered by the defendant by way of the tenancy agreement. The plaintiffs did not continue their search for an acreage property to purchase. [58] The plaintiffs allege in paragraph 49(d) of the statement of claim that over the period 1992 to 2002 Mr Smith told the plaintiffs repeatedly and consistently that “after he went there would be enough money left to them to buy assets in the company”. The only evidence that was relevant on that aspect was the evidence of Mr and Mrs Maxted about a statement made by Mr Smith about buying company assets, but without any detail or other supporting evidence that would enable a finding to be made in accordance with paragraph 49(d) of the statement of claim. 720 [9.160]

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Maxted v LC Smith & Co Pty Ltd cont. Plaintiffs’ expectation [59] The expectation that is relevant was that held by the plaintiffs at the time they did the acts relied on as detriment. The expectation created by Mr Smith on behalf of the defendant did not arise on the plaintiffs’ evidence until after they had resided on the property for about three years and they wanted to make a decision about whether to pursue their dream to purchase their own acreage property. It is also clear from Mr Maxted’s evidence of wanting to impress Mr Smith with his efforts in looking after the property that, at least, Mr Maxted had the idea that the plaintiffs might be able to gain some benefit from Mr Smith by proving themselves to be worthy of receiving such a benefit. Mr Maxted was opportunistic in his approach to impressing Mr Smith. [60] The expectation that the plaintiffs claim they had as a result of the statements made to them by Mr Smith is pleaded in paragraph 43 of the statement of claim in the following terms: (a) if the plaintiffs remained as caretakers they would be granted an interest in the Narangba Road property; (b) the value of such interest in the Narangba Road property would be such that they would not be disadvantaged materially or financially if they did not buy their own property as they had expressed intentions to Mr Smith of so doing. [61] The difficulty about the expectation, as pleaded, is that it relies on a representation that the plaintiffs allege (but is not established by the evidence) that if they stayed looking after the property, they would not have to buy their own property. In the absence of proof of such representation, there is no basis for that part of the expectation pleaded in paragraph 43(b) of the statement of claim. That leaves the pleaded expectation as one that if the plaintiffs remained as caretakers of the property, they would be granted an interest in the property. [62] When the plaintiffs at the critical time sought a commitment from the defendant about their continued occupation of the property, they were granted a long term lease of the property at the same rental that they had paid since moving to the property. In view of my conclusion that there was acceptance by the plaintiffs of the lease that the defendant was prepared to grant them, I am not satisfied that the plaintiffs did, in fact, have an expectation, after entering into the lease with the defendant, that if they remained as caretakers of the property, they would be granted a greater interest in the property. There was wishful thinking on their part that such a benefit might accrue to them, but I do not consider that was their expectation after entering into the lease. [63] Even if the plaintiffs did have an expectation after entering into the lease that if they continued looking after the property, they would be given a greater interest in the property, I am not satisfied that such an expectation was created by the statements made to them by Mr Smith. Detriment [64] It is unnecessary to consider the issue of detriment, because of my conclusion on the issue of expectation. Because of the evidence adduced relevant to detriment, I will make findings on this aspect of the matter. [65] Mr Maxted gave evidence of many works undertaken by the plaintiff in relation to the house and the property which were largely undisputed by the defendant. The defendant argues that to the extent that the plaintiffs did the works, they were not done in reliance on any expectation of being given an interest in the property arising from representations made by Mr Smith, but were done for other reasons, or were done before any such expectation arose. [66] Mr Campbell prepared a summary of the defendant’s income and outgoings in respect of the property for the 1991 to 2005 tax years (exhibit 24) from information provided by the defendant. For the years between 1991 and 2002, amounts were recorded for repairs and maintenance and the summary prepared by Mr Campbell shows an analysis of those expenditures for some of these years. [9.160]

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Maxted v LC Smith & Co Pty Ltd cont. There are separate expenditures for slashing and clearing in 2001 ($7,755), 2002 ($1,293) and 2004 ($632). There are significant variances in the amounts spent in each year on repairs and maintenance. In the 1993 year which covered the period of initial occupation of the property by the plaintiffs, an amount of $21,538 was spent on repairs and maintenance. In subsequent years the larger expenditures were $6,514 (1994), $3,953 (1995), $6,078 (1997) and $8,671 (2000). The total of the amounts spent on repairs and maintenance and slashing and clearing between 1993 and 2002 was $58,625. [67] Apart from spending about $180 on a chainsaw, the plaintiffs did not quantify any of the expenditures undertaken by them in respect of the house or the property. [68] There was no dispute between the parties that the clean up of the property after the plaintiffs took up residence was at the expense of the defendant. This is consistent with the analysis of the defendant’s expenditure on repairs and maintenance in 1993, eg an amount of $4,940 was spent on spraying weeds. Although Mr Maxted described the assistance that he gave to persons engaged by Mr Smith to undertake tasks on the property (such as removing the old machinery, pipes and engines that had been left on the property from when it had been a farm), Mr Maxted did these things because he wanted to do them and before the critical time. The same observation applies to the first lot of work that the plaintiffs did on the driveway of the property which was to smooth the river sand that the defendant purchased for the driveway. Mr Maxted also did work in establishing gardens. He said that Mr Smith paid for some of the gardens, but that he then acted on his own initiative “to make it a lot more the way we would live” (at Transcript p 47). If this work was done after the critical time, it was done because Mr Maxted wanted to do it. [69] Mr Maxted gave evidence of organising a quote from a painter to paint inside the house at Mr Smith’s request. The plaintiffs do not contend that they paid for the painting, but that they assisted in moving furniture, taking down curtains and the like to assist the painters in their task. That cannot be characterised as detriment when the plaintiffs willingly provided that assistance and it contributed to their enjoyment of the property. [70] There were a number of purchases, such as for ceiling fans and new curtains, that entailed small amounts of expenditure by the plaintiffs, but the plaintiffs were happy to undertake these expenditures as part of their pride in the presentation of the house they were renting or for their own enjoyment of the house. This also applies to the making of the curtains by Mrs Maxted. The plaintiffs’ purchase of two airconditioning units was for their comfort. [71] Mr Maxted gave evidence that he paid for coverings (in the nature of awnings) installed over the front and back doors and for the installation of a roller door on the garage. The photograph (exhibit 10) shows the awning over the front door and the open roller door. Mr Maxted did not identify the timing of this expenditure. Mr Maxted did suggest, however, that when he raised the need for the work to have the awnings installed, Mr Smith was not interested in doing that work, so the plaintiffs went ahead and organised the work themselves (at Transcript p 70). [72] The second lot of work on the driveway done by Mr Maxted was putting in cement edges and river stones. It is likely that was done after the critical time. He described making it “more of a pleasing looking driveway in shape form” (at Transcript p 48). Mr Maxted undertook this work because he wanted to and was proud of the result. [73] Mrs Maxted agreed (at Transcript p 154) that the works that the plaintiffs did around the house were done to present the house well, and not because they were told to do those works. [74] To the extent that the plaintiffs allege in paragraph 54 of the statement of claim that from 2002 until late 2004 they looked after the property with little input or direction from the defendant, the plaintiffs were conducting themselves as the tenants of the property consistent with the rights conferred on them under the tenancy agreement, irrespective of any expectation that the plaintiffs might have had about gaining an interest in the property. 722 [9.160]

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Maxted v LC Smith & Co Pty Ltd cont. [75] The plaintiffs have therefore failed to prove that the acts claimed to amount to detriment were undertaken in reliance on any expectation that they would be granted an interest in the property (apart from their long term tenancy). Even if there were the requisite link between the detrimental acts and any such expectation, the acts were not substantial and were insufficient to support a claim in equitable estoppel: Compare Flin v Flin [1999] VSCA 109; [1999] 3 VR 712, 744-749 [96]-[117]; Sullivan v Sullivan [2006] NSWCA 312 at [90]-[93]; and Donis v Donis [2007] VSCA 89 at [34]. Conclusion on claim of equitable estoppel [76] I have therefore reached the conclusion that the representations that Mr Smith made to the plaintiffs at the critical time were acted on by the defendant in entering into the tenancy agreement with the plaintiffs. Any expectation that the plaintiffs may have had about obtaining a greater interest in the property was not due to the representations of Mr Smith which had been carried into effect by the tenancy agreement, but as a result of the plaintiffs’ hope that they would gain such a benefit. There was nothing in the conduct of the defendant before Mrs Werda’s death that makes it unconscionable for the plaintiffs’ interest in the property to be limited to the tenancy agreement.

[9.165]

Notes

1. The case provides a clearer analysis of the elements of expectation and detriment necessary to establish an estoppel. Unlike part performance whereby a contract becomes enforceable and all rights under the contract may be claimed, the consequence of estoppel is that the party suffering detriment is entitled to whatever is necessary to achieve overall justice. Often that result may simply be the return of the detriment but it may not be possible or fair simply to return to the previous position. 2. Overall justice may involve the interests of third parties. In Giumelli v Giumelli (1998) 196 CLR 101 the High Court discussed relief for a range of expectations created by the appellants. The court stated: The circumstances of the case However, the appellants correctly challenge the Full Court order on other grounds. Before making an order designed to bring about a conveyance of the Promised Lot to the respondent, the Full Court was obliged to consider all the circumstances of the case. These circumstances included the still pending partnership action, the improvements to the Promised Lot by family members other than Robert, both before and after his residency there, the breakdown in family relationships and the continued residence on the Promised Lot of Steven and his family. It will be recalled that Steven is a party to the partnership action but not to the present action. When these matters are taken into account, it is apparent that the order made by the Full Court reflected what in Verwayen was described as the prima facie entitlement of Robert. However, qualification was necessary both to avoid injustice to others, particularly Steven and his family, and to avoid relief which went beyond what was required for conscientious conduct by Mr and Mrs Giumelli. The result points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum. This would reflect, with respect to the third promise, the approach taken by R D Nicholson J when giving relief in respect of the second promise. On one view, as to which we express no decision, for what is now some 12 years, the respondent has been deprived of a share of profits earned by the partnership from the Promised Lot and of rent from the house. Further, in fixing the sum to represent an appropriate monetary order there may be a case for an allowance in his favour [9.165]

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representing a share of anticipated profits from the partnership in relation to the Promised Lot for a specified period of future years, perhaps contingent upon the joint lives of Mr and Mrs Giumelli. On the other hand, an allowance would have to be made for the improvement to the value of the land since 1986 brought about, in particular, by Steven’s work. In addition to the planting of fruit trees and the construction of sheds and coolrooms, the appellants contend there has been significant expenditure on water supply and storage systems. To enable the matter to be dealt with adequately, it would be appropriate for the partnership action to be brought on concurrently for trial of remaining issues. The moving party in that action is the present respondent and he should be required by the Supreme Court, by direction in the present action, to take the necessary steps to prosecute to trial all remaining issues in the partnership action.

3. Contrast Maddison v Alderson (1883) 8 AC 467 with Re Basham [1987] 1 All ER 405 and Jackson v Crosby (No 2) (1979) 21 SASR 280. 4. The doctrine of proprietary estoppel is analysed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [8.195]–[8.235].

Brand v Chris Building Co Pty Ltd [9.170] Brand v Chris Building Co Pty Ltd [1957] VR 625 Supreme Court of Victoria HUDSON J: In the statement of claim in this action, the plaintiff alleges he is and was at all material times the registered proprietor of all that piece of land being lot 54 on Plan of Sub-division No 12244 lodged in the Office of Titles and being the whole of the land more particularly described in Certificate of Title Volume 8046 Folio 746. That land comprises a block which has a frontage to Willey Street, Sunshine, some distance south of Rufford Street. Plaintiff alleges he is and was at all material times entitled to and in actual possession of the said land. At some date or dates prior to 30 November 1956, he alleges the defendant, his servants or agents, wrongfully entered upon and trespassed upon this land, and without his knowledge or consent, erected a dwelling-house upon the land. He further alleges that the defendant continues wrongfully to enter upon the land and threatens to continue to trespass upon it and to demolish the house and otherwise interfere with the plaintiff’s possession of the land. On the basis of those allegations he claims (a) damages; (b) a declaration that he is the owner and entitled to possession of the land and of the dwelling-house; (c) an injunction restraining the defendant his servants or agents from entering upon the land; and (d) an injunction restraining the defendant or his agents from demolishing or otherwise injuring the dwelling-house or interfering with the plaintiff’s possession thereof. In its defence, the defendant admits that it commenced to build a house on the land referred to in the statement of claim prior to 30 November 1956, but save as to this it denies or refuses to admit the allegations in the statement of claim. In the alternative, the defendant alleges that if it wrongfully commenced to erect and/or wrongfully erected a dwelling-house on the land, then the plaintiff is barred by acquiescence and laches from obtaining the relief sought; and in particular, the defendant says that in commencing and continuing to erect the house it made a mistake as to fact and that (a) it believed the land was owned by Joe Pulis and Mary Doris Pulis for whom it had contracted to build a house on land owned by them; (b) The plaintiff knew of his rights as owner of the subject land and knew or ought to have known that the defendant had so commenced and/or continued in mistake as to its legal rights; (c) The plaintiff encouraged the defendant in its action by refraining from asserting his legal rights; and (d) By reason of what has occurred it would be unjust to allow the plaintiff to assert any legal right residing in him. What does the law say about such a position? I think the correct statement of the position is as set out in Halsbury’s Laws of England (3rd ed), vol 14, para 1179, p 639: 724 [9.170]

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Brand v Chris Building Co Pty Ltd cont. When A stands by while his right is being infringed by B, the following circumstances must as a general rule be present in order that the estoppel may be raised against A: (1) B must be mistaken as to his own legal rights; if he is aware that he is infringing the rights of another, he takes the risk of those rights being asserted; (2) B must expend money, or do some act, on the faith of his mistaken belief; otherwise, he does not suffer by A’s subsequent assertion of his rights; (3) acquiescence is founded on contract with a knowledge of one’s legal rights, and hence A must know of his own rights; (4) A must know of B’s mistaken belief; with that knowledge it is inequitable for him to keep silence and allow B to proceed on his mistake; (5) A must encourage B in his expenditure of money or other act, either directly or by abstaining from asserting his legal right. The authorities for these propositions regarding estoppel have been referred to in argument. Perhaps the most important is Ramsden v Dyson, a case of high authority, reported in (1866) LR 1 HL 129: there were others such as Willmott v Barber (1880) 15 Ch D 96 and the decision of our High Court in Svenson v Payne (1945) 71 CLR 531. Those authorities, I think, amply support the propositions set out in Halsbury I have read, and in the absence of the requirements there set forth, the defence of acquiescence must fail. In my opinion, the last three requirements have not been satisfied. In other words, it has not been shewn that there was knowledge by the plaintiff of his own rights for the simple reason that he did not know his rights were being infringed. It follows that he could not know of the mistaken belief of the defendant. The plaintiff did not know what was going on, and therefore, there was nothing he could do until he found out on 30 November. Therefore, it is amply clear that the plea of acquiescence upon which the defence and counter-claim are based fails. Mr Hewitt, in support of his argument for the defendant, relied on the maxim of equity; “He who seeks equity must do equity”. This does not mean that in every action where a party seeks equitable relief that that relief will be refused if some injustice will be produced. The maxim must be applied having regard to the principles established by the cases. In cases such as the present, it must be shewn that the plaintiff was guilty of something in the nature of a fraud, and there is nothing of that kind here and I can find no ground which could raise an equity in favour of the defendant. Mr Hewitt also sought to call in aid the doctrine of unjust enrichment which has been the subject of much writing of recent years, but he was not able to point to any case where it had been applied in circumstances such as the present, and to apply it would be to fly in the face of the highest authority. It is quite impossible to apply it in the face of these authorities. I think, therefore, that the claim should succeed and the counter-claim must fail.

[9.175]

Notes and Questions

1. The case involves the issue of what is regarded as part of the land and in that respect further extracted at [16.115]. 2. The case is traditionally regarded as one relating to estoppel but not linked to the proprietary estoppel cases. If the conditions for estoppel exist, should not the mistaken builder have an equitable interest in the land? A more common situation is that of mistake as to a boundary and an encroaching building. Should it be necessary that the true owner was aware of that owner’s rights and allowed the other party to proceed? Should the opportunity for awareness be sufficient? Or the willingness to carry on in ignorance?

[9.175]

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3. Often buildings are not simply on the wrong piece of land but stray across onto neighbouring land because of misunderstandings as to the position of boundaries. Resolution of such disputes is attempted by legislation relating to encroachments which is discussed at [16.125].

ER Ives Investment Ltd v High [9.180] ER Ives Investment Ltd v High [1967] 2 QB 379 Court of Appeal DANCKWERTS LJ: This appeal from the decision of His Honour Judge Carey Evans is concerned with property built on a site made vacant by war damage fronting on Earlham Road and Belvoir Street, Norwich. The defendant, Mr High, owned the site of No 77, Earlham Road and Mr Westgate owned the sites of Nos 73 and 75, Earlham Road. They were both builders. Mr Westgate built a block of flats on his site Nos 1 to 6, Frances Court. Unfortunately, as the defendant discovered, the foundations of this block of flats encroached some feet below ground on to the land forming part of No 77, Earlham Road, belonging to the defendant, on which he was proposing to build a house for himself. Both Mr Westgate and the defendant were sensible and reasonable neighbours. They entered into negotiations and it is clear, as found by the county court judge, that they reached an oral agreement that Mr Westgate should keep his foundations where they were, but in return the defendant should have a right of way across the yard adjoining the fats to a garage which the defendant intended to build close to the boundary of his land at the back of his house. There was a meeting on Nov 2, 1949, on the site between the parties and there were some letters. There were letters of Dec 6 and 12, 1949, referring to the oral agreement, and finally one on Dec 13, 1949, from the defendant in which he said (after referring to fences): I shall be very glad to have the right you offer across the back of your site so that I can have access with a car to the rear of my site. Can you allow eight feet wide? Perhaps you will kindly instruct your solicitor to write to my solicitors, Daynes Keefe & Co, Castle Meadow, Norwich, with the necessary agreement. It has been argued that this was not a binding agreement on the principle of such cases as Chillingworth v Esche [1923] All ER Rep 97 at 105; [1924] 1 Ch 97 at 113, 114 (either a contract to make a contract or a conditional contract). I am satisfied, however, that the agreement was a binding contract, and the parties merely contemplated that it would be put into proper form by a solicitor in the manner recognised in such cases as Rossiter v Miller [1874-80] All ER Rep 465; (1878), LR 3 App Cas 1124 and Bonnewell v Jenkins (1878), 8 Ch Div 70. Unfortunately, apparently no-one told the defendant that his prudent course, by reason of the Land Charges Act 1925, and s 199 of the Law of Property Act 1925, was to register a land charge either as a Class C (iv) estate contract, or a Class D (iii) equitable easement. Relying on his agreement with his neighbour, the defendant built his house with only a narrow passageway between his house and the neighbouring flats, so that he could not have had access with a car past his house that way. His house was completed nearly a year after the agreement of Nov 2, 1949. Mr Westgate sold his property (Nos 73 and 75) to some people called Wright and conveyed it to them by a conveyance dated Mar 14, 1950, which referred to the defendant’s right of way. Mr High was on good terms with the Wrights. He used the right of way without question or demur both for pedestrians and for taking rubble off his site. About the same time an eight feet wide opening was made in the wire fence separating No 75 from No 77 so as to allow access to No 77 from the yard of No 75. During the Wrights’ time the wire fence was replaced with a new wall, but the eight feet gap was preserved. Mrs Wright was consulted about this, as the wall of the defendant’s garage, which he built in 1959 immediately opposite the eight feet gap, was included in this new boundary wall. The garage 726 [9.180]

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ER Ives Investment Ltd v High cont. was constructed in such a way that it could only be entered from the yard of No 75 and the defendant could only drive out over that yard. Further, the county court judge accepted the defendant’s evidence that the Wrights watched the garage being built and complimented him on it. They knew that the only access to it was through the yard of No 75. In 1960 the defendant bought a car, as he had anticipated, and thereafter used the garage and the access over the yard in connection with it. In 1962 the defendant tendered for and was given the job of resurfacing the yard and in his bill he deducted one-fifth of the cost, obviously because he was a user of the yard, and the bill was duly paid. Towards the end of 1962 the Wrights offered Frances Court for sale by auction and by special condition No 9 provided for the continuance of the defendant’s right of way. The property was bought by the plaintiffs, ER Ives Investments Ltd and was conveyed to them by a conveyance dated Jan 1, 1963, in which (at the suggestion of the plaintiffs’ solicitors) the conveyance was subject to the defendant’s right of way “if any”. A few months later the plaintiffs challenged the defendant’s right of way. The plaintiffs’ solicitors changed their ground several times, but finally these proceedings were started by the plaintiffs in 1965. His Honour Judge Carey Evans decided in the defendant’s favour and dismissed the action. From that decision the plaintiffs appeal. But that is not the end of the matter. There is another equitable ground on which the defendant’s rights may be protected, which has nothing whatever to do with the Land Charges Act. It is discussed in Snell’s Equity (26th ed) pp 629-633 under the name “Proprietary estoppel”, and the comment is made (p 633) that “the doctrine thus displays equity at its most flexible”. There are two aspects in which this equitable principle applies in the present case. First, in the present case, the defendant, in reliance on the arrangement made with Mr Westgate, allowed the encroaching foundations to remain on his land and built his house without proper access except over the yard, and finally built his garage in such a way that it was useless unless access to it and from it could be had over the yard. Mr Westgate acquiesced in the use of the yard for access, and the Wrights stood by and, indeed, encouraged the defendant to build his garage in these conditions and for these purposes. Could anything be more monstrous and inequitable afterwards to deprive the defendant of the benefit of what he has done? Secondly, the Wrights had continued to enjoy the benefit of the encroaching foundations on the defendant’s land. It would no doubt be quite an expensive job to remove the encroaching foundations and provide other support for the building. Equity does not allow a person who takes advantage of such a situation to deny to the other party the corresponding benefits which were the consideration for allowing the foundations to remain. The plaintiffs bought the property subject to the defendant’s equitable rights and the property was so conveyed to them. They had full knowledge of the situation, yet they continue to enjoy the benefits of the situation and wish to deny to the defendant the benefit of what he was induced to do in reliance on the mutual arrangement. As long as the plaintiffs continue to enjoy the foundations, they must accept the terms of that enjoyment. [Lord Denning MR and Winn LJ agreed.]

Note

[9.185]

The significance of the approbation and reprobation argument is that it allows a remedy against a subsequent registered proprietor who was not a party to the misapprehension or mistake. It would seem that at best the doctrine of proprietary estoppel creates an equitable interest in favour of the party who has acted on the misapprehension or mistake. The interest [9.185]

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is more likely to be classified as an equity as the interest in dependent on court action for its formulation. But if the person who created the misapprehension or mistake transfers the land to another party that other party should be able to claim the benefit of indefeasibility. Mere notice of what has happened is not sufficient to justify a finding of lack of good faith. If what has happened has however created a lasting benefit the subsequent owner cannot claim that benefit without accepting the accompanying burden. These issues are also considered in Rufa v Cross [1981] Qd R 365 and GIO v Reed [1988] VR 829.

REGULATION OF LAND SALES DEALINGS Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 [9.190] Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9, 10, 11, 12, 25, 28, 29, 30 9. Meaning of required documents (1) For this part, the required documents, in relation to a sale of residential property, are a copy of the proposed contract for the sale of the property (other than the excluded particulars) including the following documents: (a)

a copy of the Crown lease;

(b)

a copy of the current edition of the certificate of title;

(c)

a copy of the deposited plan;

(d)

a copy of any encumbrance that is shown on the certificate of title (for example, a restrictive covenant or an easement);

(e)

Note: An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132). if there is an encumbrance that is not shown on the certificate of title–a statement about the encumbrance that complies with the requirements (if any) prescribed under the regulations;

(f)

a copy of the lease conveyancing inquiry documents for the property;

(g)

for a unit, a copy of– (i) if there is a registered units plan–

(h)

(A)

the registered units plan; and

(B)

a unit title certificate for the unit dated not earlier than 3 months before the day the property was first advertised or offered for sale or listed by an agent; and

(ii)

if there is no registered units plan–a plan showing the proposed location and dimensions of the unit in relation to other units and the common property; and

(iii)

the current edition of the certificate of title for the common property;

for each residence covered by the proposed contract, a copy of each of the following: (i) the building conveyancing inquiry documents for the residence; (ii)

the energy efficiency rating statement (if any) required under section 23;

(iii)

a building and compliance inspection report from an inspection carried out not earlier than 3 months before the day the property was first advertised or offered for sale or listed by an agent (and, if the seller has obtained 2 or more reports in that period, each report);

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Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 cont. (iv)

if the residence has been occupied–a pest inspection report from an inspection carried out not earlier than 3 months before the day the property was first advertised or offered for sale or listed by an agent (and, if the seller has obtained 2 or more reports in the 6 months before that date, each report);

(v)

for a residence that is a class A unit–the minutes of meetings of the owner’s corporation, and the executive committee, held in the 2 years before the day the property was first advertised or offered for sale or listed with an agent;

(i)

if there are premises covered by the proposed contract and there is a current asbestos assessment report for the premises (or some or all of them)–a copy of each current asbestos assessment report;

(j)

if there are premises covered by the proposed contract, but there is no current asbestos assessment report for the premises (or any of them), or, if a current asbestos assessment report for the premises (or any of them) exists but the seller cannot, after taking reasonable steps, find or get the report–an asbestos advice;

(k)

any other document prescribed by regulation.

(2) However– (a)

the building conveyancing inquiry documents and building and compliance inspection report are not required for– (i)

a class A unit; or

(ii)

a residence that has not previously been occupied or sold as a dwelling; or

(iii)

a residence that is to be erected or developed before completion of the sale (an off-the-plan purchase); and

(b)

a pest inspection report is not required for a class A unit; and

(c)

a document mentioned in subsection (1) is not required if the seller cannot obtain the document after taking all reasonable steps to obtain it; and for a sale of vacant land under a developer’s holding lease, the required documents are– (i) a copy of the holding lease; and

(d)

(ii)

a copy of the development conditions or, if they are not finalised, the draft development conditions for the lease.

(3) The statement and reports mentioned in subsection (1) (h) (ii), (iii) and (iv) must have been prepared by someone who– (a) is not–

(b)

(i)

a family member of the seller (or the seller’s agent or lawyer); or

(ii)

a member of a firm that the seller (or the seller’s agent or lawyer), or a family member of the seller (or the seller’s agent or lawyer), is a member of; or

(iii)

someone else carrying on a business if the seller (or the seller’s agent or lawyer), or a family member of the seller (or the seller’s agent or lawyer), has a direct or indirect right to participate in the profits of the business; and

has the professional indemnity insurance (if any) required by regulation.

(4) In this section: “asbestos advice” — see the Dangerous Substances Act 2004, section 47J. “asbestos assessment report,” for premises–see the Dangerous Substances Act 2004, section 47K. [9.190]

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Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 cont. “current asbestos assessment report,” for premises, means an asbestos assessment report for the premises if the premises have not been changed, since the report was made, in a way that would affect the accuracy of the report. “excluded particulars,” in relation to a proposed contract for the sale of residential property, means– (a)

the name and address of, and contact details for, the buyer; and

(b)

the name and address of, and contact details for, the buyer’s lawyer; and

(c)

the purchase price; and

(d)

the date of the contract; and

(e)

a description of any furnishings or goods to be included in the sale of the property.

“premises” includes land or a structure and any part of an area of land or a structure. 10. Proposed contract etc to be available for inspection (1) A seller of residential property commits an offence if all the required documents are not available for inspection by a prospective buyer (or an agent for a prospective buyer) at all reasonable times when an offer to buy the property may be made to the seller. Maximum penalty: 10 penalty units. (2) Subsection (1) does not apply in relation to a failure by a seller to make all the required documents available for inspection by a prospective buyer if– (a)

the seller engaged a lawyer to prepare the proposed contract for the sale of the property; and

(b)

the lawyer did not give the seller the required documents to which the failure relates; and

(c)

the seller believed on reasonable grounds that he or she had received all the required documents; and

(d)

the seller made all the required documents given to the seller by the lawyer available for inspection in accordance with subsection (1).

(3) An offence against this section is a strict liability offence. 11. Certain conditions to be included in contract (a)

(1) A contract for the sale of residential property must include conditions to the following effect: except as disclosed in the contract– (i) the property is sold free of encumbrances other than the encumbrances shown on the certificate of title; and (ii)

(b)

the buyer is entitled to vacant possession on completion of the contract;

if, before completion of the contract, the buyer becomes aware of a breach of a condition mentioned in paragraph (a), the buyer may– (i) rescind the contract; or (ii)

complete the contract and claim damages;

(c)

except as disclosed in the contract, there are no unapproved structures;

(d)

if, before completion of the contract, the buyer becomes aware of an unapproved structure that is not disclosed in the contract, the buyer may– (i) ask the seller to arrange for the structure to be approved before completion of the contract; and (ii)

(e)

if the structure is not approved before completion–rescind the contract, or complete the contract and claim damages.

the buyer may not make any requisitions on the title to the property;

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Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 cont. (f)

the seller warrants that, at the date the contract is made– (i) the seller will, at the time of completion, be able to complete the contract; and (ii)

the seller has no knowledge of any unsatisfied judgments, orders or writs affecting the property; and

(iii)

(g)

(h)

the seller has no knowledge of any current or threatened claims, notices or proceedings that may lead to a judgment, order or writ affecting the property; the seller warrants that, at the date the contract is completed– (i) the seller will be, or will be able to be, the registered proprietor of the territory lease relating to the property (if any); and (ii)

there are no unsatisfied judgments, orders or writs affecting the property; and

(iii)

the seller has no knowledge of any current or threatened claims, notices or proceedings that may lead to a judgment, order or writ affecting the property;

if, before completion of the contract, the buyer becomes aware of an error in the description of the property the buyer may– (i) ask the seller to arrange for the error to be corrected before completion of the contract; and (ii) if the error is not corrected before completion– (A) for an error that is material–rescind the contract, or complete the contract and claim damages; and (B)

(i)

for an error that is not material–complete the contract and claim damages;

the required documents mentioned in section 9(1)(a) to (k) for the sale form part of the contract.

(2) However, the conditions mentioned in subsection (1)(f)(ii) and (iii) and (g)(i), (ii) and (iii) are not required to be included in a contract if the property is being sold– (a)

by a mortgagee in possession of the property, or exercising a power of sale; or

(b)

by a registered or official trustee, or the official receiver, under the Bankruptcy Act 1966 (Cwlth); or

(c)

under a court order.

(3) If a contract for the sale of residential property is entered into and the contract does not include a condition required under subsection (1) to be included in the contract, the condition is taken to be included in the contract. 12. Cooling-off period (1) There is a cooling-off period for every contract for the sale of residential property during which the buyer may exercise the right under section 14 to give a rescission notice. (2) However, there is no cooling-off period for a contract for the sale of residential property if– (a)

the buyer is a corporation; or

(b)

the property is sold by tender; or

(c)

the property is sold by auction; or

(d)

the contract is made on the same day as the property was offered for sale by auction but passed in, and the buyer was recorded in the bidders record at the auction as– (i) a bidder; or (ii)

(e)

a person for whom a bidder was bidding; or

the buyer waives the cooling-off period under section 13. [9.190]

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Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 cont. (3) The cooling-off period begins when the contract is made and ends at 5pm on the 5th working day after the day the cooling-off period begins. (4) The cooling-off period may be extended or shortened– (a)

by a provision in the contract; or

(b)

by a separate written agreement between the parties before, at or after the time the contract is made (but before the end of the cooling-off period).

(5) However, a provision or agreement shortening the cooling-off period does not take effect until– (a)

the buyer receives legal advice from a lawyer in relation to the shortening of the cooling-off period; and

(b)

the lawyer signs a certificate that complies with section 17 to that effect; and

(c)

the buyer gives a copy of the certificate to the seller.

25. Bidders record (1) Before residential property is offered for sale at a public auction, the seller’s agent must make a record (a bidders record) of the people who can bid at the auction. (2) The bidders record must contain the following information for each person who can bid at the auction: (a)

the person’s name and address;

(b)

the details prescribed under the regulations about the proof of identity for the person sighted by the agent;

(c)

whether the person is bidding for himself or herself or for someone else;

(d)

if the person is bidding for someone else (the principal)–the name and address of the principal; and

(e)

an identifying number (the bidder number) given to the person for the auction by the agent;

(f)

the other information (if any) prescribed under the regulations.

(3) The agent must keep the bidders record for 3 years. (4) The regulations may make provision in relation to bidders records, including– (a)

entitling a seller of residential property to inspect the bidders record for the sale; and

(b)

how a bidders record is to be made and kept.

28. Bids only to be taken from recorded bidders (1) The auctioneer at a sale of residential property by public auction commits an offence if the auctioneer– (a)

takes a bid from a person who is not displaying the person’s bidder number for the auction; or

(b)

takes a bid from a person and does not audibly acknowledge the person’s bidder number for the auction when taking the bid.

Maximum penalty: 50 penalty units. (2) An offence against this section is a strict liability offence. (3) An auctioneer who refuses to take a bid from a person because of this section does not incur a liability to anyone because of the refusal. (4) The taking of a bid in contravention of this section does not affect the validity of the bid (or its taking or acceptance) and the bid (and its taking or acceptance) are as valid for all purposes as if this section had not been enacted. 29. Dummy bidding prohibited 732 [9.190]

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Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 9-12, 25, 28-30 cont. (1) A seller of residential property must not– (a)

make a bid at a public auction of the property; or

(b)

arrange for someone else to make a bid for the seller at a public auction of the property.

Maximum penalty: 100 penalty units. (2) A person must not make a bid for the seller of residential property at a public auction of the property. Maximum penalty: 100 penalty units. (3) An offence against this section is a strict liability offence. (4) Subsections (1) and (2) do not apply to a bid made in accordance with section 30. (5) For subsection (2)– (a)

a bid may be found to have been made for a seller even though it was not made at the request of, or with the knowledge of, the seller; and

(b)

evidence that, in making a bid, the bidder intended to benefit the seller is evidence that the bidder made the bid for the seller.

(6) It does not matter that a person making a bid in contravention of this section is not in the ACT or Australia when the bid is made. 30. Permissible seller bid (1) The auctioneer of residential property at a public auction may make 1 bid for the seller if– (a)

the conditions of the auction permit the making of the bid; and

(b)

before bidding begins, the auctioneer orally declares at the auction that the conditions permit the making of the bid; and

(c)

immediately before or when making the bid, the auctioneer states audibly to the bidders that the bid is being made for the seller (for example, by stating “seller bid”).

(2) It is not sufficient compliance with the requirement under subsection (1)(c) to identify a bid as a seller bid if the auctioneer only identifies the seller by name without stating that the person named is the seller.

[9.195]

Notes

1. Recent legislation similar to that in the Australian Capital Territory has been passed in all jurisdictions except Western Australia, Tasmania and the Northern Territory, see Property, Stock and Business Agents Act 1941 (NSW), s 49; Sale of Land Act 1962 (Vic), s 38; Property Law Act 1974 (Qld), s 60; Land and Business (Sale and Conveyancing) Act 1974 (SA), s 24N; Civil Law (Sale of Residential Property) Act 2003 (ACT), s 29. Generally the legislation requires disclosure of all encumbrances and restrictions affecting the land, a cooling off period before contracts for the sale of land are binding and for the regulation of the conduct of auctions. 2. The legislation is discussed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [8.285]–[8.305].

[9.195]

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MISLEADING OR DECEPTIVE CONDUCT ............................................................ 735 [10.10]

[10.20]

UNCONSCIONABLE OR UNFAIR CONDUCT ...................................................... 741 [10.20]

[10.30]

Commercial Bank of Australia Ltd v Amadio ............................ 741

ABNORMAL CONTRIBUTIONS TO THE PURCHASE PRICE ................................ 746 [10.30] [10.35]

The nature of a resulting trust ........................................................... 746 Transfer to a volunteer ........................................................................ 746 [10.35] [10.40]

[10.50]

House v Caffyn ..................................................................... 746 Wirth v Wirth ........................................................................ 749

Purchase in the name of another ...................................................... 751 [10.50]

[10.60]

Henville v Walker ................................................................... 736

Calverley v Green .................................................................. 751

FAILURE OF AN UNDERSTANDING OR ENTERPRISE .......................................... 759 [10.60] [10.65]

The nature of a constructive trust ..................................................... 759 Understandings that a transfer is not absolute ................................ 759 [10.65] [10.70]

[10.80]

Bannister v Bannister ............................................................. 759 Baumgartner v Baumgartner ................................................. 761

Failure of an understanding ............................................................... 766 [10.80] [10.90]

Bahr v Nicolay (No 2) ........................................................... 766 Paulet v Stewart .................................................................... 776

[10.100] TAKING ADVANTAGE OF ANOTHER .................................................................... 781 [10.100] Undue influence .................................................................................. 781 [10.105]

[10.110]

Bridgwater v Leahy ............................................................... 781

Transactions involving a family dependency ................................... 785 [10.110]

Garcia v National Australia Bank ............................................ 785

[10.120] Breach of a fiduciary relationship ...................................................... 793 [10.125]

Maguire v Makaronis ............................................................ 793

[10.130] UNCONSCIONABLE EXERCISE OF RIGHTS ......................................................... 797 [10.130]

Tanwar Enterprises Pty Ltd v Cauchi ....................................... 797

MISLEADING OR DECEPTIVE CONDUCT [10.05] Section 18 of the Australian Consumer Law (ACL) prohibits a corporation from

engaging in conduct in trade or commerce which is misleading or deceptive. The ACL is set out in Schedule 2 of Competition and Consumer Act 2010 (Cth). That Act replaces the Trade Practices Act 1974 (Cth) which introduced standards of commercial conduct, particularly relating to restraint of trade (Part IV) and consumer protection (Part V). Section 18 of the ACL reproduces s 52 which was the broadest of the provisions in the Trade Practices Act 1974 (Cth). Section 18 of the ACL attracts civil but not criminal consequences. As in the Trade [10.05]

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Practices Act further detailed prohibitions are set out in subsequent sections (ss 30 – 50 of the ACL) and these sections attract civil and criminal penalties.

Henville v Walker [10.10] Henville v Walker (2001) 206 CLR 459 High Court of Australia GLEESON CJ. This appeal raises a question concerning the extent of liability under s 82 of the Trade Practices Act 1974 (Cth) (“the Act”) for a contravention of s 52. The misleading or deceptive conduct involved the giving of advice and information by a real estate agent, which induced a purchaser to buy land for the purpose of a development project and to undertake the project. The appellants were contemplating the purchase of land in a residential area for the purpose of development by the construction of a small block of home units. In considering whether to buy the land for that purpose, they made a feasibility study which calculated the likely return from the project. The feasibility study was based upon estimates of construction and other costs, and anticipated selling prices of the units. The appellants relied upon their own expertise for the cost estimates. (The first appellant is an architect.) They relied upon advice of the vendor’s agent (the first respondent) as to selling prices and marketability for the purpose of estimating gross revenue. The costs were substantially under-estimated. The selling prices were substantially over-estimated. The state of the market for home units was misrepresented. The land was acquired and the project was undertaken. In addition to the faulty estimation of costs and returns, the project suffered reverses for other reasons. The respondents were held to have contravened s 52 of the Act (read together with s 51A). What is the extent of their liability under s 82? Is it the whole of the loss suffered on the development project; or some, and if so, what, part of that loss? Or is it to be determined on a different basis? The appellants sued the respondents in the Supreme Court of Western Australia. In addition to the claim under the Act there was also a claim under the Fair Trading Act 1987 (WA) and a claim in tort for negligent misrepresentation. Because the claim under the Act succeeded, it was unnecessary for the trial judge, Anderson J, to deal with the other claims. Anderson J held that the respondents were liable, under s 82 of the Act, for part of the loss on the project. He excluded losses “which are really down to” matters he regarded as not attributable to the respondents’ erroneous estimates of likely selling prices. Such matters included the lack of proper costing by the first appellant, lack of financial resources, and the failure to get the project finished in a reasonable time. He assessed the damages for which the respondents were liable by notionally capping the appellants’ expenditure on the project at a certain level. It will be necessary to return in due course to the method of assessment adopted. The Full Court of the Supreme Court of Western Australia did not find it necessary to decide the questions formulated above. That Court held that the necessary causal connection between the conduct of the respondents and the loss suffered by the appellants had not been established. Rather, it concluded that the first appellant “was the author of his own misfortune and his conduct in preparing and relying on the erroneous feasibility study is to be regarded as the sole cause of his decision to proceed with the development”. That finding on causation also disposed of the alternative claims. For reasons that will appear, I consider that the appellants have made good a challenge to that finding. The appellants seek a restoration of the judgment of Anderson J. They did not cross-appeal to the Full Court, although they filed a notice of contention asserting that the damages to which they were entitled were “at least” those assessed by Anderson J. If this Court overrules the decision of the Full Court that the conduct which contravened s 52 was not a cause of the appellants’ loss, it will be required to consider the principles relevant to assessment of damages. There was an alternative basis upon which the Full Court set aside the judgment of Anderson J. It was connected with what were regarded as the extraneous reasons for the loss on the project, including cost overruns and delays having nothing to do with the original faulty estimates. This, the Full Court considered, confronted the appellants with “an evidentiary difficulty”. Even if the appellants 736 [10.10]

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Henville v Walker cont. had been entitled otherwise to an award of damages under s 82, it was necessary for them to separate out the losses which were unconnected with the original faulty estimates, and this had not been done. The appellants, therefore, had failed to discharge the onus of establishing what losses were caused by the respondents’ misleading conduct. It will be necessary to return to this matter as well. It will be noted that the reasoning involves an acceptance of the view of Anderson J that the respondents were not liable for the whole of the loss incurred as a result of the purchase of the land and the undertaking of the development project. Two further points should be mentioned. First, at trial, and on appeal, both in the Full Court and this Court, argument proceeded on a basis that treated as immaterial, both the difference between the first appellant and the second appellant, a trust of which Mr Henville is trustee, and also the difference between the first respondent (Mr Walker, a real estate agent) and the first respondent’s company. This, no doubt, was convenient. I will do the same. But it might have masked a possible issue that was never litigated. There was no claim for contribution by the respondents against the first appellant, upon the basis he owed a duty to the trust, and was therefore under a co-ordinate liability. I express no opinion as to whether such a claim would have been available. The possibility was not the subject of argument in this Court. Secondly, although brief reference was made in argument in this Court to s 87(1) of the Act, no reliance was placed by either side upon the reference in that provision to compensating for part of the loss or damage suffered by a victim of a contravention of s 52 [5]. I therefore express no opinion as to whether that provision might have been called in aid of the approach adopted by Anderson J. The detailed facts of the case are set out in the judgment of McHugh J. I will make only such reference to them as is necessary to explain my reasons. The respondents knew that the appellants were looking for an opportunity to enter into a land development project. They were considering buying land, borrowing the necessary development funds from a bank, and constructing home units. The respondents, who were the agents for the owner of the land, and who expected to be appointed agents for the sale of the home units, made representations as to the approximate market value of units on the site if they were built to a certain size and standard, and as to the likely time it would take to sell the units. The representations were misleading. The appellants relied upon their own experience and expertise to estimate the likely costs of development. That estimate was careless, and substantially under-estimated development costs. The combined effect of the cost estimates and the projections as to selling prices, reflected in the appellants’ feasibility study, was to predict a reasonable profit if the development went ahead. If either the selling prices or the costs had been estimated with reasonable accuracy, the result would have been to show that the project would not be profitable, or at least would not have had a sufficient margin of profit to justify the risk, and the project would not have gone ahead. The Full Court found that, even if the units had been able to be sold for an amount within the range of likely sale prices estimated by the respondents, the venture would have appeared unprofitable if appropriate cost estimates had been made by the appellant. It concluded that the appellants would never have embarked on the project but for Mr Henville’s error in grossly under-estimating the building costs. The figures used for the purposes of the feasibility study, involving the combined effect of the erroneous cost estimates and the erroneous sales projections, produced an expected profit which was acceptable. But that profit would have been eliminated, or reduced below an acceptable level, whichever of the two erroneous figures had been corrected. (The anticipated profit was $176,000.The expected returns from sales were $750,000. The actual returns from sales were $545,000.) Anderson J held that the representations as to likely sales prices were a substantial inducement to the appellants in deciding to buy the land and embark upon the development project. The reversal of that finding by the Full Court, and the conclusion that the erroneous cost estimates were the sole cause of the decision to proceed, was not justified. The feasibility study was based upon [10.10]

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Henville v Walker cont. two integers: costs and returns. Each was erroneous. If either integer had been correct, the project would not have gone ahead. Neither error was the sole cause of the decision to undertake the project. Each was a cause. In the present case, the contravention involved engaging in conduct that was misleading or deceptive, contrary to s 52 as read in the light of s 51A. The conduct concerned representations as to the state of the market for home units and as to likely selling prices. It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. The respondents knew the purpose for which their representations were being relied upon by the appellants. The Full Court accepted that the making of the representations amounted to engaging in misleading or deceptive conduct in trade or commerce. There was no warrant for a conclusion that the negligence of the appellants in relation to the feasibility study was the sole cause of the decision to undertake the project. For there to be the necessary causal relationship between a contravention of s 52, and loss or damage, so as to satisfy the requirements of s 82(1), it is not essential that the contravention be the sole cause of the loss or damage. As Brennan J pointed out in Sellars v Adelaide Petroleum NL, where the making of a false representation induces a person to act in a certain manner, loss or damage may flow directly from the act and only indirectly from the making of the representation; but in such a case the act “is a link – not a break – in the chain of causation”. In the present case there were two concurrent causes of the imprudent decision to buy the land and undertake the development project. The conduct of the respondents was one of those causes. That is enough. Having concluded correctly that the misrepresentations as to the state of the market and as to likely selling prices, which constituted the contravention of s 52, were a cause of the appellants’ loss, Anderson J said: A representation that a development will be worth a certain amount when completed has no capacity to cause losses at large. It is no warrant to design units that will end up costing more than the amount for which it was represented that they could be sold. Losses which are really down to extravagant design, to the lack of a proper costing of the proposed design, to the lack of financial resources to complete the development embarked on and to the failure to get the project finished in a reasonable time are not losses suffered by a misrepresentation as to the market value which the development will have on completion. Therefore in a case like this I do not think the amount which the units actually cost to build is an appropriate basis from which to measure the plaintiff’s recoverable loss. It is convenient to commence a consideration of the relevant principles by examining that proposition. The appellants undertook a risky business venture, which resulted in a loss. The decision to embark upon the venture was made because of an expectation of a certain level of profit regarded as sufficient to justify taking the risk. That expectation was the consequence of the combined effect of two errors, one made directly by the appellants, and the other made as a result of their reliance upon misrepresentations made by the respondents in contravention of s 52 of the Act. The ultimate loss also resulted in part from factors which were unrelated to the contravention of s 52 in any sense except that they would not have come into play if the business venture had never been undertaken. Leaving aside, for the moment, the problem of measuring the extent to which the loss resulted from those factors, there arises a question of the causal relationship between the ultimate loss and the 738 [10.10]

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Henville v Walker cont. respondents’ misrepresentations. Were they, to use the words of Lord Hoffmann in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd “losses attributable to causes which negative the causal effect of the representation”? Section 82 of the Act is the statutory source of the appellants’ entitlement to damages. The only express guidance given as to the measure of those damages is to be found in the concept of causation in the word “by”. The task is to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case. The purpose of the statute, so far as presently relevant, is to establish a standard of behaviour in business by proscribing misleading and deceptive conduct, whether or not the misleading or deception is deliberate, and by providing a remedy in damages. The principles of common law, relevant to assessing damages in contract or tort, are not directly in point. But they may provide useful guidance, for the reason that they have had to respond to problems of the same nature as the problems which arise in the application of the Act. They are not controlling, but they represent an accumulation of valuable insight and experience which may well be useful in applying the Act. The assessment of damages for deceit, or for negligent misstatement, has confronted courts with issues similar to those which arise in the present case. In Clark v Urquhart Lord Atkin said: I find it difficult to suppose that there is any difference in the measure of damages in an action of deceit depending upon the nature of the transaction into which the plaintiff is fraudulently induced to enter. Whether he buys shares or buys sugar, whether he subscribes for shares, or agrees to enter into a partnership, or in any other way alters his position to his detriment, in principle, the measure of damages should be the same, and whether estimated by a jury or a judge. I should have thought it would be based on the actual damage directly flowing from the fraudulent inducement. Although he did not put his reasoning on this basis, the result produced by Anderson J appears to be the same as if he had set out to award expectation rather than reliance damages. What he was seeking to do was to measure the causative effect of the misleading representation made by the respondents; and the method he employed, in practical effect, bound the respondents to make good those representations by awarding the appellants the difference between what the units would have sold for if the representations were true and the amount for which the units were actually sold. The question is whether the respondents have shown that the method used by Anderson J resulted in over-compensation of the appellants. The representation having been that the units would sell for between $250,000 and $280,000 each, he decided to award the appellants what he called their capital loss on the project, but to measure that loss on the basis of a notional, rather than the actual cost. He treated $250,000 per unit as the upper limit of the cost. The actual cost was substantially more, but he treated costs in excess of that amount as “down to” what he regarded as extraneous factors. This was not intended to be anything other than an expedient, albeit obviously inexact, method of isolating the causative effect of those factors from the entire loss. The respondents did not demonstrate any better way of doing it. And they have not shown, in this Court, that the appellants were over-compensated.

[10.10]

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Henville v Walker cont. The appeal should be allowed with costs. The orders of the Full Court should be set aside. In place of those orders, the appeal to the Full Court should be dismissed with costs. [Gaudron, McHugh, Gummow and Hayne JJ agreed in the result.]

[10.15]

Notes and Questions

1. In providing remedies for misleading or deceptive conduct, the ACL is framed in most broad terms; it has led to a mass of litigation. Do you consider that this litigation arises because the legislation is too imprecise or that it is a welcome change from unwieldy legislation reaching its pinnacle in our tax laws? 2. The courts have consistently held that what is misleading or deceptive must be judged from the overall effect of the message. They have refused to accept literal truth as a defence and have been little swayed by the common law notion of puffery. In Given v Pryor (1979) 24 ALR 442 a television advertisement showed houses in an attractive setting, with spoken words to the effect that it was “a wonderful place to live”. The court held that these pictures and words implied that only normal building and zoning controls applied and the advertisement was misleading or deceptive because a special permit was needed for the construction of a house. Further analysis of the meaning of misleading or deceptive conduct and the remedies for infringement of the prohibition is contained in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 235. 3. The relationship between prohibited conduct and entitlement to recovery of losses was reviewed by the High Court in I and L Securities Ltd Pty v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109. The appellant lent money by way of mortgage following deceptive representations as to the value of land. The respondent argued that the appellant had not made proper inquiries as to the financial capacity of the mortgagor and that damages should be reduced by reference to this failure. This argument was rejected. The majority of the court reasoned that the then damages section (s 82) was not restrained by common law principles such as mitigation or contributory negligence and should not be read down by reference to other pecuniary remedies in the Act. What was important was the causative connection between the conduct and the loss. 4. The civil remedies for breach of s 18 of the ACL are extensive and may provide greater relief than at common law for such torts as misrepresentation. The remedies include injunction (s 232), compensation (s 236) and other remedies at the court’s discretion (s 243). Criminal sanctions include the making of undertakings (s 218), substantiation notices (s 219), pecuniary penalties (s 224) and injunctions (s 232). 5. As well as the broad prohibition on misleading or deceptive conduct in s 18 of the ACL, false representations relating to land are prohibited by s 30 (because “services” include an interest in land) and s 31. Both of these sections, unlike s 18, have criminal as well as civil sanctions.

740 [10.15]

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UNCONSCIONABLE OR UNFAIR CONDUCT Commercial Bank of Australia Ltd v Amadio [10.20] Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 High Court of Australia MASON J: I agree with Deane J’s comprehensive statement of the facts and with his conclusion that the respondents are entitled to relief on the ground that the bank was guilty of unconscionable conduct in procuring the execution of the mortgage guarantee by the respondents. Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of “unconscionable conduct” is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, eg, a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest. It goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan (1956) 99 CLR 362 at 405: The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other. Likewise Kitto J (1956) 99 CLR, at 415 spoke of it as “a well-known head of equity” which “applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands”. There are a number of factors which go to establish that there was a gross inequality of bargaining power between the bank and the respondents, so much so that the respondents stood in a position of special disadvantage vis-a-vis the bank in relation to the proposed mortgage guarantee. By way of contrast to the bank, the respondents’ ability to judge whether entry into the transaction was in their own best interests, having due regard to their desire to assist their son, was sadly lacking. The situation of special disadvantage in which the respondents were placed was the outcome of their reliance on [10.20]

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Commercial Bank of Australia Ltd v Amadio cont. and their confidence in their son who, in order to serve his own interests, urged them to provide the mortgage guarantee which the bank required as a condition of increasing the approved overdraft limit of his company, V Amadio Builders Pty Ltd (“the company”), from $80,000 to $270,000 and misled them as to the financial position of the company. Their reliance on their son was due in no small degree to their infirmities -they were Italians of advanced years, aged 76 and 71 respectively, having a limited command of written English and no experience of business in the field or at the level in which their son and the company engaged. They believed that the company’s business was a flourishing and prosperous enterprise, though temporarily in need of funds. In reality, as the bank well knew, the company was in a perilous financial condition. In the weeks immediately preceding the execution of the mortgage guarantee the company was unable to pay its debts as they fell due. In this situation the bank had selectively paid cheques drawn by the company in favour of suppliers in order to ensure continuity in the supply of building materials, the company being a building contractor. In this period the bank had regularly and continuously dishonoured other cheques, the payment of which was not essential to the maintenance of the supply of building materials. In pursuing this course and in agreeing to an increase in the company’s overdraft limit, the bank was substantially influenced by a special consideration. The company was a major customer of the bank, indeed the largest customer at the Glynde branch of the bank, and the company’s continuation in business was advantageous to General Credits Ltd, a finance company and subsidiary of the bank. In fact the company built houses for a joint venture comprising General Credits Ltd and another company of Vincenzo’s at cost plus 10 per cent, this figure being designed to cover building costs and administration charges. It was not intended to yield a profit to the company. General Credits Ltd’s share of the joint venture profits was 60 per cent. In addition it provided the bulk of the finance required for the joint venture’s operations. The respondents, needless to say, were quite unaware of these circumstances. The effect of the respondents’ execution of the mortgage guarantee was disastrous for them though advantageous to the bank. The bank agreed to increase Vincenzo’s overdraft limit in the light of his statement that the property comprising four shops which was the subject of the mortgage guarantee was valued in the vicinity of $200,000. The liability of the respondents under that instrument, assuming its validity, proved to be $239,830.85, that being the amount of the judgment including interest obtained by the bank at first instance. Although the new arrangement made between the bank and Vincenzo which called for the provision of security by the respondents increased the company’s approved overdraft limit from $80,000 to $270,000, the company’s overdraft substantially exceeded $80,000 before the mortgage guarantee was executed on 25 March 1977. On the day before, the actual overdraft was $189,967, all efforts in the early part of 1977 to reduce the amount of the overdraft substantially having failed. It had been as high as $223,432 on 16 March and had generally increased from $130,000 on 31 December 1976 to $185,000 at the end of February 1977. The consequence was that the bank’s security, which was inadequate before 25 March, was significantly improved. If we look to the amount of the bank’s increased exposure as measured by the difference between the amount of the actual overdraft on 24 March and the new limit of $270,000, it is evident that the value of the security provided by the mortgage guarantee, as Vincenzo represented it to the bank, exceeded the increase in the bank’s exposure. Immediately after execution of the instrument the bank met unpaid cheques amounting to $45,000 approximately. Thereafter the company’s business quickly deteriorated. No doubt the respondents’ age and lack of business experience played a part in their reliance on their son’s judgment and in their failure to make any inquiries as to the financial position of the company and their failure to seek advice as to the probable or possible consequences of the transaction into which they entered. Their lack of command of English, especially written English, apart from contributing to their reliance on their son, had an additional importance. Vincenzo had 742 [10.20]

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Commercial Bank of Australia Ltd v Amadio cont. informed them that the bank would present for signature a guarantee and very probably a security of some sort, though the precise nature of that security, ie, mortgage or charge, was not specified. He had incorrectly said that the liability would be limited to a period of six months and to an amount of $50,000. Mr Virgo, the bank manager, in the conversation which took place immediately before execution, informed them that their liability under the instrument was unlimited in time, the question having been raised by Mr Amadio senior. Mr Virgo said nothing on the topic of unlimited liability because the respondents did not mention it. The primary judge found that if Vincenzo “had disabused his parents’ minds of their confidence in him, his parents would not have helped him”. The correctness of this finding has not been challenged. Nor could it be for the simple reason that any rational person knowing the circumstances of the company at the time would not have executed the instrument which they signed. In deciding whether the bank took unconscientious advantage of the position of disadvantage in which the respondents were placed, we must ask, first, what knowledge did the bank have of the respondents’ situation? Mr Virgo was aware that the respondents were Italians, that they were of advanced years and that they did not have a good command of English. He knew that Vincenzo had procured their agreement to sign the mortgage guarantee. He had no reason to think that they had received advice and guidance from anyone but their son. In cross-examination he conceded that he believed that Vincenzo had acted in the “role of adviser/explainer” in relation to the transaction and referred to him as acting “in his capacity as dominant member of the family”. Mr Virgo also knew that, in the light of the then financial condition of the company, it was vital to Vincenzo to secure his parents’ signature to the mortgage guarantee so that the company could continue in business. It must have been obvious to Mr Virgo, as to anyone else having knowledge of the facts, that the transaction was improvident from the viewpoint of the respondents. In these circumstances it is inconceivable that the possibility did not occur to Mr Virgo that the respondents’ entry into the transaction was due to their inability to make a judgment as to what was in their best interests, owing to their reliance on their son, whose interests would inevitably incline him to urge them to sign the instrument put forward by the bank. Indeed, the inquiry by Mr Amadio senior as to the duration of the arrangement should have alerted Mr Virgo to the likelihood that Vincenzo had not adequately or accurately explained the intended transaction to them, let alone the possible or probable consequences which attended it. Whether it be correct or incorrect to attribute to Mr Virgo knowledge of this possibility, the facts as known to him were such as to raise in the mind of any reasonable person a very real question as to the respondents’ ability to make a judgment as to what was in their own best interests. In Owen and Gutch v Homan (1853) 4 HLC, at 1035 (10 ER, at 767), Lord Cranworth LC said: it may safely be stated that if the dealings are such as fairly to lead a reasonable man to believe that fraud must have been used in order to obtain” (the concurrence of the surety), “he is bound to make inquiry, and cannot shelter himself under the plea that he was not called on to ask, and did not ask, any questions on the subject. In some cases wilful ignorance is not to be distinguished in its equitable consequences from knowledge. The principle there stated applies with equal force to this case. The concept of fraud in equity is not limited to common law deceit; it extends to conduct of the kind engaged in by the respondents’ son when he took advantage of the confidence and reliance reposed in him to induce his parents to enter into a transaction in order to serve his ends, thereby depriving them of the ability to make a judgment as to what is in their interests. As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into [10.20]

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Commercial Bank of Australia Ltd v Amadio cont. that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same. The knowledge of Mr Virgo was the knowledge of the bank. Whether we treat Mr Virgo as having knowledge of the possibility already discussed or as having knowledge of facts which would raise that possibility in the mind of any reasonable person the inevitable conclusion is that the bank was guilty of unconscionable conduct by entering into the transaction without disclosing such facts as may have enabled the respondents to form a judgment for themselves and without ensuring that they obtained independent advice. I agree with Deane J that it matters not that the respondents have not offered to do equity. In the result I am of opinion that the respondents were entitled to an order setting aside the mortgage guarantee and that the appeal to this Court should be dismissed. [Wilson and Deane JJ agreed; Gibbs CJ reached the same result; Dawson J dissented.]

[10.25]

Notes

1. Section 20 of the Australian Consumer Law prohibits conduct which would be unconscionable under what it designates as the “unwritten law”. In effect the remedies available for breach of that Act apply where common law unconscionability is made out. 2. Section 21 sets out a statutory base for relief on the basis of unconscionability for private transactions entered into by private individuals with corporations or individuals subject to the ACL. A list of factors to determine what conduct is unconscionable is set out in s 21(2). The difficulty with the statutory base is that it seeks to distinguish private from business loans on the basis of whether the loan is of a kind (rather than the loan itself) normally provided for domestic or household purposes. Section 21 provides as follows: (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person (in this subsection referred to as the “consumer”), the Court may have regard to – (a) the relative strengths of the bargaining positions of the corporation and the consumer; (b) whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation. 744 [10.25]

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3. Section 22 prohibits unconscionable conduct affecting small businesses. As well as factors similar to those set out in s 21(2) breach of any relevant industry code of practice is a factor to be taken into account in deciding if conduct has been unconscionable. 4. The unconscionability provisions of the Australian Consumer Law are mirrored in the Fair Trading Acts of the States and Territories and thus extend the provisions to all business actions of individuals. Further unconscionability provisions are in the Contracts Review Act 1980 (NSW) and the Fair Trading Act 1999 (Vic), ss 32U – 32ZD and the National Credit Code, ss 70 – 73. The Contracts Review Act 1980 (NSW) and the provisions of the Fair Trading Act 1999 (Vic) apply to contracts generally; the National Credit Code enacted pursuant to the National Consumer Credit Protection Act 2009 (Cth) applies to loans made in the course of a business to a natural person where the loan is provided wholly or predominantly for personal, domestic or household purposes. 5. Many mortgages were from the 19th century subject to the moneylenders legislation which applied where the lender carried on the business of money lending. This legislation was the forebear of the current consumer credit legislation. The legislation allowed a transaction to be attacked if it was harsh and unconscionable or if interest rates were excessive; these formulas differed amongst the States and Territories and in particular there were variations as to whether the factors were alternatives or had to be present in some combination. For a long time these references to unconscionability seemed to have a limited operation. By contrast the concept of unconscionability had a central role in European legal systems outside Great Britain and was introduced into the United States in the Uniform Commercial Code. As a matter of statute the Consumer Credit Act 1972 (SA), s 46, first gave broad powers of review relating to unconscionability; see Moore, “Consumer Litigation before the Credit Tribunal” (1978) 6 Adel LR 304. In the past 40 years the doctrine of unconscionability has been reborn in Australia as a significant common law remedy and has been relied upon in a number of situations and not just in the area of loans. 6. As well as relief against unconscionable conduct the ACL renders void unfair terms (s 23). The prohibition is upon unfair terms in standard form contracts and the focus of concern are long-term commitments and contractual penalties for breach for services such as telecommunications. An unfair term is defined in s 24 as one which. “would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.” A court must take into account “the extent to which the term is transparent” and “the contract as a whole.” A term is transparent if it “is expressed in reasonably plain language;” and “is legible; and presented clearly; and readily available to any party affected by the term.” Section 25 of the ACL contains examples of offending conduct; they emphasise one-sided obligations and include terms by which one party but not the other has a right to renew the contract, variations to price without a right to terminate, and limits on the right to sue.

[10.25]

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ABNORMAL CONTRIBUTIONS TO THE PURCHASE PRICE The nature of a resulting trust [10.30] The doctrine of resulting trusts may be regarded as a presumption against gifts. The

trust results in an interest in favour of the transferor where no consideration is provided for the transfer. Similarly a trust results in proportion to contributions to the price where co-owners pay unequally. The doctrine of advancement negates the presumption of a resulting trust where there is a close relationship between the transferor and transferee or the co-owners. The relationship provides an explanation for a gift. Transfer to a volunteer

House v Caffyn [10.35] House v Caffyn [1922] VLR 67 Full Court of the Supreme Court of Victoria CUSSEN J: The plaintiff in this case claims as administrator of the estate of John JW Caffyn, deceased, intestate, a brother of the defendant. In respect of certain land of which the defendant became the registered proprietor by reason of a transfer signed by the intestate, and expressed to be in consideration of 950l paid by the defendant to the intestate, the plaintiff alleged that the defendant was a trustee for the intestate, and that therefore the defendant is now a trustee for the plaintiff of the proceeds of the sale of the land by the defendant. There was no allegation or proof of fraud or mistake, or of any express trust, and this is not a case in which the plaintiff has any special rights on behalf of creditors. The plaintiff relied solely upon an alleged presumption of a resulting trust arising, as he contended, from the fact that the consideration expressed in the transfer was not paid as expressed in the transfer or at all. The defendant, by his statement of defence, denied the alleged trust, and alleged that if the consideration expressed in the transfer was not paid, that yet valuable consideration was in fact given, and further alleged (by an amendment at a late stage of the hearing) in effect that the intestate intended to transfer the beneficial interest in the land to the defendant, on trust for himself and their father. I doubt whether such amendment was necessary, having regard to the defendant’s denial of the alleged trust; but in my view this becomes unimportant. Defendant at the close of the plaintiff’s case did not dispute that there was a rebuttable presumption of a resulting trust. Lengthy particulars, interrogatories and answers, and evidence are set out in the Appeal Book, which I think tended to obscure the main questions in the case. McArthur J, decided in favour of plaintiff, and defendant has appealed from that decision. Two main questions arise for discussion: 1

Did a presumption of an implied resulting trust or use arise on plaintiff’s allegations and proof?

2

If yea, did it appear on the whole of the evidence that the intestate intended to part with the beneficial interest in the land – that is, intended that there should be no resulting trust or use?

I am inclined to think that the first question should be answered in the negative, but if this is wrong, then I think that the second question should be answered in the affirmative – that is, in favour of the defendant. Before discussing these questions it may be well to state that a registered transfer has the same efficacy as if under seal, and that where it operates to transfer the whole interest of the registered proprietor of the land it has, in relation to the extent of the estate transferred, the same effect as a conveyance to the transferee and his heirs. Speaking generally, the principles of law and equity applicable to land and dealings with land under the general law should, where they are not inconsistent with the provisions, express or implied, of the Act, be applied to land and dealings with land under the Act. 746 [10.30]

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House v Caffyn cont. Coming now to the first question, I will at the outset discuss the position with respect to a voluntary conveyance of land under the general law, meaning by “voluntary” that there was no valuable or good consideration (money, money’s worth, marriage, or blood), either expressed or averred and proved. In Fowkes v Pascoe [1875] LR 10 Ch 343 at 348 there is an emphatic dictum by James LJ, that an implication of a resulting trust certainly does not arise on a voluntary conveyance of land. There is little doubt that the Lord Justice had in mind the equally emphatic statements to the same effect by Lord Hardwicke in Lloyd v Spillet [1740] 2 Atk 148, which shortly before the decision in Fowkes v Pascoe were brought pointedly to his attention in Haigh v Kaye [1872] LR 7 Ch 469, though that case eventually was decided upon different considerations. Lord Hardwicke repeated his statements in Young v Peachy [1741] 2 Atk 254. I have no doubt – if I may say so with profound respect – that the statements of Lord Hardwicke and James LJ, properly understood, are correct; but as the text-writers on equity, real property, and trusts appear to be about equally divided on the matter, and some of them assert that there are authorities to the contrary, it is well to state what I understand to be the precise meaning of the statement – “There is no implication of a resulting trust on a voluntary conveyance of land under the general law”. In the first place, though “use” and “trust” are for many purposes synonymous (as must constantly be remembered throughout this judgment), it is the common practice of lawyers to indicate by the word “trust” a trust (use) superimposed upon a use (trust), and that is what Lord Justice James was doing. As is said in Hayes’s Popular View of Real Property, p 36, the primary “use” on which the Statute did operate, retained, along with its new character of a legal estate, its ancient appellation of a “use”; the secondary use on which the Statute did not operate was called for distinction’s sake a “trust”. As the “use” became henceforth by the effect of the Statute essentially the legal estate in the land, it ceased to be the creature of equity, and henceforth fell under the ordinary cognizance of the Courts of Common Law. In the second place, the Lord Justice was not referring to a case where there was a partial declaration of a “trust” as he used the word, as in such a case the person alleging a resulting trust would not be relying merely on the fact that the conveyance was voluntary. In the third place, by the words “conveyance of land”, the Lord Justice was probably referring to a case where a use was expressed to the granted and his heirs, through it is perhaps not necessary so to limit his statement. Applying what I have said as to cases which fall within the statement of James LJ, the result is that there is no resulting trust where there is a voluntary conveyance by an owner in fee simple “unto and to the use of (in trust for) A and his heirs”, or “unto B and his heirs to the use of (in trust for) A and his heirs.” A voluntary conveyance by an owner in fee simple “to A and his heirs”, or “unto and to the use of A and his heirs in trust for B for life”, do not fall within the statement. In both the examples I have given as falling within the statement, though in the first A has the legal estate at Common Law, and in the second under the Statute, the expression of the use (trust) prevents any presumption of a resulting use (trust) arising – that is to say, negatives any implication which might otherwise be made that the grantor did not intent the beneficial interest to pass. But this is not a conveyance of land under the general law. It is a registered transfer under the Transfer of Land Act, and no use is expressed. That Act contains provisions with respect to the creation of registered or statutory estates in land, without the intervention of uses. I need not consider what effect (if any) the expression of a use in an instrument of transfer would have. It seems impossible to apply the Statute of Uses (as to the possession being executed to the use) to estates of registered proprietors under the Act: See Hogg on the Australian Torrens System, pp 891, 892. The position in a case like the present seems to resemble that which would have arisen on a voluntary conveyance before the Statute of Uses “to A and his heirs” – that is, that there is an implied resulting use (trust) for the grantor. Reference may be made to what was said by Stephen J, in Chomley v Firebrace [1878] 5 VLR (E) 57 at 74, where he states: “The case of Raleigh v Glover [[1866] 3 WW & a’B (E) 163] establishes the [10.35]

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House v Caffyn cont. proposition that the doctrine of resulting trusts arising from the fact that no consideration was paid may be applied to land under the Act.” See also McKie v McKie [1898] 23 VLR 489; Perpetual Trustees Co v Wright [1917] VLR 372. It should be noticed, however, that none of these cases deal with what may be called a voluntary transfer by the registered proprietor, and the distinction between a voluntary conveyance and the providing of purchase money by one person whereby land is put into the name of another, goes back at least to Lord Hardwicke’s time. In England, s 33 of the Land Transfer Act 1875 provides that a transfer of land made without valuable consideration shall, as far as the transfer is concerned, and subject to equities, etc, binding the transferor, be when registered of the same effect as a transfer for valuable consideration, but we have no such provision in our Act. On the whole, I am not satisfied that the statement of James LJ, referring to land under the general law can be applied in the present case. But that statement applies to a voluntary conveyance, and it remains, therefore, to consider whether (1) the fact that defendant was intestate’s brother; (2) the fact that a consideration, whether correctly or not, is expressed in the transfer, negatives the presumption of a resulting trust or use. As to (1), as a brother came within the consideration of “blood”, he would not be a “stranger”, and there would, in the absence of an expressed pecuniary consideration, be a good deal to be said for it. A “good” consideration was sufficient to negative a resulting use or to support a use in a covenant to stand seized: cf Habergham v Vincent [1793] 2 Ves Jun, at 226. In such cases the relationship might be averred and proved dehors the deed. But, as a pecuniary consideration is expressed, I am inclined to think that the suggested “good” consideration cannot be relied on. The next question is whether the expression of a pecuniary consideration in itself negatives the presumption of an implied resulting use or trust, for in this connection the words “use” and “trust”, as the Statute does not apply, may be taken as synonymous. For the most part in what follows I have, therefore, where I am not quoting, mentioned the word “trust” only. In Leake on Property in Land (2nd ed), pp 83-85, it is stated: “In the absence of express declaration as to the use the statement of a consideration paid serves as an implied declaration of the use to the feoffee or grantee; and for the purpose of marking the intention the amount of the consideration is immaterial; a merely nominal consideration would suffice … Upon a feoffment or conveyance in fee, if there be no declaration of use nor any consideration expressed to be paid the use remains in the grantor, and is commonly called a resulting use … But (in case of bargain and sale) the value or amount of the consideration paid was immaterial, the existence or expression of it was sufficient to denote that the transaction was intended by way of bargain, and not as a mere voluntary agreement; and if not a voluntary agreement it was effectual to raise a use by way of bargain and sale.” In Goodeve’s Modern Law of Real Property, p 258, the following passage from Davidson on Conveyancing is cited: “Where there is on the face of the conveyance a consideration expressed for it a limitation to the purchaser and his heirs will confer a fee simple; but before the Statute of Uses the rule was that any conveyance made to another without any consideration or any declaration of a use should be deemed to be made to the use of the party conveying; and it has been supposed that this rule has not been altered by the Statute.” It looks as if by the words “without consideration” Davidson meant to include “without consideration expressed.” The result seems to be that the expression of a valuable consideration is sufficient to negative a resulting use in the case of a conveyance – see Leman v Whitley [1828] 2 Russ 423, not overruled on this point – and to raise a use in the case of a bargain and sale. In the present case, where the consideration expressed is substantial it is not necessary to consider whether the statements above made were not, after the Statute of Uses, modified by imposing a resulting trust (at all events in the case of bargains and sales) where the consideration expressed was merely nominal. There are authorities to support the conclusion that an averment was not permitted (in the absence of express trust, fraud, etc) to contradict the statement of a consideration expressed in the deed: See Lewin on Trusts (11th ed), pp 51, 52, citing Calvert on Uses and Trusts, p 51 (96, Sugden’s ed), and see also Wilkes v Leuson [1513] Dyer 169a. It is true that Lewin uses the word “paid”, but Gilbert, whom Lewin 748 [10.35]

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House v Caffyn cont. cites, uses the word “expressed.” On the whole, though no doubt the question is a difficult one, I am inclined to think that, by reason of the expression of a substantial consideration, there was here no presumption of a resulting trust. Schutt J agreed with Cussen J; Irvine CJ dissented.

Wirth v Wirth [10.40] Wirth v Wirth (1956) 98 CLR 228 High Court of Australia DIXON CJ: In the foregoing circumstances it is a question of no little importance whether there arises from the respondent’s transfer of July 1923 to the appellant of his interest as joint tenant in the land a presumption of a resulting trust in his favour. At that date she had not become his wife. There is some evidence that the transfer was made without consideration. On those grounds it is said that it is a voluntary transfer to a stranger and until the contrary is shown it is to be presumed that she took upon trust for him. One cannot be sure what is the explanation of the statement of the consideration in the transfer. None is offered and it is difficult to escape the feeling that in some way it represented what was regarded as the advantage he had gained by expenditure from her savings. It is or may be important to bear in mind that we are not dealing with a purchase in the name of another person. Where a purchase was made in the name of a stranger who provided none of the purchase money the law was clear from a very early time that a resulting trust was presumed and the stranger could take beneficially only if he proved affirmatively that it was so intended. But in the case of a conveyance of land, both before and after it was enacted by 8 & 9 Vict c 106, s 2, that corporeal hereditaments should lie in grant, the habendum stated that the releasee or grantee, properly called a purchaser whether giving value or not, should hold unto and to the use of himself and his heirs. This expression of the use to the purchaser himself seems to have led to the conclusion that in the case of such a conveyance of land no resulting trust could be presumed simply from the absence of any consideration express or implied. Thus Story in his Equity Jurisprudence, 2nd English ed (1892), par 1197, wrote: “Another common transaction which gives rise to the presumption of an implied resulting use or trust, is, where a conveyance is made of land or other property without any consideration, expressed or implied, or any distinct use or trust stated. In such a case the intent is presumed to be, that it shall be held by the grantee for the benefit of the grantor, as a resulting trust. But if there be an express declaration that it is to be in trust, or for the use of another person, nothing will be presumed against such a declaration. And if there be either a good or a valuable consideration, there equity will immediately raise a use or trust correspondent to such consideration, in the absence of any controlling declaration or other circumstances.” See Spence, Equitable Jurisprudence, p 199; Sanders, Uses and Trusts (1844), vol 1, p 267; Lloyd v Spillit (1740) Barn C 385 at 387 [27 ER 689 at 690], per Lord Hardwicke; Young & Peachy (1741) 2 Atk 255 at 257 [26 ER 557 at 558], per Lord Hardwicke; Fordyce v Willis (1792) 3 Bro CC 577 at 587 [29 ER 708 at 713] per Lord Thurlow; Fowkes v Pascoe (1875) LR 10 Ch Application 343 at 348, per James LJ. It is to be noticed that when by the Law of Property Act 1925 (Imp), s 207 and 7th sched, the Statute of Uses was repealed, it was provided by s 60(3) that in a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee: see Nathan, Equity through the Cases, 1st ed, pp 96, 97. This provision does not form part of the law of Queensland. In any case the transfer in question was under The Real Property Acts 1861 to 1952 (Q), and Cussen J has decided that a voluntary transfer under the Torrens system is not governed by the rule laid down by the authorities cited with reference to voluntary conveyances expressing a use to the grantee or purchaser: House v Caffyn (1922) VLR 67 at 75-79. It is unnecessary to repeat what his Honour said in this valuable and important judgment. [10.40]

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Wirth v Wirth cont. But is it compatible with the expression of the consideration of 100 pounds to treat the conveyance as raising a presumption of a resulting trust? This also is a question discussed by Cussen J in House v Caffyn (1922) VLR 67, at 79-81. The conclusion to which his Honour was disposed was that by reason of the expression of a substantial consideration there was no resulting trust. Perhaps what was said in Coultwas v Swan (1870) 22 LT 539 by Stuart VC (1870) 22 LT, at 540 and by Lord Hatherly (1871) 19 WR 485 at 486 tends to the contrary. But it must be remembered that the consideration expressed was one agreed upon though it was in fact unpaid or unsatisfied. The consequence is not a resulting trust but a lien in favour of the grantor. If on the other hand it is a false consideration, the reason for inserting it will bear directly upon the true character of the transaction and from that it will appear whether or not it was intended to transfer the beneficial interest as well as the legal estate. The present is not a case in which one can be sure that the consideration expressed was a mere sham. It is at least clear that before a presumption of a resulting trust can arise upon a transfer expressing a consideration, it must be shown that the expression of the consideration was false and the transfer was intended as a voluntary assurance. I am not prepared to say that the meagre evidence on the subject satisfactorily establishes so much. But however that may be the fact that the transfer was made to the appellant in contemplation of the marriage for which they had contracted appears to me to be a reason for treating the transfer as one giving rise to no presumption of a resulting trust. It is true that the relation of an engaged couple has not, before the decision in Moate v Moate (1948) 2 All ER 486; 92 SJ 484, been considered to raise a presumption of advancement. But what is important is that the transfer was made so to speak in preparation for the marriage and on the footing that the transferee became the transferor’s wife but in advance of her doing so. While the presumption of advancement doubtless in its inception was concerned with relationships affording “good” consideration, it has in the course of its growth obtained a foundation or justification in the greater prima facie probability of a beneficial interest being intended in the situations to which the presumption has been applied. A hundred years ago in Soar v Foster (1858) 4 K & J 152 [70 ER 64], Page Wood VC regretted that one at least of the extensions of the rule had been made and refused to apply the rule to the case of a deceased wife’s sister to whom the grantor or assignor was invalidly married. The Vice-Chancellor said: Upon the whole, therefore, the result of the authorities is this: The rule which raises a presumption that a purchase in the name of another was intended as an advancement or provision for the latter, so as to preclude a resulting trust from arising for the purchaser until that presumption has been rebutted, is applicable where the purchase was made in the name of a legitimate or illegitimate child, or in the name of a grandchild whose father is dead, or in the name of the wife of the purchaser. In all these cases the rule is definite and clear, that the purchase is prima facie to be taken as a provision or advancement for the person in whose name the purchase had been made: (1858) 4 K & J, at 160, 161 [70 ER, at 67]. But it is to be noted that Molesworth J in Murdock v Aherne (1878) 4 VLR (E) 244, at 249 seems to have regarded the relation between a man and a woman whom the man had bigamously married and who knew it as within the presumption of advancement. No doubt in Moate v Moate (1948) 2 All ER 486; 92 SJ 484 Jenkins J applied the presumption of advancement where it had not hitherto been applied. But the application was not inconsistent with any decided case and it accords with reason. To say that a transfer of property to an intended wife made in contemplation of the marriage raised a presumption of a resulting trust but a similar transfer made immediately after the celebration of the marriage raised a presumption of advancement involves almost a paradoxical distinction that does not accord with reason and can find a justification only on the ground that the doctrine depends in categories closed for historical reasons. This is not characteristic of doctrines of equity.

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Wirth v Wirth cont. For the foregoing reasons I do not think that there is a presumption of a resulting trust in the case of the transfer of the respondent’s undivided interest in the land. [McTiernan J agreed; Taylor J dissented.]

Note

[10.45]

In New South Wales and Western Australia legislation provides that no resulting trust shall arise merely from the absence of consideration: Conveyancing Act 1919 (NSW), s 44(1) and the Law of Property Act 1969 (WA), s 39. See also Strugwell v Walker (1993) DFC 95-134. Purchase in the name of another

Calverley v Green [10.50] Calverley v Green (1984) 155 CLR 242 High Court of Australia GIBBS CJ: For about ten years from 1968 the parties to this appeal lived in what is nowadays called a “de facto relationship” – that is, although not married to each other, they lived together as though they were husband and wife. They first lived at Mount Pritchard, in a house owned by the appellant, Arthur George Calverley. He paid the respondent, Dianne Lea Green, $10 per week as a contribution to the cost of the provisions that she purchased for the household; although at first that sum represented about half that cost, as time went on it came to represent a much smaller proportion. The respondent had continued in her employment and she provided from her earnings the rest of the money necessary to pay for the household provisions. In 1972, in consequence of a disagreement, the respondent left the appellant, but after a few weeks there was a reconciliation and she returned to live with him again. Both parties then thought it wise to move to more congenial surroundings, and they jointly decided that they should move to Baulkham Hills if a house could be found there at a price that the appellant could afford. A house was found in about August 1973, but the appellant at first experienced difficulty in obtaining finance. Later he told the respondent that a loan had been approved, but that the finance company required the purchase to be in the joint names of the parties, and at his suggestion she joined with him in signing an application for finance in which she was represented to be his wife. Finance was approved and the house at Baulkham Hills was purchased for $27,250. The appellant paid the deposit, which is stated in the evidence to have been $9,000, from part of the proceeds of the sale of the house at Mount Pritchard. An amount of $18,000 was borrowed on a mortgage given by both parties and under which they were jointly and severally liable to pay the sum borrowed with interest. It does not appear from the evidence how the remaining amount of the purchase price, $250, was paid, but it appears to have been paid by the appellant. The land was transferred to the parties as joint tenants. They lived together in the house, under the same arrangements as before, until April 1978, when the respondent left. It was held by Rath J, at first instance that the land at Baulkham Hills was put into the joint names of the parties for the purpose of enabling finance to be raised, and not to confer any beneficial interest on the respondent, and that she had no beneficial interest in the property. On appeal, the decision of Rath J was reversed, and it was held by the Court of Appeal that, subject to the mortgage, the parties were joint owners in equity, as well as in law of the land. Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, [10.50]

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Calverley v Green cont. unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, ie a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such-not, for example, as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Robinson v Preston (1858) 4 K & J 505 at 510; 70 ER 211 at 213; Ingram v Ingram (1941) VLR 95 and Crisp v Mullings (1976) EGD 730 (a decision of the English Court of Appeal). As I have indicated, the general rule that in the situations mentioned it is presumed that a resulting trust arises in favour of the purchaser, or in favour of two purchasers in the proportions in which they contributed the purchase money, is subject to the exception created by the presumption of advancement. “It is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose or in other words that the equitable right is not at home with the legal title”; Martin v Martin (1959) 110 CLR 297 at 303; in other words, it is “no more than a circumstance of evidence which may rebut the presumption of resulting trust”: Pettitt v Pettitt (1970) AC 777 at 814. The presumption arises when a husband makes a purchase in the name of his wife, or a father in the name of his child or other person to whom he stands in loco parentis. The authorities have denied that it arises where a wife makes a purchase in the name of her husband (Mercier v Mercier [1903] 2 Ch 98), or a mother in the name of her child (Bennet v Bennet (1879) 10 Ch D 474; Scott v Pauly (1917) 24 CLR 274 at 282; Pickens v Metcalf and Marr [1932] NZLR 1278) or where the purchase is taken in the name of a sister (Noack v Noack [1959] VR 137, at 140), nephew (Russell v Scott (1936) 55 CLR 440), son-in-law (Knight v Biss [1954] NZLR 55) or grandchild (Soar v Foster (1858) 4 K & J 152 at 157; 70 ER 64 at 66), unless the purchase is in loco parentis to the nominee. The principle on which these decisions have been rested is not altogether satisfactory. Lord Eldon said in Murless v Franklin (1818) 1 Swans 13 at 17; 36 ER 278 at 280 that the presumption of advancement arises “where the purchaser is under a species of natural obligation to provide for the nominee”. In Bennet v Bennet Jessel MR also said that the presumption arises from the existence of an obligation on the one person to make a provision for the other (see at 476); he went on to say (at 477) that “the presumption of gift arises from the moral obligation to give”; later he referred to it as a “moral legal obligation … [an] obligation according to the rules of equity”: see at 478. Isaacs J in Scott v Pauly at 282, seems to have thought that in a case where the purchaser is the father the presumption of advancement “is an inference which the courts of equity in practice drew from the mere fact of the purchaser being the father, and the head of the family, under the primary moral obligation to provide for the children of the marriage, and in that respect differing from the mother”. However, Soar v Foster is authority for the proposition that the existence of a moral obligation to support the person in whose name the purchase is taken is not enough to give rise to a presumption of advancement. In that case the purchaser had gone through a form of marriage with his deceased wife’s sister after the passing of Lord Lyndhurst’s Act which rendered null and void all marriages within the prohibited degrees of consanguinity or affinity; thereafter they cohabited together and treated each other as man and wife. It was submitted that if the purchaser had a moral obligation to provide for the other party, that could raise a presumption of advancement; see at 156-157 (ER at 66). Page Wood V-C rejected the submission. He said at 161 (ER, at 67-68): 752 [10.50]

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Calverley v Green cont. Then how does the inference arise that the purchase was intended as a provision for the defendant? Not upon the ground of his being under a moral obligation to provide for the defendant, for that argument would be equally applicable, if, instead of an invalid marriage of this description, the case had been one of bigamy by a person representing himself to be unmarried. In such a case there would be a clear moral duty incumbent upon the person supposed to provide for a woman whom he had so grossly deceived. The same argument would apply to a case of mere cohabitation without any form of marriage whatever. Any moralist would say that a man was bound to make provision for the woman with whom he had so cohabited. But it would be impossible for this Court to hold, if in either of the cases supposed an investment had been made by the man in the names of himself and the woman, that, upon the mere ground of his being under such moral obligation, the purchase could be presumed to have been intended by him as a provision of advancement. The principle upon which the presumption of advancement rests does not seem to me to have been convincingly expounded in the earlier authorities, nor do the two presumptions, of a resulting trust and advancement, together always lead to a result which coincides with that which one would expect to occur in ordinary human experience. For example, a lady who placed deposits, each of 150 pounds, in the names of her niece and nephew, aged respectively two and six years, would not ordinarily be thought to intend that the infants should hold the deposits as trustees for her, but that is the result to which the authorities led Northcroft J in Re Muller: Cassin v Mutual Cash Order Co Ltd [1953] NZLR 579. In Wirth v Wirth (1956) 98 CLR 228 Dixon CJ put that law on a more rational basis. That was not a case of a purchase in the name of another, but one of a voluntary transfer by an existing owner. The question whether a resulting trust is presumed in the latter case is not without complications, but it is unnecessary to discuss it here. Dixon CJ who accepted or at least was content to assume, the correctness of the view expressed by Cussen J in House v Caffyn [1922] VLR 67 at 78, that if the land is under the Torrens system there is a presumption of a resulting trust, went on to hold, following Moate v Moate [1948] 2 All ER 486, that a transfer of a property by a prospective husband to his intended wife in contemplation of the marriage for which they had contracted raised a presumption of advancement. Neither of the other members of the Court in that case found it necessary to decide whether there was a presumption of advancement when the property was transferred to the intended wife. However the principle as stated by Dixon CJ is intelligible and is likely to lead to a just result and should in my opinion be accepted. The presumption should be held to be raised when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred, whether or not the purchaser owed the other a legal or moral duty of support. It is true that this may require a reconsideration of the correctness of the actual results reached in some of the earlier cases, but to regard that as a barrier to acceptance of the principle would be to treat the established categories as frozen in time. As Dixon CJ said, that would not be characteristic of the doctrines of equity. It then becomes necessary to apply the principle enunciated by Dixon CJ in Wirth v Wirth to the case in which a man purchases property in the name of a woman with whom he is living in a de facto relationship. I do not regard Napier v Public Trustee (WA) (1980) 55 ALJR 1 as concluding the question in favour of the view that a presumption of advancement can never arise in such a case. In that case Aickin J, with whom Mason, Murphy and Wilson JJ agreed, said, at 3, that it is “well established that no presumption of advancement arises in favour of a de facto wife”. However, the question was not argued in that case and it was not necessary to decide it for the purposes of the decision; I left the question open. The question is whether the relationship which exists between two persons living in a de facto relationship makes it more probable than not that a gift was intended when property was purchased by one in the name of the other. The answer that will be given to that question will not [10.50]

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Calverley v Green cont. necessarily be the same as that which would be given if the question were asked concerning a man and his mistress who were not living in such a relationship. The relationship in question is one which has proved itself to have an apparent permanence, and in which the parties live together, and represent themselves to others, as man and wife. It is true that in some cases a person may maintain a de facto relationship for the very purpose of preventing the other party to the relationship from obtaining any right or claim to property, but the question now asked arises only when one party has taken the deliberate step of purchasing property in the name of the other. Once one rejects the test applied in Soar v Foster as too narrow, and rejects any notion of oral disapproval, such as is suggested in Rider v Kidder (1905) 10 Ves 360; 32 ER 884, as inappropriate to the resolution of disputes as to property in the twentieth century, it seems natural to conclude that a man who puts property in the name of a woman with whom he is living in de facto relationship does so because he intends her to have a beneficial interest, and that a presumption of advancement is raised. Cases such as Soar v Foster, where the relationship was based on an invalid marriage ceremony, or Murdock v Aherne, where the relationship was founded on a bigamous marriage, would be a fortiori. For these reasons I consider that there was a presumption of advancement in the present case. However, both the presumption of advancement and the presumption of a resulting trust, may be rebutted by evidence of the actual intention of the purchaser at the time of the purchase: see Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364, 365. Where one person alone has provided the purchase money it is his or her intention alone that has to be ascertained. In the present case however both purchasers contributed the purchase money. The amount of $18,000 borrowed under the mortgage was provided equally by the parties, for it was lent to them jointly, on terms which made them jointly and severally liable for its repayment, and, having thus been borrowed, was applied by them in part payment of the purchase price. Where there are two purchasers, who have contributed unequal proportions, but have taken the purchase in their joint names, the intentions of both are material. Even if the parties had no common intention, the intentions of each may be proved, for the purpose of proving or negating that one intended to make a gift to the other. The evidence does show that the appellant had no intention to confer a beneficial interest on the respondent – it rebuts the presumption of advancement. When a purchase was contemplated, the question was whether the appellant could afford it. The appellant made no suggestion that the property be put in joint names until he experienced difficulty in obtaining finance. When he made the suggestion, he said that the finance company required the purchase to be in the joint names. It can be concluded, on the balance of probabilities, that the appellant did not intend to confer any beneficial interest on the respondent. The presumption of advancement thus being rebutted, it is presumed that the respondent held her one half interest in the property on a resulting trust in favour of the appellant, the extent of the trust being measured by the proportion of the purchase money which the appellant provided. Since the appellant already has a one half legal interest in the property, the trust is in respect of so much of his proportionate beneficial interest as exceeds one half – to that extent the respondent holds her legal one half in trust for the appellant, so that the appellant has in all a beneficial interest in the proportion which his contribution bears to the total purchase price. The question however then arises whether the respondent holds any greater interest in trust for the appellant – that depends on whether when she took the legal title she intended to create a further trust in his favour. The evidence does not show that the respondent intended to confer any beneficial interest on the appellant. She may have regarded her signature to the mortgage documents as an empty formality, but if a bystander had asked her whether she intended that the appellant should own the land beneficially, even if he paid nothing under the mortgage, and she were obliged to pay the whole mortgage debt with interest, it is most unlikely that she would have replied in the affirmative. So far as the evidence shows, she formed no intention at all as to the beneficial ownership of the property, and it has not been established that she intended to hold any part of her interest in trust for the appellant. 754 [10.50]

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Calverley v Green cont. In other words, the evidence negatives an intention on the part of the appellant to confer a beneficial interest on the respondent and it does not reveal that the respondent had an actual intention that the land should be held beneficially by the appellant in any greater proportion than that in which he had contributed to the purchase price. The appellant may have had an actual intention that he should be beneficially entitled to the whole of the property, but his intention can only affect the question whether a resulting trust arises. In so far as no resulting trust arose in the appellant’s favour, a trust could arise in respect of the legal interest of the respondent only if she intended that the appellant should have a beneficial interest greater than that to which the resulting trust entitled him. The result in my opinion is that the evidence is sufficient to rebut a presumption of advancement, but not sufficient to rebut the presumption of a resulting trust. The extent of the beneficial interests of the respective parties must be determined at the time when the property was purchased and the trust created. The fact that the mortgage debt was repaid by the appellant is therefore not relevant in determining the extent of the interests of the parties in the land, although it may be relevant on an equitable accounting between the parties. MASON AND BRENNAN JJ: As both parties contributed to the purchase price, there could not be a resulting trust in favour of the defendant alone. It follows that the Court of Appeal was right to allow the appeal from Rath J. Then the Court of Appeal went on to hold that the legal estate prevailed unless there were an express trust created in favour of the defendant when the parties acquired the legal estate in the Baulkham Hills property. That was too large a step to take, for it was necessary to consider another equitable presumption which arises from the unequal contribution of the purchase price and which governs the present case unless some opposing presumption displaces it or the other facts of the case rebut or qualify it. Unless an equitable presumption of a trust is displaced by a counter-presumption or it is rebutted or qualified by evidence of the intention of the party paying the purchase price or of the common intention of the parties who contribute that price, the presumption determines the conclusion to Ca Abr 291 (21 ER 1052) and Lake v Craddock (1732) 3 P Wms 158 (24 ER 1011) in White & Tudor’s Leading Cases in Equity, 9th ed (1928), vol 2, p 882; Rigden v Vallier (1751) 3 Atk 731 at 735 (26 ER 1219 at 1221); Robinson v Preston (1858) 4 K & J 505 at 510 (70 ER 211 at 213); Aveling v Knipe (1815) 19 Ves Jun 441 at 444-445 (34 ER 580 at 582); Hill v Hill (1874) 8 IR Eq 140. As there was no agreement made after the purchase to alter the equitable interests acquired when the property was purchased, the payments made under the mortgage work no alteration in those interests. This case cannot be likened to Bloch v Bloch (1981) 37 ALR 55 where the relevant property which the parties intended to acquire was seen to be not the title to land subject to mortgage but the land freed of the mortgage (at 64). In such a case the price paid to free the land of mortgage as well as the price paid for the title to the land itself must be taken into account in determining the parties’ beneficial interests. Mortgage payments may quantify the parties’ interests under a resulting trust of a property acquired as a mortgage-free investment, but they would rarely quantify the interests of parties under a resulting trust of a house property acquired as a home to live in. If it is right to regard the payment of the mortgage instalments as having been made by the defendant out of his own funds and on his own account-that is, if he made those payments not intending the plaintiff ultimately to have the benefit of those payments-the defendant may be entitled to contribution from the plaintiff for her share of the payments and to an equitable charge to secure the making of her contribution: see Ingram v Ingram (1941) VLR 95, at 102. That question was not argued on the appeal. Neither has any argument been raised to assert the existence of a beneficial interest under a constructive trust arising after the transaction of purchase was closed and overriding the beneficial interests then acquired. In Canada and in some cases in England, the device of the constructive trust has been invoked “to give relief to a wife who cannot prove a common intention or to a wife whose contribution to the acquisition of property is physical labour rather than purchase money” (per Laskin J (as he then was) in [10.50]

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Calverley v Green cont. Murdoch v Murdoch (1973) 41 DLR (3d) 367,at 388; and see Rathwell v Rathwell (1978) 83 DLR (3d) 289 and Pettkus v Becker (1980) 117 DLR (3d) 257). It is unnecessary to consider whether in some future case the device of a constructive trust might be relied on where property beneficially owned in particular proportions is maintained or enhanced by work done or contributions made in different proportions. If such a question arises in a contest between parties to a marriage it may be necessary to consider the extent to which the device is available in the equitable jurisdiction when ss 79 and 80 of the Family Law Act confer a statutory jurisdiction to alter proprietary interests and that jurisdiction may be exercised to give relief to a party to a marriage who has made a non-pecuniary contribution to the purchase of property. We would allow the appeal and set aside the judgment of the Court of Appeal except for its orders allowing the appeal from Rath J and setting aside his Honour’s order. We would stand the matter over until 12 February 1985 in order to give the parties an opportunity to agree, in the light of this judgment, upon an order which might finally dispose of the issues outstanding between them. If no agreement is reached, it will be necessary to remit the matter to the Supreme Court of New South Wales to proceed in accordance with this judgment. In that event, it would be open to the Supreme Court to consider, as Mahoney JA suggested, whether the defendant is entitled to any relief against the plaintiff in respect of his payments of the mortgage instalments. MURPHY J: Presumptions arise from common experience (see Actors Equity v Fontana Films (1982) 150 CLR 169 at 213-215). If common experience is that when one fact exists, another fact also exists, the law sensibly operates on the basis that if the first is proved, the second is presumed. It is a process of standardised inference. As standards of behaviour alter, so should presumptions, otherwise the rationale for presumptions is lost, and instead of assisting the evaluation of evidence, they may detract from it. There is no justification for maintaining a presumption that if one fact is proved, then another exists, if common experience is to the contrary. I have reconsidered the law on presumptions of resulting trusts including the case of Napier v Public Trustee (1980) 32 ALR 153 (in which I agreed with Mr Justice Aickin). My conclusion is they are inappropriate to our times, and are opposed to a rational evaluation of property cases arising out of personal relationships. In this case, the fact that the title to the property is in the parties jointly, is not displaced by anything in the circumstances. The circumstance that the contributions to the purchase were unequal, and that by arrangement the mortgage payments were made by Mr Calverley during their living together, while Miss Green paid most of the household expenses, raises no equity. The property is that of the parties jointly. The members of the Court of Appeal were correct in taking the view that there was no presumption which detracted from the legal title, which should prevail. Their decision in this respect should stand, and if that were all, the appeal should be dismissed. The fact that since the parting, although the mortgage payments were a joint obligation, they were made by Mr Calverley, may raise questions of contribution due to him, against which should be set-off the value of the occupation of the property by Mr Calverley. If the parties cannot agree on a settlement of these subsidiary questions, the case should be remitted. DEANE J: This appeal turns upon presumptions of equity. The relevant presumptions are those applicable in determining the beneficial ownership of property which is purchased and transferred into the legal ownership of persons otherwise than in accordance with their respective contributions to the purchase price. Those presumptions evolved in times when a majority of adults laboured under restrictions and disabilities in respect of the ownership and protection of property and when it may have been wrong to assume that the fact that property was caused to be transferred into the legal ownership of a person without any express qualifying limitation was a prima facie indication of an intention that he should own it. Even in those times however, there was much to be said for the view that, except where they served the same function as a civil onus of proof and operated to resolve a 756 [10.50]

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Calverley v Green cont. factual contest in circum-stances where the relevant evidence was either uninformative or truly equivocal, the worth of those presumptions was at best debatable. In present times, their propriety is open to serious doubt in any case in which they establish as the starting point for resolution of an issue of fact, a presumption-which “should not … give way to slight circumstances” (Shephard v Cartwright (1955) AC 431, at p 445; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365) – that a person who causes property to be placed in the legal ownership of another, either solely or jointly with himself, is not thereby evincing an intention that the other should, in a real sense, be the sole or joint owner of it. The relevant presumptions are, however, too well entrenched as “land-marks” in the law of property (per Eyre LCB, Dyer v Dyer (1788) 2 Cox 92 at 93 (30 ER 42 at 43) to be simply discarded by judicial decision. Indeed, the law embodying them has been said in this Court to be so clear that it “can … no longer be the subject of argument” (per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ, Charles Marshall Pty Ltd v Grimsley, at 364). If they are to be modified to avoid prima facie assumptions that a person intends the opposite to that which he does, it must be by legislative intervention which will not disturb past transactions which may conceivably have been structured by reference to them. The present case was resolved in the courts below by reference to one or other of those presumptions as a starting point. It must be so resolved in this Court. There are three presumptions of equity which are here relevant. The first is that which was applied by Rath J at first instance in this case but was held by the Court of Appeal to be irrelevant upon a proper appreciation of the facts. Worded in terms that are appropriate for present purposes, it is: where a person pays the purchase price of property and causes it to be transferred to another or to another and himself jointly, the property is presumed to be held by the transferee or transferees upon trust for the person who provided the purchase money. The second can properly be seen as complementary of the first. It is: where two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it. The third “presumption”, usually called the “presumption of advancement”, is not, if viewed in isolation, strictly a presumption at all. It is simply that there are certain relation-ships in which equity infers that any benefit which was provided for one party at the cost of the other has been so provided by way of “advancement” with the result that the prima facie position remains that the equitable interest is presumed to follow the legal estate and to be at home with the legal title or, in the words of Dixon CJ, McTiernan, Fullagar and Windeyer JJ in Martin v Martin (1959) 110 CLR 297 at 303, that there is an “absence of any reason for assuming that a trust arose”. “The child or wife has the legal title. The fact of his being a child or wife of the purchaser prevents any equitable presumption from arising” (ibid, at 304, quoting Ashburner’s Principles of Equity, 2nd ed, (1933), at p 110n). The weight to be given to a presumption of a resulting trust in the resolution of what is essentially an issue of fact may vary in accordance with changing community attitudes and with the contemporary strength or weakness of the rationale of the rule embodying the presumption (see, eg, Snell’s Principles of Equity, 28th ed (1982), at p 183 and the cases there cited, and per Mahoney J, Doohan v Nelson (1973) 2 NSWLR 320 at 325-326). The generalization that a presumption of resulting trust “should not give way to slight circumstances” (see above) can no longer properly be accepted as an unqualified rule. Indeed, in a case where a presumption of resulting trust or a “presumption” of advancement applies in circum Equity, 28th ed (1982), at p 183 and the cases there cited, and per Mahoney J, Doohan v Nelson (1973) 2 NSWLR 320 at 325-326). The generalization that a presumption of resulting trust “should not give way to slight circumstances” (see above) can no longer properly be accepted as an unqualified rule. Indeed, in a case where a presumption of resulting trust or a “presumption” of advancement applies in circumstances where the relationship between the parties [10.50]

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Calverley v Green cont. does not, as a matter of modern experience, provide any firm rational basis for presuming either intention to retain the beneficial interest or an intention to confer it on the other party, the presumption may be found to be of practical importance only in those cases where the evidence, including evidence of the actual relationship between the parties, does not enable the court to make a positive finding of intention (cf per Gibbs J in Napier, at 2 and per Lord Upjohn, Pettitt v Pettitt (1970) AC 777 at 813-814). The evidence in the present case is silent as to the intentions of Mr Calverley and Miss Green on the subject of the beneficial ownership of the Baulkham Hills property and discloses no adequate grounds for an inference either that there was an arrangement between them or that either intended that the beneficial interest in the property should be otherwise than according to their respective contributions to the actual purchase price. In the context of the relationship which existed between Mr Calverley and Miss Green at the time of the purchase, the presumption of a resulting trust in Mr Calverley’s favour of an approximate two-thirds interest in the property had little, if any, practical significance beyond that of determining questions of onus of proof. Even so regarded however, the presumption remained unrebutted by the evidence. In that regard, the fact that Miss Green was added as a purchaser and mortgagor to facilitate the arrangement of finance is equivocal (“amphibolous”: Martin at p 305) in that it can be viewed as either an explanation of her acquisition of a beneficial interest in the property or as an explanation of her being but a trustee for Mr Calverley. The fact that it was intended that, at least while they were living together, Mr Calverley should pay the instalments of the mortgage is equivocal in the context that it was part of an overall understanding under which Miss Green was to bear the main part of the costs of the day to day household expenses. I agree with the comments made by Mason and Brennan JJ in the last three paragraphs of their judgment and in the orders which they propose. It should be mentioned that neither party sought to rely on the doctrine of equitable estoppel.

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Notes and Questions

1. The difficulties of presumptions as to resulting trusts and advancement are largely that they were first established when family relationships were very different. Married couples were the primary focus of the law and financial responsibility was placed on the male head. The courts have sought to adjust the rules by piecemeal adjustments so as, for example to accommodate persons living in an unmarried domestic relationship. Now they must recognise couples of the same sex with some formal legal status (perhaps to extend to marriage) or simply in a long-term relationship. How do you draw inferences as to the expectations of such a diverse range of relationships? Or do you agree with Murphy J that the result is so confusing that it is time to start again? 2. The application of the resulting trust principles is judged at the time of purchase of the property. Contributions are assessed at this time whereas the substantial payments may well be the subsequent discharge of a loan and these payments may not necessarily be made by the persons entering the loan agreement. The rebutting evidence of intention must be that of the party contributing the whole of the purchase price or in the case of unequal contributions the common and revealed intention. 3. The application of the presumption of a resulting trust may be affected by an illegal motive for the placing of the nominal title in another person. The ownership of property often attracts taxes or other government charges. A nominal owner may be chosen to 758

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lessen or avoid these obligations. Equitable intervention to protect the transferor then seems to reward the illegal act. In Nelson v Nelson (1995) 184 CLR 538 a mother transferred property to her child so as to avoid charges to which the mother would have been subject. The High Court was able to fashion an equitable remedy so as to recognise the intention that the mother should retain the beneficial interest without allowing the illegal scheme to succeed. The claim of the mother by way of a resulting trust was subject to the condition of payment to the relevant government authorities of the money avoided by the scheme.

FAILURE OF AN UNDERSTANDING OR ENTERPRISE The nature of a constructive trust [10.60] A constructive trust is imposed by law where it is unfair for the legal owner to assert

the apparent title. A constructive trust has been imposed where a person takes a transfer on the basis that the land will be held for another or where property is acquired for an enterprise (including a personal relationship) that subsequently fails. Understandings that a transfer is not absolute

Bannister v Bannister [10.65] Bannister v Bannister [1948] 2 All ER 133 English Court of Appeal SCOTT LJ: read the following judgment of the court. This is an appeal from an order of the Brentwood County Court dated September 19, 1947, dismissing a claim by the plaintiff against the defendant for possession of the downstairs front room of a cottage known as No 30, Maryland Cottages, Mountnessing, Essex, and allowing a counterclaim by the defendant for a declaration that the plaintiff held No 30, Maryland Cottages in trust for the defendant for her life. No 30, Maryland Cottages and the adjoining cottage, No 31, had belonged to the defendant’s husband who died intestate in 1939. Under his intestacy the defendant, as his widow, became entitled to his residuary estate (including the two cottages) for life with remainder to his brothers and sisters. It appears, however, that by a family arrangement the brothers and sisters gave up their respective reversionary interests in the two cottages for the defendant’s benefit and that at the date of the agreement mentioned below they were her absolute property. Towards the end of 1942 there were negotiations between the defendant and the plaintiff (who is her brother-in-law) for the sale of the two cottages by the defendant to the plaintiff and these negotiations resulted in an oral agreement between them. There was a conflict of evidence as to the terms of this oral agreement, but the learned county court judge accepted the defendant’s evidence about it. According to the defendant’s evidence the plaintiff said he would let her have the price her husband paid for the cottages, namely, £250. The defendant replied that she would let the plaintiff have the cottages at that price if he would let her rent the one, by which she clearly meant No 30, in which she was living at the time. The plaintiff then said: “I do not want to take any rent, but will let you stay as long as you like rent free.” He further said he was going next door, that is, to No 31. The defendant thereupon agreed to sell the two cottages to the plaintiff on these terms. She would not have sold the two cottages to the plaintiff “if this had not been agreed”, by which she meant if the plaintiff had not agreed to let her stay in No 30 as long as she liked rent free. The sale thus orally agreed on was completed by a conveyance dated Jan 7, 1943, which was a plain conveyance on sale of the two cottages by the defendant to the plaintiff at the price of £250, containing no reference at all to the stipulation to the effect that the defendant was to be allowed to [10.65]

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Bannister v Bannister cont. stay in No 30 as long as she liked rent free. According to the uncontradicted evidence of a local auctioneer and valuer (which was accepted by the learned county court judge), the value in 1943 of the two cottages, with rent restricted tenants in occupation of each, would have been £400, to which £100 should be added on the assumption of a sale with vacant possession. The price of £250 paid by the plaintiff must, therefore, be taken to have been at least £150 below the contemporary value of the two cottages and to have amounted to not more than five-eights of such value. After the sale the defendant seems to have remained in occupation of the whole of No 30 until the autumn of 1945, when the plaintiff and his wife had to give up the house they had been living in, and, with the defendant’s consent, moved into No 30, the defendant making room for them by letting them have all except the downstairs front room, into which she appears to have taken as much of her furniture as she conveniently could, leaving the rest in other parts of the cottage. Early in 1947 a Mr and Mrs Freeman, who had, apparently, been the plaintiff’s tenants at No 31, moved into the rooms in which the plaintiff and his wife had been living at No 30 and the plaintiff and his wife moved into No 31. The defendant had previously revoked her permission for the occupation of these rooms by the plaintiff and his wife, and the plaintiff let the Freemans into occupation of them without the defendant’s consent. Since the sale of the two cottages to the plaintiff he has paid the sched A tax, and, apparently, also the rates, on both of them, and has also paid for repairs. The Freemans have been treated by the plaintiff as occupying the rooms in No 30 taken over from him as his tenants and they have been paying rent to him. On the other hand, the defendant has ever since the sale been living in No 30, or latterly in the downstairs front room of No 30, rent free. The plaintiff, having given the defendant notice to quit the downstairs front room of No 30, with which she refused to comply, commenced the present action, claiming by his particulars of claim dated Oct 2, 1947, possession of the room in question on the footing that the defendant had been occupying it as a tenant at will at no rent and that her tenancy at will had been duly determined by notice to quit. The defendant counterclaimed in the action for a declaration to the effect that the plaintiff held No 30 in trust for the defendant for life, with an alternative claim for specific performance which was not pursued, and ancillary claims for possession of No 30 other than the downstairs front room (which also was not pursued), and damages for trespass. In the result, the learned county court judge, by his order dated Sept 19, 1947, dismissed the plaintiff’s claim with costs, and on the defendant’s counterclaim awarded her £10 damages with costs and made a declaration to the effect claimed by her. In view of the learned county court judge’s acceptance of the defendant’s evidence he necessarily found as a fact that the oral agreement as a result of which the defendant conveyed Nos 30 and 31 to the plaintiff for £250 included an undertaking by the plaintiff to permit the defendant to stay in No 30 for as long as she liked rent free, and that, but for this undertaking, the defendant would not have sold the two cottages to the plaintiff at what, on the uncontradicted evidence of value, he rightly described as “a bargain price.” He further found as a fact that there was no fraud in the case. On these findings of fact he held that on well-known equitable principles there was (as he put it) an implied or inferential trust, or, in other words, a constructive trust, of No 30 under which the plaintiff held that property in trust for the defendant for life. … It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available. Nor is it, in our opinion, necessary that the 760 [10.65]

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Bannister v Bannister cont. bargain on which the absolute conveyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It is enough that the bargain should have included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by another. The above propositions are, we think, clearly borne out by the cases to which we were referred of Booth v Turle (1873) LR 16 Eq 182, Chattock v Muller (1878), 8 Ch Div 177, Re Duke of Marlborough [1894] 2 Ch 133; 63 LJ Ch 471, and Rochefoucauld v Boustead. We see no distinction in principle between a case in which property is conveyed to a purchaser on terms that the entire beneficial interest in some part of it is to be retained by the vendor (as in Booth v Turle) and a case, like the present, in which property is conveyed to a purchaser on terms that a limited beneficial interest in some part of it is to be retained by the vendor. We are, accordingly, of opinion that the third ground of objection to the learned county court judge’s conclusion also fails. His finding that there was no fraud in the case cannot be taken as meaning that it was not fraudulent in the plaintiff to insist on the absolute character of the conveyance for the purpose of defeating the beneficial interest which he had agreed the defendant should retain. The conclusion that the plaintiff was fraudulent, in this sense, necessarily follows from the facts found, and, as indicated above, the fact that he may have been innocent of any fraudulent intent in taking the conveyance in absolute form is for this purpose immaterial. In the result, we hold that the appeal fails and the order of the learned county court judge should be affirmed, but in the interests of accuracy we think his order should be varied by substituting a declaration to the effect that the plaintiff holds No 30 in trust during the life of the defendant to permit the defendant to occupy the same for so long as she may desire to do so and subject thereto in trust for the plaintiff.

Baumgartner v Baumgartner [10.70] Baumgartner v Baumgartner (1987) 164 CLR 137 High Court of Australia MASON CJ WILSON AND DEANE JJ: By her summons the respondent sought a declaration that the appellant held his interest in the property already described, upon trust as to one half for the respondent. By her amended summons she sought a declaration that the appellant held his interest in the property upon trust for her and, in the alternative, a declaration that the appellant held the property subject to a charge in favour of her. The primary judge set out in his reasons for judgment the circumstances in which the proceedings originated. In June 1978 or thereabouts the appellant and the respondent became acquainted at their place of employment. The appellant had been married twice previously. The respondent was then married with two children. The relationship between the appellant and the respondent became so close that in September 1978 the respondent left her home, husband and two young children to live with the appellant in his home unit at Cabramatta. Their de facto relationship continued until August 1982 or thereabouts when the respondent left the appellant, taking with her a child named Dallas, the issue of their relationship. During the period of their cohabitation the respondent left the appellant on a number of occasions. One such occasion was in late 1978 and early 1979. One of the elements in the reconciliation which then took place was their decision to have a child. The child Dallas was born in February, 1980. Before this separation, and probably in early 1979, there had been talk of marriage between the parties. The primary judge considered that the appellant then had a strong emotional attachment to the respondent, though the judge thought that the strength of the respondent’s attachment to the appellant was doubtful. The appellant’s jealousy was aroused in circumstances which need not be [10.70]

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Baumgartner v Baumgartner cont. recounted. At all events the judge concluded that the decision to have a child was not related, as the respondent claimed, to plans to get married. In this respect his Honour preferred the appellant’s evidence. Moreover, he held that the decision to have the child did not confirm the respondent’s case that the parties had decided to marry and to purchase the land at Leumeah for the purpose of building a home which would in whole or in part belong to the respondent. The appellant bought the land at Leumeah in his own name in October 1979 or shortly thereafter. The parties had decided that the home unit was too small and that it should be sold. The appellant took the initiative in deciding to buy the land at Leumeah, though he consulted the respondent and discussed the matter with her. There is no suggestion that he would have made the purchase without her consent. The parties discussed the matter of ownership of the land. Unfortunately it does not appear whether the discussions took place before or after the purchase of the land. The appellant admitted that after they had a conversation with the builders of the house at Leumeah the respondent said to him, “Why can’t the house be in my name as well?” and that he replied, “We’re not married and the loan is in my name and is coming from the sale of the unit.” On another occasion, when the respondent objected to the appellant’s absences early in the morning when he visited the building site, the appellant claimed that he said to her: “Look I’m doing this for all of us you know, the harder I am working the sooner I will have it paid off and the better we will be in the future and this is all the thanks I get.” On another occasion the matter was discussed by the parties when they visited the appellant’s friends, the Schneiders, while the house was being built. According to the respondent, Mr Schneider asked, “What’s happening with the house you’re building – Are you going to put it in both your names?” The appellant replied: No, the Building Society won’t accept both our names on the title deeds because we’re not married and we’re living in a de facto relationship only. Anyway there is really no need for both our names to go on the papers. Frances knows that it’s our house once it’s built. Turning to the respondent, the appellant then said, “You know what for you’re working”. The appellant gave a version of this conversation which differs in minor respects only. But he says that he did not wish to discuss his personal affairs with the Schneiders and he brought the conversation to a close as soon as possible. According to the appellant the conversation took place after he had made it clear that, as a result of the respondent’s relationship with another man, he would not marry her and did not intend to put the property in her name. Some time before October 1980 the appellant sold his home unit at Cabramatta and the parties began living in rented accommodation pending completion in October 1980 of the house at Leumeah. The net proceeds of sale of the unit, after discharge of the mortgage, was $12,883.41. The respondent claims that in December 1980 she raised the question of marriage with the appellant who said, “I don’t want to get married yet – just wait a while”. She replied: Well you can at least have a will made out – just in case anything ever happens to you. I will have to have some proof that this is my home also, otherwise there could be fights in court … According to the respondent, the appellant answered, “Alright I’ll have a will made out so that you will be looked after”. She says that he repeated this statement at other times and added: You know I’m really doing this for all of us – for you and me and Dallas. I’ll make sure your name is transferred to the title deeds when we get married but there is no need to do this before we get married. 762 [10.70]

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Baumgartner v Baumgartner cont. The appellant denied that the respondent ever spoke of the need for proof that the house was her home or of fights in court. He admitted that on one occasion he said to the respondent, “Look I will do this one day (ie make a will) when the time comes if we ever get married and I will have the house transferred to our joint names”. The respondent gave evidence that on some later occasion after they had moved into the house, an argument arose over the appellant banking the respondent’s pay each week and that the appellant said: I’m only saving you the time by doing all this myself and anyway everything I do is for us as a family, not just for me. If I do it it makes life easier for us and I want to make sure that we get everything finished like the house payments and car payments so that we can enjoy our life later on when we have got more time together. The appellant did not deny making this statement. On the respondent’s account the appellant never gave her any reason for refusing to put the house in her name except expense. His Honour found that when the parties commenced to live together the respondent generally gave the appellant her pay packet. They regarded this as a pooling of resources. The appellant paid rent, mortgage instalments and other expenses associated with the living accommodation. He also paid the ordinary expenses of running the household, including entertainment and the costs of the motor vehicle. At the time of the purchase of the Leumeah property the appellant still owed money on his unit. From the pooled resources he was able on about four occasions to make “double payments” in relation to his unit, the standard monthly mortgage payment being $170 per month. However, there was, so the primary judge found, no agreed division in relation to the respondent’s contributions to the family finances. Nonetheless it is probable that the pooling of resources, as Priestley JA pointed out, had the effect of reducing the mortgage debt on the home unit more quickly than it would have been reduced had they not been pooling their resources. While the evidence about the appellant’s earnings was somewhat imprecise, the parties have agreed that the total earnings of the parties available for contribution to the common pool during the period of cohabitation were $89,188.63 of which the appellant’s share was $50,981.99 and the respondent’s share $38,206.64. The difference is partly explained by the fact that the respondent was not earning for a period of three months in which she gave birth to Dallas and was subsequently caring for him. If we credit the respondent with the income of $3,000 which she would have earned in the period of three months, the aggregate earnings of the parties were contributed by the appellant as to 55% and the respondent as to 45% approximately. In 1981 the respondent changed her name by deed poll to that of the appellant, that is, Baumgartner. The judge found that her reasons for doing so were not clear. The change took place some time after her divorce and it indicates that she then accepted that the appellant did not intend to marry her and that she expected that they would continue living together. In fact they continued to live together until August 1982, when the respondent left, taking Dallas and much of the furniture. The respondent says that after she left she had a conversation at work with the appellant about the furniture in which he said, “I suppose you think you’re smart but that’s the only thing you’ll ever get from me”. According to the respondent, she answered: Leo you know that’s not fair – this house belongs to both of us and I have put a lot of money into it. Ever since we started living together I have given you all my money and we always agreed that whatever we had we would share. The appellant did not deny this conversation. When the relationship finally broke down, in March 1984, the property at Leumeah was valued at $67,650.00. Its value was said not to have altered significantly since then. The furniture which the respondent took with her is said to have a value of $7,000 or $10,000, though the judge seems to [10.70]

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Baumgartner v Baumgartner cont. have thought that both valuations were unreliable. The furniture was bought with the appellant’s money or money from the pooled resources. Rath J was influenced by the circumstance that the respondent came to the appellant’s home, in which she had no financial stake, and that she left that home “of her own will with a substantial quantity of furniture”. In the circumstances his Honour rejected the respondent’s implicit assertion that it was unfair that she should have to work and keep paying off the house if her name was not going to be on the title deed. His Honour’s ultimate conclusion was that there was no intention to create a trust, that there were no circumstances giving rise to a constructive trust and that there was nothing unconscionable or inequitable in the appellant retaining the full legal and equitable title. In Muschinski v Dodds a man and woman who had lived together for three years decided to buy a property on which to erect a prefabricated house and to restore a cottage. The woman was to provide $20,000 from the sale of her house and the man was to pay the cost of construction and improvement from $9,000 he would receive on the finalization of his divorce and from loans. The property was conveyed to them as tenants in common. Although some improvements were made by the man, the erection of the house did not proceed and the parties separated. The woman contributed $25,259.45 and the man $2,549.77 to the purchase and improvement of the property. This Court declared that the parties held their respective legal interests upon trust to repay to each his or her respective contribution and as to the residue for them both in equal shares. Deane J (with whom Mason J agreed) reached this result by applying the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. His Honour said (at 620): the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude (1868) LR 3 Ch App 369 at 374-375 and per Jessel MR, Lyon v Tweddell (1881) 17 ChD 529 at 531. His Honour pointed out (at 614) that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention “to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle”. See also at 617. In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged (at 616) that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust. In the present case the parties pooled their earnings with a view to meeting all the expenses and outgoings arising from their living together as a family. The individual contributions of each party were not allocated to a particular category or particular categories of expenses and outgoings. The pool of earnings was used to pay outgoings associated with accommodation – mortgage instalments on the unit at Cabramatta and the property at Leumeah – as well as other living expenses. There was no suggestion that the respondent’s contributions were paid and received by way of rent or a charge for use and occupation and for living expenses. Such a suggestion would be inconsistent with the relationship that came into existence between the appellant and the respondent, a family relationship which was for the most part until 1982 a long-term stable relationship in which marriage was under 764 [10.70]

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Baumgartner v Baumgartner cont. continuous contemplation. The land at Leumeah was acquired and the house on it was built in the context and for the purposes of that relationship. Together they planned the building of the house. Together they inspected it in the course of its construction. Together they moved out into it and made it their home after it was built. In this situation it is proper to regard the arrangement for the pooling of earnings as one which was designed to ensure that their earnings would be expended for the purposes of their joint relationship and for their mutual security and benefit. To the extent which the pooled funds were the source of payment of mortgage instalments by the appellant, the pooled funds contributed not only to present accommodation expenses but also to the security of the parties’ accommodation in the future. In this context it would be unreal and artificial to say that the respondent intended to make a gift to the appellant of so much of her earnings as were applied in payment or mortgage instalments. There is no evidence which would sustain a finding that the respondent intended to make a gift to the appellant in this way. The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent. It therefore becomes necessary to determine the terms of that constructive trust. The facts that the Leumeah property was acquired and developed as a home for the parties and that, at least indirectly, it was largely financed out of money drawn from the pool of their earnings, this being one of the purposes which the pool was to serve, combine to support an equality of beneficial ownership at least as a starting point. Equity favours equality and, in circum-stances where the parties have lived together for years and have pooled their resources and their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind. The question which has caused us particular difficulty is whether any such adjustment is necessary in the circumstances of the present case to avoid any injustice which would otherwise result by reason of disparity between individual financial contributions. The conclusion to which we have come is that some such adjustment is necessary. Although the present case is close to the borderline, we do not consider that it is possible to treat the respective financial contributions of the parties as being approximately equal. Even after crediting the respondent with the amount she would have earned during the period of three months during which the respondent was precluded from working by reason of having and caring for their child, it is agreed that the respective contributions were approximately 55% as to the appellant and 45% as to the respondent, that is to say, the appellant contributed almost a quarter more than the respondent. The Court should, where possible, strive to give effect to the notion of practical equality, rather than pursue complicated factual inquiries which will result in relatively insignificant differences in contributions and consequential beneficial interest. We do not think, however, that the difference in the present case can be regarded as relatively insignificant. Nor has it been suggested that the difference in the amount of the financial contributions was offset by the greater worth of the respondent’s contribution in other areas. In these circumstances, though acknowledging that the case [10.70]

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Baumgartner v Baumgartner cont. is close to the borderline, we consider that the constructive trust to be imposed should declare the beneficial interests of the parties in the proportions 55% to the appellant and 45% to the respondent. There are, however, other adjustments which should be made in the interests of justice. Those adjustments are all in favour of the appellant. The appellant should be entitled to receive from the proceeds of any sale of the property repayment of the contributions effectively made by him before and after the period during which the parties were living together and pooling their resources. That is to say, the appellant should be entitled to be paid the net proceeds of the sale of his unit ($12,883.41) which were devoted to the purchase of the property less the amount of payments of instalments under the mortgage over the unit which were made from the pooled earnings during the period of cohabitation. The appellant should also be entitled to be repaid the instalments under the mortgage over the property which he has paid during the period since the termination of the relationship between the respondent and himself subject to an off-setting adjustment to reflect any benefit enjoyed by the appellant through use and occupation of the property during that period. The final adjustment which should be made in the appellant’s favour relates to the furniture which was taken by the respondent when her relationship with the appellant terminated. That furniture was largely acquired during the period of cohabitation and, in the context of other allowances made in favour of the appellant, can fairly be treated as purchased from the pooled funds. The order made by the Court of Appeal in relation to it is inappropriate on that approach. The appropriate adjustment would be that the appellant is entitled to be paid from the proceeds of any sale an amount equal to the value of that furniture. The appellant should be entitled to a lien over the property to secure the payment to him of the above-mentioned amounts from the net proceeds of sale of the property after discharge of the amount remaining outstanding under the mortgage. If the parties are not able to agree on the precise amounts of the above adjustments, it will be necessary to remit the matter to the Supreme Court to enable those amounts to be determined. That would involve further legal costs. Obviously, it is in the interests of both parties that any such further legal costs be avoided. In the circumstances, the appropriate course at this stage is to stand the matter over to a date to be fixed so that the parties have an opportunity of agreeing upon the content of the precise orders which should be made. We would allow the appeal, set aside the orders made by the Court of Appeal other than in relation to costs and stand the appeal over to a date to be fixed so that the parties may have the opportunity of presenting submissions as to the terms of the consequential orders to be made. Since the appellant has been substantially unsuccessful in the appeal, the appellant must pay the respondent’s costs of the appeal. If it becomes necessary to remit the matter to enable the determination of relevant amounts, the costs of the proceedings upon remitter will be reserved for the Supreme Court. [Toohey and Gaudron JJ agreed.]

Question

[10.75]

Should it make any difference that parties are in a relationship and buy property for that relationship or one of them owns property and then enters a relationship as part of which the property is to be for their mutual benefit? Failure of an understanding

Bahr v Nicolay (No 2) [10.80] Bahr v Nicolay (No 2) (1988) 164 CLR 604 High Court of Australia 766 [10.75]

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Bahr v Nicolay (No 2) cont. [This case has previously been twice extracted in Chapter 5 as to the meaning of fraud as an exception to indefeasibility and the scope of the “in personam” exception to indefeasibility. At this point the significance of the case is as to the circumstances in which an owner’s conduct will create an express or a constructive trust.] MASON CJ AND DAWSON J: The facts of this appeal have been set out in the reasons for judgment prepared by Wilson and Toohey JJ and we need not repeat them. … The appellants submitted that cl 4 creates a trust in favour of them as third parties, in accordance with the principles enunciated in cases such as In re Schebsman; The Official Receiver v Cargo Superintendents (London), Ltd and Schebsman (1944) Ch 83 and Green v Russell; McCarthy (Third Party) (1959) 2 QB 226. However, in the absence of the manifestation of a clear intention to create a trust, the courts have been reluctant to hold that a trust exists. Du Parcq LJ elegantly expressed the traditional attitude when he said: It is true that, by the use possibly of unguarded language, a person may create a trust, as Monsieur Jourdain talked prose, without knowing it, but unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention. This reluctance to accept that the parties have created an express trust has induced the English courts to impose what has been described as a constructive trust in order to protect a prior interest from destruction on the registration of a later interest: see Bannister; Binions v Evans (1972) Ch 359; Lyus v Prowsa Ltd (1982) 1 WLR 1044; 2 All ER 953. Bannister itself was not a third party trust. It was simply a case in which a transferee, who took a transfer as trustee, repudiated his trust and asserted a beneficial title in himself. On the other hand Fullagar J stated a contrary view in Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 at 67: “It is difficult to understand the reluctance which courts have sometimes shown to infer a trust in such cases.” His Honour was referring to contracts whereby a benefit is promised to a third party. We agree with his Honour’s comment. If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason why in a given case an intention to create a trust should not be inferred. The present is just such a case. The trust is an express, not a constructive, trust. The effect of the trust is that the second respondents hold Lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement. Even if we had not reached this conclusion, we would not have regarded the registration of the transfer in favour of the second respondents as destroying the appellants’ rights. Having regard to the intention of the parties expressed in cl 4 of the later agreement, the subsequent repudiation of cl 6 of the 1980 agreement constituted fraud. The case therefore fell within the statutory exception with the result that the appellants’ prior equitable interest prevails over the second respondents’ title, the second respondents taking with notice of that interest. WILSON AND TOOHEY JJ: In 1979 the appellants, Mr and Mrs Bahr, acquired Cervantes Lot 221 and the business of a general store conducted on it, together with a licence from the Crown to occupy Cervantes Lot 340. That licence carried with it the right to call for a Crown Grant of Lot 340 on the erection of commercial premises on the land by 14 August 1980. Cervantes is a seaside town in Western Australia. The appellants needed finance in order to build the premises on Lot 340. After unsuccessful approaches to financial institutions and others, they approached the third respondents who carried on business as real estate agents. They did so at the suggestion of Lloyd Moris Callard who was employed by the third respondents as the manager of one of the sections of their business. Mr Callard suggested [10.80]

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Bahr v Nicolay (No 2) cont. a plan by which the appellants sell Lot 340 under an arrangement which would permit them to occupy the land as lessees and thereafter to buy it back. This would provide them with cash and, it was thought, enable them to re-acquire the land when they were in a financial position to do so. The first respondent was a client of the third respondents who for some years had acted as his agent in the investments of moneys. At all material times the first respondent lived in Canada. Mr Callard and Ian Langdon Shellabear, one of the third respondents, spoke to CAM Robertson, a solicitor who held power of attorney for the first respondent. Mr Shellabear then got in touch with the first respondent who agreed to buy Lot 340 under a lease and buy-back arrangement. By an undated contract, stamped 25 June 1980, the appellants agreed to sell Lot 340 to the first respondent for the sum of $32,000, payable as to $16,000 on execution and as to $10,000 when construction of the premises reached plate height, with the balance of $6,000 to be paid within three days of receipt by the first respondent of a certificate of compliance from the building surveyor of the relevant shire. The appellants undertook to complete the building by 14 August 1980, thereafter to apply for the issue of a Crown Grant and then to take all necessary steps to transfer the land into the name of the first respondent. The first respondent in turn agreed to lease the land to the appellants for a term of three years from 14 August 1980 for an annual rental of $4,000. Clause 6 of the agreement read: The Vendors hereby further agree that upon the expiration of the lease contained in clause 5 hereof they will enter into a contract with the Purchaser for the purchase by the Vendors of the land for a sum of FORTY FIVE THOUSAND DOLLARS ($45,000) payable by way of TEN (10%) per cent deposit with the balance of the purchase moneys to be paid at settlement. Settlement is to be effected thirty (30) days after the payment of the deposit. By cl 9, time was expressed to be of the essence “of this contract”. Clause 10 incorporated the Real Estate Institute of Western Australia (Inc) 1980 General Conditions for the Sale of Land into the contract. Burt CJ, in the Full Court, said of cl 6: That clause does not in terms impose any obligation upon the first respondent to sell but in so far as it imposes an obligation upon the appellants to “enter into a contract with (the first respondent) for the purchase” by them of the land I think by necessary implication the clause placed upon the first respondent an obligation to agree to sell back. And that was certainly the understanding of the parties. The trial Judge so held and I think that he was right. Counsel for the first respondent conceded the point in his argument before us. If it had been necessary to do so, the trial Judge would have rectified the agreement to make the position clear but in my view it was not necessary to do so. In this Court none of the parties sought to depart from the position described by Burt CJ and we must deal with the appeal accordingly. The effect of the arrangement made between the parties was that the first respondent outlaid $32,000 for which he was to receive at the end of three years an amount of $45,000 together with rent over that period amounting to $12,000. By letter dated 20 October 1980 the Lands Department informed the appellants that a Crown Grant for Lot 340, registered in their names, had that day been issued by the Land Titles Office. On 5 March 1981 the appellants transferred the land to the first respondent. They did not then lodge a caveat to protect their interest arising from cl 6 of their agreement with the first respondent. The building on Lot 340 was completed by 14 August 1980 and the appellants began to operate the business of a general store, post office and newsagency business, together with a liquor store on Lot 221. In December 1980 they sold the post office and newsagency business to FJ and M Hesford. During 1981 they made attempts to sell the business of general store conducted on Lot 340 and the liquor store on Lot 221. Those attempts did not come to anything. The second respondents were among those interested. They lived at Green Island, some 50 kilometres south of Cervantes, and were 768 [10.80]

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Bahr v Nicolay (No 2) cont. known to Mr Callard both personally and as a client of the third respondents. It is unnecessary to trace the rather tangled chain of negotiations that took place, involving to different degrees all the parties to this appeal; but it eventuated in the second respondents making the first respondent an offer to buy Lot 340. There is no doubt that the second respondents were aware of the agreement between the appellants and the first respondent. Indeed Mr Robertson, as attorney and solicitor for the first respondent, refused to enter into any contract with the second respondents unless that contract contained express reference to the earlier agreement. By an agreement dated 26 December 1981 the first respondent sold Lot 340 to the second respondents for the sum of $40,000. The agreement is on a standard form of offer and acceptance which incorporates the Real Estate Institute’s General Conditions for Sale. Added to the standard conditions in the offer and acceptance is a further “condition” in these terms: 4. That the Purchaser acknowledges that an agreement exists between Walter Bahr & Joanna Maria Bahr and Marcus Grenville Nicolay as stamped and signed on the 5th March 1980. The reference to 5 March 1980 is an error but nothing turns on that. It was common ground that the agreement referred to was that made between the appellants and the first respondent, stamped 25 June 1980. Under the agreement between the first respondent and the second respondents settlement was due on 4 January 1982. In fact it took place on 31 December 1981 and the second respondents thereupon became the registered proprietors of Lot 340. On 3 January 1982 Mr Callard told the appellants that Lot 340 had been bought by the second respondents. The evidence suggests that this was the first time the appellants had been told. The appellants did not lodge a caveat to protect their interest under cl 6 until 14 January 1982, that is after the second respondents had been registered as the proprietors of Lot 340. On or about 6 January 1982 the second respondents sent to the appellants’ solicitors, Northmore Hale Davy & Leake, a letter, the operative part of which read: As requested to (sic) Mr Callard of Shellabear & Son we are writing to confirm as pointed out by Shellabear & Son the clause relating to the purchase of Lot 340 by W & JM Bahr is recognised (sic) by us and providing 3 months notice of their intention to purchase is given on July 1st 1983 with 10% of the purchase money then we will agree to sign an offer for $45,000 plus any improvement at cost from this date. It will be recalled that, under the agreement between the appellants and the first respondent, the former held Lot 340 as lessees for a term of three years from 14 August 1980. Why the appellants should be required to give three months’ notice of “intention to purchase” is obscure. Why they should pay for improvements presumably effected by them is even harder to understand. On 17 February 1982 the appellants’ new solicitors wrote to the second respondents a letter which concluded: We confirm that at the expiration of the lease our clients will enter into a contract with you to purchase Lot 340, Cervantes for the sum of $45,000.00 in terms of their agreement with Mr Nicolay and your recent letter to Messrs Northmore Hale Davy & Leake. On 23 June 1983, that is before the lease had expired, the appellants’ solicitors wrote to the second respondents with a cheque for $4,500 by way of deposit and an offer and acceptance form relating to the sale of Lot 340 from the second respondents to the appellants. The letter also contained a “Notice of Exercise of Option”, with the comment: It is our view that on the basis of the agreement entered into between yourselves and Mr Nicolay and subsequent correspondence from yourselves to the then solicitors representing Mr and Mrs Bahr that a binding option agreement exists between you and the Bahrs. The reference to an option is not entirely clear. It may be that the appellants’ solicitors were treating the letter of 6 January 1982 as an option. But it seems more likely that they regarded cl 6 as conferring [10.80]

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Bahr v Nicolay (No 2) cont. an option on the appellants. Whatever their view of their clients’ position, the claim made by the appellants in this litigation is based on the original contract between them and the first respondent and it was in terms of the contract that the litigation was fought. By letter dated 29 June 1983 the second respondents’ solicitors returned the cheque for $4,500 and the other enclosures with the letter of 23 June, making it clear that their clients did not intend to sell Lot 340 to the appellants. On 19 August 1983 the appellants’ solicitors wrote to Mr Robertson with the statement: “Our clients now require the property to be re-conveyed …” On the same day Mr Robertson replied that: “… my client is not able to dispose of the subject property being Lot 340 Cervantes as it has already been disposed of to a client negotiated by Shellabear & Son.” On 1 September 1983 the appellants issued a writ against the first respondent and the second respondents. They joined the third respondents as defendants some time later. As finally amended, the statement of claim sought various heads of relief including an order that Lot 340 vest in them on payment of $45,000, alternatively specific performance of the agreement made between the appellants and the first respondent, and damages against all respondents. It is in the conduct of the second respondents that fraud must be found. The evidence is far from precise. In cross-examination the second respondent David George Thompson said that when he offered $40,000 for Lot 340 he believed from Mr Callard that the appellants were in financial trouble: “In other words, they weren’t going to survive.” The tenor of his evidence was that he knew of the “buy-back” arrangement between the appellants and the first respondent but thought that the appellants’ financial position made it unlikely that they would be able to repurchase Lot 340. There is no doubt that the second respondents took a calculated risk that the appellants would be unable to find the $45,000 required by cl 6. As early as February 1982 differences had arisen between the appellants and the second respondents, though it was in relation to the purchase by the latter of the business being conducted by Mr and Mrs Hesford on Lot 340. On 17 February 1982 the appellants’ solicitors wrote to the second respondents regarding occupancy of Lot 340. That letter concluded in terms that are set out earlier in these reasons. On 3 March 1982 the second respondents’ solicitors replied: our clients have no intention of entering into a contract with your clients to sell the property for $45,000 and maintain that they are not bound by any terms of the agreement between your clients and Mr Nicolay. We refer you to Section 68 of the Transfer of Land Act 1893 as amended and the authorities on this subject. Can it be said, using the language of Waimiha Sawmilling Co v Waione Timber Co, at 106, that the designed object of the transfer to the second respondents was to cheat the appellants of a known existing right? Notwithstanding the various matters to which we have referred, we think the evidence falls short of establishing that case. The second respondents agreed to buy Lot 340 in the hope, even the expectation, that the appellants would not be able to buy back Lot 340. But the evidence does not justify a finding that it was their intention to ensure that the appellants did not do so. However it does establish that the second respondents took a transfer of Lot 340, knowing of cl 6, accepting an obligation to resell to the appellants and communicating that acceptance to Callard, but banking on the appellants’ inability to find the $45,000 necessary to implement the clause. What are the consequences of that finding? It is nearly a century since, in Gibbs v Messer (1891) AC 248 at 254, the Privy Council described the Torrens System in these terms: The object 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. That end is accomplished by providing that every one who 770

[10.80]

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Bahr v Nicolay (No 2) cont. purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title. That statement still stands as an exposition of the nature and purpose of the Torrens System, though “bona fide” must be equated with “in the absence of fraud”, and “indefeasibility” is a word that does not appear in all the Torrens statutes of this country. Nevertheless, in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker (1967) 1 AC 569, at p 585 made it clear that: “… this principle 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.” Sir Garfield Barwick, who was a member of the Privy Council in Frazer v Walker, commented in Breskvar v Wall, at 384-385: Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title. This vulnerability on the part of the registered proprietor is not inconsistent with the concept of indefeasibility. The certificate of title is conclusive. If amended by order of a court it is, as Barwick CJ pointed out at p 385, “conclusive of the new particulars it contains”. Returning to Frazer v Walker, the Privy Council said, at p 585, of claims in personam: The principle must always remain paramount that those actions which fall within the prohibition of sections 62 and 63 may not be maintained. The reference to ss 62 and 63 is a reference to the Land Transfer Act 1952 (NZ), roughly corresponding with ss 68 and 199 of the TLA. The point being made by the Privy Council is that the indefeasibility provisions of the Act may not be circumvented. But, equally, they do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the registered proprietor after registration: Barry v Heider (1914) 19 CLR 197. And we agree with Mahoney JA in Logue v Shoalhaven Shire Council (1979) 1 NSWLR 537, 563 that it may arise from conduct of the registered proprietor before registration. The evidence leads irresistibly to the following conclusions. The second respondents understood through their agent Callard that the first respondent would not sell Lot 340 unless they agreed to be bound by the obligation in cl 6 which required the first respondent to resell to the appellants. The second respondents bought Lot 340 on the understanding common to vendor and purchasers that they were so bound and cl 4 was included to give effect to that understanding. Clause 4 may have been, of itself, insufficient for that purpose but the second respondents’ letter of 6 January 1982 and their two offers of 8 January 1982 put beyond doubt their acknowledgement of their obligation to the appellants. By taking a transfer of Lot 340 on that basis, and the appellants’ interest under cl 6 constituting an equitable interest in the land, the second respondents became subject to a constructive trust in favour of the appellants: Lyus v Prowsa Developments Ltd; Binions v Evans (1972) Ch 359 at 368. If it be the position that the appellants’ interest under cl 6 fell short of an equitable estate, they nonetheless had a personal equity enforceable against the second respondents. In either case ss 68 and 134 of the TLA would not preclude the enforcement of the estate or equity because both arise, not by virtue of notice [10.80]

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Bahr v Nicolay (No 2) cont. of them by the second respondents, but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of their contract with the first respondent. In light of the conclusion that the appellants had, by reason of their contract with the first respondent, an equitable estate in Lot 340 and that, as against the second respondents, they have such an estate or in any event a personal equity, the question arises whether the appellants may now enforce their rights in regard to Lot 340. As to the first respondent, the trial judge’s findings were in these terms: I find that the first defendant was under an obligation pursuant to the terms of that agreement (the agreement stamped 25 June 1980) to sell to the plaintiffs Lot 340 at the expiration of the term of the lease for the price of $45,000 payable by a deposit of 10% and the balance within 30 days payment of such deposit, and that were it not for the fact that the first defendant had parted with possession of such land, the plaintiffs, subject to being ready willing and able to perform their obligation under the agreement, would be entitled to an order for specific performance. I find however that the plaintiffs were not ready willing and able to so perform, the result of which is that not only are they not entitled to specific performance against the plaintiff (sic), but they are also not entitled to damages … Later his Honour said: I further find that the plaintiffs, not having established that they were ready willing and able to complete in accordance with the provisions for completion in that they failed to establish their ability to pay the purchase price, are not in any event entitled to an order for specific performance against either the first or second defendants. … In any event the first respondent cannot now perform his obligations under his contract with the appellants except by joining with them in proceedings against the second respondents or pursuing his third party claim against those respondents. The second respondents remain the registered proprietors of Lot 340 and can, if required to do so, transfer that land to the appellants. The question to be answered is whether, at trial, the appellants did establish their readiness and willingness to perform their obligations under the contract made with the first respondent. The second respondents, it must be remembered, had made it clear at an early stage that they did not intend to transfer Lot 340 to the appellants even if the purchase price was forthcoming. They were relying upon the strength of their title. And the first respondent had, by transferring the land to the second respondents, made it impossible for him (directly at any rate) to meet his obligations under cl 6 of the original agreement. In those circumstances the trial judge ought, if there was no other obstacle to specific performance, to have made a decree such as was made in Mehmet v Benson. In this way his Honour could have ensured that, so long as the appellants were still in a position to perform their obligations, they would be entitled to specific performance. The appellants are entitled to a decree for specific performance that permits them, within a reasonable time, to furnish to the second respondents the purchase price of $45,000 in return for which the second respondents must transfer Lot 340 to them. Since all parties are before the Court, there is no need to make orders for specific performance directed to the first respondent: see Cheshire and Fifoot, Law of Contract, 5th Aust ed (1988), par 1523. And, since cl 6 of the original agreement contemplates a cash transaction, there seems little point in requiring the appellants and the second respondents to enter into a contract at this stage. It may be that an inquiry is necessary in respect of occupation of the land and as to rates, taxes and other outgoings. If these matters cannot be agreed between the parties, the Court should hear submissions as to the orders appropriate in the 772 [10.80]

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Bahr v Nicolay (No 2) cont. circumstances. In the light of these conclusions, it is unnecessary to take up any questions raised by the first respondent’s cross appeal or the notices of contention filed by the first respondent and the third respondents. The appeal to this Court should be allowed. The judgment of the Full Court should be set aside so far as it relates to the matters the subject of this appeal and in lieu the appellants’ appeal to that Court should be allowed. BRENNAN J: The attitude of each party has been persisted in since that time. The Thompsons take their stand on the provisions of ss 68 and 134 of the Transfer of Land Act 1893 (WA) (“the TLA”). Section 68 of the TLA provides that, except in case of fraud, the registered proprietor of land holds the land subject only to such encumbrances as may be notified on the certificate of title save for certain exceptions, none of which is relevant here. Section 134 provides, inter alia, that, except in the case of fraud, no person taking a transfer of land “shall be affected by notice actual or constructive of any trust or unregistered interest any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.” These provisions are designed to achieve the main object of the Torrens system of registration of interests in land which the Privy Council in Gibbs v Messer (1891) AC 248 at 254, perceived to be: 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. That end is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title. The consequence is that, whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser has notice, a purchaser who takes with notice of an antecedent interest but who becomes registered under the TLA without fraud takes free of that interest: Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37; Munro v Stuart; Friedman v Barrett, Ex parte Friedman (1962) Qd R 498 at 511-512. Registration of the transfer is not fraudulent merely because the transferee knows that an antecedent interest of which he has notice will be defeated thereby. As Kitto J said in Mills v Stokman (1967) 116 CLR 61 at 78: “merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud”. However, the title of a purchaser who not only has notice of an antecedent unregistered interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation. In Barry v Heider (1914) 19 CLR 197, Isaacs J said of the Land Transfer Acts (at p 213): They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them. In Frazer v Walker (1967) 1 AC 569 at 585, the Privy Council said that 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”. Barwick CJ, who was a member of the Judicial Committee in Frazer v Walker, commented in Breskvar v Wall (1971) 126 CLR 376 at 384-385: Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title. [10.80]

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Bahr v Nicolay (No 2) cont. Orders of that kind do not infringe the indefeasibility provisions of the TLA. Those provisions are designed to protect a transferee from defects in the title of the transferor, not to free him from interests with which he has burdened his own title. In Loke Yew v Port Swettenham Rubber Company, Limited (1913) AC 491 Lord Moulton gave an example of a case where equity would enforce the terms on which a transfer was taken. He said (at 504-505): Take for example the simple case of an agent who has purchased land on behalf of his principal but has taken the conveyance in his own name, and in virtue thereof claims to be the owner of the land whereas in truth he is a bare trustee for his principal. The Court can order him to do his duty just as much in a country where registration is compulsory as in any other country, and if that duty includes fresh entries in the register or the correction of existing entries it can order the necessary acts to be done accordingly. By contrast, Waimiha Sawmilling Co v Waione Timber Co (1926) AC 101 was a case where the purchaser had notice of a claim to an unregistered interest but had given no undertaking to be bound by it. That case illustrates the proposition that where a transferee has purchased with mere notice of an unregistered interest, registration of the transfer to him does defeat the unregistered interest, but Waimiha Sawmilling Co v Waione Timber Co does not suggest that a registered proprietor who has purchased on terms that his title will be subject to an unregistered interest is able to defeat that interest upon the registration of his transfer. A registered proprietor who has undertaken that his transfer should be subject to an unregistered interest and who repudiates the unregistered interest when his transfer is registered is, in equity’s eye, acting fraudulently and he may be compelled to honour the unregistered interest. A means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest. That is not to say that the registration of the transfer to such a proprietor is affected by such fraud as may defeat the registered title: the fraud which attracts the intervention of equity consists in the unconscionable attempt by the registered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title. The principles are stated in Bannister v Bannister (1948) 2 All ER 133 and Lyus v Prowsa Ltd (1982) 1 WLR 1044; (1982) 2 All ER 953. In Bannister, Scott LJ said (at 136): It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available. Nor is it, in our opinion, necessary that the bargain on which the absolute conveyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It is enough that the bargain should have included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by another. In Lyus v Prowsa Ltd land was sold by a bank, as mortgagee exercising a power of sale, subject to, but with the benefit of, a prior agreement to sell made between the mortgagor and the plaintiffs. The bank had consented to but was not bound by the plaintiffs’ contract. The purchaser from the bank (and a sub-purchaser who was subject to the same obligation) was held to take its interest subject to a constructive trust for the plaintiffs. Though a statutory provision similar to s 68 of the TLA was relied on, Dillon J found (at 1054; 962) that although there is no fraud merely in relying on legal rights conferred by statute, there was fraud in a purchaser’s “reneging on a positive stipulation in favour of the plaintiffs in the bargain under which the (purchaser) acquired the land”. 774 [10.80]

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Bahr v Nicolay (No 2) cont. Therefore, although a purchaser who secures registration of a transfer of the fee simple merely with notice of a third party’s right to purchase acquires on registration of his transfer a title freed of any obligation to the third party which equity would otherwise impose, a purchaser who has undertaken – whether by contract or by collateral undertaking – to hold his title subject to a third party’s right to purchase remains bound by his undertaking after registration of his transfer. If he should repudiate the third party’s right to purchase, equity imposes a constructive trust so that the registered proprietor holds his title on trust for the third party to the extent of the third party’s interest. It might be thought that, if the undertaking from which the constructive trust originates is found in an oral collateral agreement, s 34 of the Property Law Act 1969 (WA) or the Statute of Frauds would preclude its enforcement. But an undertaking that a title to be acquired on registration of a transfer shall be held subject to the unregistered interest of a third party is not itself a disposition of the third party’s interest; and s 34 of the Property Law Act requires only an instrument disposing of an interest in land to be in writing: Adamson v Hayes (1973) 130 CLR 276 at 306. As to the Statute of Frauds, Scott LJ held in Bannister v Bannister that it presents no obstacle to the imposition of a constructive trust in cases where the constructive trust has its origin in an oral agreement. If a statute enacted to prevent fraud could be raised by a purchaser as a cloak for unconscionable conduct, the statute would be put to a purpose for which it was not intended: Rochefoucauld v Boustead (1897) 1 Ch 196; Cadd v Cadd (1909) 9 CLR 171 at 187. Perhaps the theory which supports equity’s willingness to modify the effect of the Statute of Frauds has not been convincingly expounded. Nevertheless it is a doctrine of long standing that the Statute does not preclude the imposition of a constructive trust when a transferee relies on the absolute character of the transfer to defeat a beneficial interest which, according to the true bargain between transferee and transferor, is to belong to another, and there is no reason why that doctrine should be doubted: Organ v Sandwell (1921) VLR 622 at 630. As the Thompsons not only had notice of the Bahrs’ interest but had undertaken that their title would be subject to the Bahrs’ interest, they cannot rely on the Property Law Act, the Statute of Frauds or the TLA to avoid honouring their undertaking. As a contractual undertaking, it can be enforced by Nicolay to whom it was given. As the Bahrs’ interest was created by an antecedent agreement pursuant to which Nicolay was bound to enforce the Thompsons’ undertaking to honour the Bahrs’ interest, there can be no reason for denying the Bahrs’ standing to enforce the undertaking against the Thompsons directly in a suit in which Nicolay is a party: Snelling v John G Snelling Ltd (1973) QB 87 at 99. Moreover, the constructive trust on which the Thompsons hold their title is a trust to give effect to the Bahrs’ interest. As beneficiaries of that trust, the Bahrs may enforce their interest against their trustee directly: Neale v Willis (1968) 19 P & CR 836, and cf Hersey v Giblett (1854) 18 Beav 174 (52 ER 69). The Bahrs are therefore entitled to enforce their right of purchase directly against the Thompsons. They do not thereby impeach the registration of the transfer to the Thompsons. Nor does the TLA present a bar to the enforcement of the undertaking, though (to adopt what Barwick CJ said in Breskvar v Wall, at 385) the terminal point of a decree enforcing the undertaking might be an order directing the Thompsons to divest themselves wholly of the estate vested in them by that registration. The evidence showed conclusively that the Bahrs had performed the terms of cl 6 when the suit was commenced. The evidence further showed not only that the Bahrs were anxious to complete the repurchase but also that they had some arrangements in hand to finance it. The adverse finding that they could not raise the balance purchase price seems not to have taken account of the fact that it is payable only in exchange for the instruments necessary to secure registration of a clear title, and that lot 340 would thus be available on settlement as security to a mortgagee. There is no foundation for a finding that the Bahrs – or any nominee of the Bahrs if they chose to assign their interest as purchasers – would be unable to complete. The decree to which the Bahrs are entitled on a finding that they are [10.80]

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Bahr v Nicolay (No 2) cont. ready, willing and able to perform their obligations does not expose the Thompsons to the risk of loss. The decree would not require the Thompsons to transfer lot 340 to the Bahrs except in exchange for the purchase price. I agree with Wilson and Toohey JJ that the proceedings taken pursuant to an authority signed by the Bahrs under Pt X of the Bankruptcy Act 1966 (Cth) as it then stood placed no restriction on the enforcing of their right to repurchase lot 340.

[10.85]

Notes and Questions

1. The judgments of Mason CJ and Dawson JJ in Bahr v Nicolay (No 2) (1988) 163 CLR 490 expand the definition of fraud within the indefeasibility provisions of the Torrens system statutes (at least as previously understood). This concept is considered at [5.150]–[5.210]. 2. The finding of a constructive trust by Wilson and Toohey JJ in Bahr v Nicolay involves the enforcement of that constructive trust under the in personam exception to indefeasibility. That exception is also considered earlier at [5.215]–[5.265]. The finding by Brennan J of an express trust falls readily within the in personam exception as it involves an interest created by the registered proprietor personally. 3. Was there any factual basis why the Thompsons had been reluctant to continue their arrangement with the Bahrs? Did the nature of these proceedings releave the Bahrs from establishing financial matters they would have had to have shown in other proceedings?

Paulet v Stewart [10.90] Paulet v Stewart [2009] VSC 60 [footnotes omitted] [The plaintiff claimed beneficial ownership of land in the Melbourne suburb of Croydon which was held in the name of the defendant. The plaintiff claimed that she was intended as the beneficial owner of the property or that she was entitled by reason of contributions to the property. The plaintiff had fallen out with her mother (referred to as Mrs Paulet) but was the beneficiary of her mother’s estate.] 246. In my opinion, the plaintiff’s claim that the Croydon property was held on trust for Mrs Paulet fails for a number of reasons. First, such a claim is quite inconsistent with the existence of the Loan Agreement made on 7 November 1990, which I consider was a valid agreement and not a sham. It seems to me that neither the plaintiff nor her legal advisers ever came to grips with the damaging contradiction between the claim that Mrs Paulet was the beneficial owner of the Croydon property and the claim that the defendant owed Mrs Paulet’s estate $50,000 plus interest thereon for the loan made by her at the time of the purchase of the Croydon property. Although they were not pleaded in the alternative, they could not stand together. Either the Loan Agreement was valid or it was a sham, entered into for the purpose of disguising Mrs Paulet’s beneficial ownership of the Croydon property. In the latter case, it was quite wrong to attempt to recover under the falsely created Loan Agreement. As I have said, however, I consider that the Loan Agreement was valid. 247. Secondly, such a claim is also contrary to the existence of the Loan Agreement allegedly made on or about 1 December 1992. The first of the two undated documents in the plaintiff’s handwriting, which refers to the sum of $25,500 being paid by Mrs Paulet to her grandson, also refers to that payment being made by Mrs Paulet on behalf of the defendant “to allow titles to be transferred fully” to the defendant. If, as the second of these two undated handwritten documents suggests, the 776 [10.85]

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Paulet v Stewart cont. Croydon property was to be held by the defendant on trust for her grandmother, then it would be completely contrary to this intention for the payment by Mrs Paulet to Mr Bill Stewart to be treated as a loan to the defendant. 248. Thirdly, the plaintiff’s evidence about who was the initial beneficial owner of the Croydon property was contradicted by the evidence of Mr Bill Stewart. He appeared to me to be independent of both parties and I generally accept his evidence on this issue. It supported the defendant’s version of events. On the other hand, the plaintiff’s evidence on this issue was to some extent supported by that of Mr Nigel Stewart and Mrs Duval. I accept that Mrs Paulet may have been contemplating, in August 1990, moving closer to her daughter and that she may have even looked at possible blocks of land. But insofar as the evidence of Mr Nigel Stewart and Mrs Duval went further and claimed that the Croydon property had in fact been purchased by Mrs Paulet, then I reject it. Although they were both aligned with the plaintiff’s cause, and Mr Nigel Stewart had a very real interest to support the plaintiff’s case, I do not consider that their evidence on this issue was deliberately false. Rather, I consider that after 18 years their memory of what had occurred was, not surprisingly, vague and that they had become confused between what they actually remembered and what had been discussed in the last couple of years with the aggrieved plaintiff. It was also apparent that Mr Nigel Stewart was suffering from some memory loss resulting from the onset of dementia, as had been conceded by the plaintiff’s counsel in his opening. 249. Fourthly, I reject the plaintiff’s evidence about how it was that the defendant’s name came to be on the title. In my opinion, it was inherently improbable that the defendant would have volunteered to have her name on the title to protect her brother’s house from claims by his ex wife. I do not consider that the defendant was sophisticated enough to have put herself forward in this way. Mr Bill Stewart’s explanation was far more credible. It also explains why the inclusion of the defendant’s name was, as the plaintiff’s counsel submitted, “an afterthought”. But as events transpired, with Mr Bill Stewart pulling out of the purchase, the defendant was left as the legal and beneficial owner of the whole property. 250. Fifthly, Mr De Kever’s evidence did not support the plaintiff’s claims that there was an arrangement to hide her mother’s ownership of the Croydon property and that it was discussed with him. Mr De Kever’s evidence was strong support for the conclusion that Mrs Paulet had lent money to her grandchildren, but was very concerned to see that her loan was secured. 251. Sixthly, contemporaneous writings by the plaintiff treated the Croydon property as the defendant’s and one in which the plaintiff had no equitable interest despite her being the sole beneficiary of her mother’s estate. I refer in particular to the letters dated 26 October and 29 October 2004 from the plaintiff and Mr Nigel Stewart to the CBA and to the three handwritten notes from the plaintiff to the defendant, one undated and two bearing the fax header 31 March 2004. Further, although they may or may not have been that contemporaneous, the way in which payments made by the plaintiff in reduction of the home loan (and to assist in purchasing and improving the Croydon property) were described in notations by the plaintiff as loans to the defendant which had to be repaid indicate that the plaintiff did not see the Croydon property as belonging to her. The deposit slips, at least the three payments of $5,000, all special repayments, are obviously excellent examples of the plaintiff’s state of mind, where she has written once on all of them and twice on two of them, that the money being paid in reduction of the home loan had to be repaid by the defendant. Finally, I consider that Mr De Kever’s brief to counsel dated 15 October 2004 accurately recorded the plaintiff’s instructions. 252. Seventhly, there was no mention of the Croydon property in the list of Mrs Paulet’s assets in the plaintiff’s affidavit as the executor of her mother’s estate. This was a significant omission, in my opinion. I do not accept the plaintiff’s evidence that she was told by Mr De Kever that the Croydon property could not be included. Nor do I believe that the omission was brought about by Mr De Kever [10.90]

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Paulet v Stewart cont. being too hasty. I am sure he would have been careful to ensure that the assets were listed correctly. It is true that there is also no mention in the plaintiff’s affidavit of the debt owed by the defendant to Mrs Paulet’s estate, but as I explain later, in my opinion, that debt lapsed on the death of Mrs Paulet. 253. Eighthly, as discussed above, the defendant has contributed at least $90,000 and probably more, in reduction of the home loan. Why the plaintiff would arrange for such a large proportion of the defendant’s income to be expended in this way, with the result that the plaintiff had to meet a lot of the defendant’s daily living expenses, if the defendant was not purchasing her own home, was never satisfactorily explained. Further, for the reasons already given, I am not prepared to treat any part of these payments as rent. 254. Ninthly, there was no consistent evidence from the plaintiff about whose property it was. On some occasions, it was Mrs Paulet’s, on others it was to be for Mrs Paulet and the plaintiff, and once it was even: “my mum told me that the house was going to be for Nigel, nanna and I”. 255. Tenthly, I do not consider that the fact that the plaintiff spent at least $50,000 on making improvements to the Croydon property at a time when she was contemplating moving to that property assists one in reaching the conclusion that the plaintiff regarded herself as the beneficial owner of the Croydon property. As the plaintiff readily admitted, many of the improvements were essential, or at least helpful, for her own benefit. Moreover, these payments and others, such as those for council rates, utilities and insurance, were equally consistent with a desire on the part of a generous mother to assist her profoundly deaf daughter to live an independent life. 256. Finally, the plaintiff’s actions with respect to her living at the Croydon property are at best equivocal for her claim. Although the plaintiff said that the initial idea was that a granny flat would also be constructed on the Croydon property for her to live in, this did not occur in the six years between the purchase of the property and Mrs Paulet’s death. Then, the plaintiff did not move to the Croydon property until some 2.5 years after her mother’s death, when she sold her Mt Evelyn property. About eight months after that, the plaintiff purchased the Chirnside Park property and started sleeping there. But she still went to the Croydon property during the day. At no time during the period of nearly eight years between her mother’s death and the lockout did the plaintiff take any step to have the Croydon property transferred into her name. Her explanation for this failure was that if she raised the issue of ownership with the defendant, she would be assaulted by the defendant. I do not accept this evidence. In my opinion, much of the plaintiff’s evidence about her daughter’s violent behaviour was exaggerated. Mr Nigel Stewart’s evidence on this point seemed more credible. That is, there were some instances of the defendant assaulting the plaintiff, which the defendant virtually conceded. But, in any event, it seems to me that if the defendant was always belting the plaintiff up, resolution or clarification of the question of ownership of the Croydon property was all the more pressing. The Claims Arising Out of the Maintenance, Improvement and Mortgage Payments 277. Finally, there are the plaintiff’s claims that she is entitled to such beneficial interest in the property as is represented by her contribution of at least $181,928.92 in maintaining and improving the Croydon property and in making mortgage repayments in respect of the Croydon property, alternatively that she is entitled to repayment of that sum. However the claims are framed, I consider that the plaintiff has failed to make out any entitlement. 278. The primary submission by counsel for the plaintiff in respect of these claims was that the plaintiff was entitled to an equity in the Croydon property proportionate to, or measured by, her maintenance, improvement and mortgage payments. In Muschinski v Dodds Deane J, with whom Mason J, as his Honour then was, agreed, described the equity in the following terms: … the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed on the basis and for the purposes of the relationship or endeavour would 778 [10.90]

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Paulet v Stewart cont. otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him to do so. 279. In Henderson v Miles (No 2), this was described by Young CJ in Eq as a “windfall equity” for the claimant in that, if the equity were not recognised, the other party would receive “an unconscionably retained windfall”. In that case there had been “no broken promise by the defendants nor any unfair inducement by them to bring the plaintiff to her present position”. Nevertheless, it was held that the plaintiff was entitled to an equitable charge on the defendants’ property. 280. In this case, however, there was, in my opinion, no “joint relationship or endeavour” between the plaintiff and the defendant. Rather, I am satisfied that these payments were volunteered by the plaintiff as part of her generous efforts to assist her profoundly deaf daughter to live an independent life or were made at a time when she was contemplating moving into the Croydon property and were for the purpose of making essential, or at least helpful, improvements for her own benefit, without any request from, or agreement with, the defendant for the making of the improvements. In either case, I consider that it was never contemplated by either the plaintiff or the defendant at the time of expenditure that the plaintiff was entitled to, or that the defendant was liable to provide to her, any benefit in the Croydon property by reason of any of that expenditure. In my opinion, there is no reliable or satisfactory evidence that the payments were made pursuant to any agreement with the defendant that, in return for making them, the plaintiff would be able to live at the Croydon property for any agreed period or indefinitely. Nor is there any reliable or satisfactory evidence that they were made pursuant to any agreement with the defendant that they were loans which the defendant would repay at any agreed time or when requested to do so by the plaintiff. In those circumstances, in my opinion, there is nothing unconscionable about the defendant retaining the benefit of these payments. 281. The dilemma for the plaintiff is that her own actions cast real doubt on the claims she now seeks to make. If, for example, the plaintiff is asserting that the $49,100 of mortgage repayments were made by her because she was the beneficial owner of the Croydon property or because the defendant had agreed that the plaintiff could live there indefinitely, then why did she write on most of the deposit slips that the amount of the payment was “to be paid back on sale of house”, and other notes, indicating that the payments were loans? If, on the other hand, the plaintiff is asserting that the mortgage repayments were loans by her, then why should she be believed when she has clearly added, after writing the initial notes to the effect that the payments were made on the sole condition that they be repaid “on sale of house”, which event may not occur for many years to come, the condition that they are also repayable when requested by the lender? Similar considerations apply to the maintenance and improvement payments. 282. In my opinion, the appropriate conclusion to draw is that all of these maintenance, improvement and mortgage payments were made by way of gifts from the plaintiff to the defendant, as the plaintiff herself described them on at least one occasion in a contemporaneous communication. I am satisfied that until the relationship between them broke down, the plaintiff was prepared to spend money on meeting the defendant’s daily living expenses and on maintaining and improving the Croydon property and on assisting with the mortgage repayments, knowing that most of the defendant’s pension income was going towards the worthy goal of paying off her home loan. I am convinced that if the plaintiff had been asked, in say 1998, whether she expected anything in return for making these payments or whether she regarded them as loans to the defendant, she would have answered in the negative, and that she would have described the payments as gifts to her daughter. [10.90]

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Paulet v Stewart cont. 283. An alternative way of reaching the same conclusion is to find that, as Mr Johnson, counsel for the defendant, submitted, the plaintiff did not rebut the presumption of advancement by way of a gift from a parent to a child. 284. In Nelson v Nelson, each member of the High Court of Australia held that the presumption of advancement extended to the relationship of mother and child, even adult children. Deane and Gummow JJ also said that the presumption of advancement: … is perhaps not strictly a presumption at all. Rather, the position is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of “advancement”. The consequence is that the equitable estate follows the legal estate and is at home with the legal title; there is an absence of any reason for assuming that a trust arose. The operation of the presumption of advancement may be rebutted by evidence of the actual intention, at the time of the purchase, of the parent or other person who provided the purchase money. Evidence also may be given to support the presumption of advancement. Similar views were expressed by the other members of the Court. 285. In Laskar v Laskar, Lord Neuberger of Abbotsbury, with whom Tuckey and Rimer LJJ agreed, stated: The presumption of advancement still exists, although it was said as long ago as 1970 to be a relatively weak presumption which can be rebutted on comparatively slight evidence: see per Lord Upjohn in Pettit v Pettit [1969] UKHL 5; [1970] AC 777, 814. I would add that it is even weaker where, as here, the child was over 18 years of age and managed her own affairs at the time of the transaction. 286. The factors identified by his Lordship as weakening the daughter’s claim in Laskar are not the same in this case. Whilst the defendant is now 40 years of age, as previously stated, in September 2007 VCAT appointed an administrator of her estate. Further, I have found that, until she asserted her independence in 2004, the defendant’s finances were controlled by the plaintiff. In the circumstances, I agree that the plaintiff did not rebut the presumption of advancement by the mother to her daughter, so that the equitable estate follows the legal estate and no trust in favour of the plaintiff arose. 287. Given these conclusions, it is not necessary for me to embark on the complicated task of deciding what amount the plaintiff should receive by way of a charge over the Croydon property, in order for the defendant’s retention of it not to be regarded as unconscionable. That task is further complicated by the fact that there was no evidence of any increased value in the Croydon property brought about by the improvements. They may have increased the value by significantly more or less than their claimed cost. I simply do not know. This valuation evidence really should have been part of the plaintiff’s case, but given her financial difficulties it is, perhaps, understandable why the expense was not incurred at this stage. Also missing was the evidence required to establish the discounts to be applied to a penultimate figure, in accordance with the approach adopted by McDougall J in Taylor v Streicher.

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Paulet v Stewart cont. Conclusion 288. For all of the above reasons, I have concluded that none of the plaintiff’s various claims succeeds. Accordingly, there will be judgment for the defendant.

Note and Question

[10.95]

The broad concept of undoing injustice represented by the description “windfall equity” is assimilated in the above case to the need to establish a joint enterprise that has failed. The court finds that the failed enterprise analysis and the presumption of advancement principle reach the same result. What if that were not so?

TAKING ADVANTAGE OF ANOTHER Undue influence [10.100] Equity intervened to allow transactions to be set aside where the relationship

between the parties introduced a suspicion that the weaker party had not acted of a free will.

Bridgwater v Leahy [10.105] Bridgewater v Leahy (1998) 194 CLR 457 High Court of Australia CALLINAN, GAUDRON, GLEESON, GUMMOW, KIRBY JJ: [Footnotes omitted] Bill had been born in Wallumbilla and lived there all his life. We have referred to the evidence which showed the amassing by him of considerable land and interests. He was a quiet, reserved man of limited education. He travelled only infrequently away from his home. The primary judge found: He had a reasonable relationship with his daughters, although he really excluded both them, and Stella his wife, from his business affairs, and rather stolidly considered their true place to be “in the home”. Bill’s life revolved substantially about his interest in cattle, and the recreations of shooting and football. … Bill provided only very basic accommodation for his wife and daughters. He was remarkable [sic] frugal. He did not even give birthday presents. His treatment of his wife and daughters in this will was therefore consistent with that general approach Bill felt that the place for Stella and his daughters was in the home, not on the land or engaged in business affairs. On the other hand, he had an “enormous affection” for Neil, “fully trusted him” and, for his part, Neil appreciated the high regard his uncle felt for him. Bill had the goal of retaining the properties as an integrated farming enterprise under reliable and experienced management. His Honour found that this goal was important to him. The Transfers and the Deed, as a means to attain that goal, involved an improvident transaction which was neither fair nor just and reasonable. The effect of the Transfers and the Deed was to dispose of a significant portion of Bill’s assets not for their value of $696,811 but for $150,000. This transaction put it out of Bill’s power to change his testamentary arrangements with respect to that portion of its assets. Further, for all his deep concerns that all his properties be kept together under the one manager, even at the expense of the interests of his children, the form of the transaction was such as to provide no certainty that this necessarily would follow for the remainder of Bill’s life or after his death. Nor is it any sufficient [10.105]

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Bridgwater v Leahy cont. response that, were Bill to retain the $150,000 or assets representing such sum, this would augment the $200,000 which would fall into the residue under cl 4 of the Will upon exercise of the option after his death. Bill’s goal to preserve his rural interests intact and his perception that Neil was the candidate to provide reliable and experienced management thereof were significant elements in his emotional attachment to and dependency upon Neil. The initiative to utilise the circumstance of the sale of the Injune Land (to the retention of which Bill had been opposed) for the irreversible implementation of Bill’s wishes during his lifetime came from Neil. It is not an answer that there was no finding that Neil had pursued the initiative to its implemention in July and November 1988 with the motive or purpose of forestalling any change in Bill’s testamentary intentions. The equity to set aside the Deed may be enlivened not only by the active pursuit of the benefit it conferred but by the passive acceptance of that benefit. Relief The relationship between Bill and Neil meant that, when Neil raised the question of using the proceeds of sale of the Injune Land, they were meeting on unequal terms. Neil took advantage of this position to obtain a benefit through a grossly improvident transaction on the part of his uncle. In some cases, the equity that arises by reason of an unconscientious or unconscionable dealing of the nature with which this appeal is concerned may be satisfied only by setting aside that dealing in its entirety. The dealing may be embodied in the one instrument which contains several provisions or in several instruments. In other circumstances, of which this case is an example, the equity may be satisfied by orders setting aside some but not all of these instruments or some but not all of the provisions thereof. It is unconscionable for Neil and his wife to retain the benefit of the improvident transaction by asserting the forgiveness of the whole of the debt which would otherwise be owing to Bill’s estate. On the findings of fact made by and available to him, the primary judge should have held that the Deed should not be allowed to stand and be given its full effect; the Court of Appeal also should have intervened. A similar conclusion would have followed with respect to the Transfers but for the complexities that would arise in the disentanglement of the transactions involved, including the absence of Sam and the mortgagee as parties to this litigation. In the circumstances of this case and consistently with the framing of relief which, in Lord Blackburn’s phrase, is “practically just” [see Erlanger v New Sombrero Phosphate Company (1878) 3 App Cas 1218 at 1278-1279], the appellants, as representatives of Bill’s estate, properly may elect that only the Deed itself be set aside. However, in seeking equity, the estate must be prepared to do equity [see Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 115]. In particular, weight has to be given to the testator’s wish significantly to benefit his nephew which was expressed in cl 4 of the Will. In the course of argument on this appeal, there was discussion as to the appropriate form of equitable relief if the appeal was successful. In accordance with the authority referred to above, counsel for the respondents stressed the requirements of “practical justice”. Reference was made to Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 to emphasise the importance of the consideration that in the particular circumstances of a case the equity may be satisfied by orders having the effect of setting aside no more than so much of a disposition as prevents the moving party “obtaining an unwarranted benefit at the expense of the other” (at 114). Attention also was drawn to the significance in framing relief of the personal rights of the appellants against the estate under Pt 4 of the Succession Act. Once a court has determined upon the existence of a necessary equity to attract relief, the framing, or, as it is often expressed, the moulding, of relief may produce a final result not exactly representing what either side would have wished. However, that is a consequence of the balancing of competing interests to which, in the particular circumstances, weight is to be given. 782 [10.105]

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Bridgwater v Leahy cont. Further, the implementation of that relief may require additional factual inquiries. Leave to adduce evidence in that respect may be appropriate. When the point arises in an appellate court the orders may be so drawn as to give liberty to apply and to provide for pursuit of such a course in the court of first instance. As will appear, the present appeal is such a case. Although the present action was differently cast, the ultimate question it presents may be appreciated by considering what would be the outcome of an action by the estate to recover from Neil and Beryl the amount forgiven. In that situation and having regard to all the circumstances, would it be consistent with equity and good conscience for Neil and Beryl to plead the Deed as to the full amount of the forgiveness? Would a response by the estate seeking rescission of the Deed as to the whole of the forgiveness succeed? Had the Transfers been implemented and the Will taken effect according to its terms before the Deed was executed, the residuary estate, dealt with in cl 4 of the Will, would have been augmented by recoupment from Neil and Beryl of the amount forgiven by the Deed. The option in Neil’s favour still would have operated but only in respect of the remaining interests of the estate in the Tooks Land and the Mt Leigh Land, together with the partnership interest and the interest in personal property. As we have indicated earlier in these reasons, the consequence of an order setting aside the Deed as to the whole of the forgiveness would be that the substantial amount so retrieved by the estate would fall wholly into the residue divisible under cl 4 equally between Bill’s daughters. The option provision would not apply to it. The interests of Bill’s widow under cl 3 of the Will would be unaffected. What would Neil’s position be under the Will? The Transfers withdrew from the estate what had been the testator’s interests in the Wonga Park Fee Simple, the Wonga Park Perpetual Lease Selection and the Risby Land. The Transfers are not set aside. The testator benefited to the extent of the $150,000 paid by Neil on the revised settlement date of 28 November 1988. Upon the present thesis, the exercise of the option in cl 4, in its remaining operation, would have yielded to Neil (as was in fact the case) assets valued at some $248,000 in exchange for the payment of $200,000. That would not reflect any significant level of benefaction to Neil by his uncle. Had the Transfers not been made and cl 4 had been left to operate in its terms at Bill’s death, then, in exchange for the $200,000 he later paid on exercise of the option, Neil would have received value in a sum greatly exceeding $248,000 which, as we have indicated, represented that which Neil acquired when he exercised the option after Bill’s death. That further value would have been represented by the value at that time of the total consideration of $696,811 payable in accordance with the Transfers for the acquisition of Bill’s interests in the Wonga Park Fee Simple, the Wonga Park Perpetual Lease Selection and the Risby Land. However, as we indicated earlier, Neil had been prepared to pay and had paid $150,000 towards that $696,811. This payment by him should not now be left out of account. The status quo with respect both to the Deed and the Transfers cannot be restored. The issue then is whether, in the situation presented by the setting aside of the Deed but not the Transfers, an allowance should be made by the estate in favour of Neil which qualifies what otherwise would be the full recoupment to the estate of the amount forgiven by the Deed. This was $546,811 of the purchase price under the Transfers of $696,811. Should the estate, as a term of the restoration of its rights to recover the debt, be required to make a provision in Neil’s favour? Before an answer is given, regard must be paid to the subjection of the estate to claims under Pt 4 of the Succession Act. If cl 4 had operated in Neil’s favour, fully in accordance with its terms in respect of the whole of the testator’s lands there indicated, the testator’s daughters as well as his widow would have had their rights against the estate under Pt 4 of the Succession Act, asserting that adequate provision had not been made from the estate for their proper maintenance and support. They might reasonably have expected substantial provision to be made by order in their favour. Nevertheless, if the widow and daughters had pursued the Family Provision Application, regard would have to have been had to such [10.105]

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Bridgwater v Leahy cont. evidence and submissions as were properly presented in opposition to their claims. In particular, some significant weight would have to have been given to Bill’s wish to benefit his nephew by the means adopted in cl 4 of the Will. The result would have been to retain some provision in Neil’s favour after the orders were made on the Family Provision Application. This provision should be reflected in the terms now imposed upon the estate in setting aside the Deed. There should be an allowance in favour of Neil and Beryl from the indebtedness which may be recouped from them by the estate as a consequence of the setting aside of the Deed. The matter should be returned to the Supreme Court to determine, in the absence of agreement in this respect between the parties and after hearing such further evidence (if any) as is allowed, the amount of such allowance. This requires a finding of the present value of the provisions in favour of Bill’s widow and daughters which properly would have been made out of the estate upon the Family Provision Application. This valuation is to be made on the footing that, at Bill’s death, the estate included, in addition to the assets actually devised and bequeathed by the Will, the interests of the testator in the lands identified in the option provision in cl 4 but which had been the subject of the Transfers. Those lands so transferred should have attributed to them for this purpose a value represented by the purchase price of $696,811 (less the $150,000 paid by Neil) and interest at commercial rates allowed from time to time by the Supreme Court of Queensland from the revised settlement date of 28 November 1988. It will then be for the Supreme Court to determine, taking this valuation and as a matter of practical justice, that sum, being the sum stipulated in the Deed as forgiven (that is, $546,811) or a lesser amount, in respect of which it declares the Deed is of no effect. The amount representing the valuation of the deemed provision under the Family Provision Application in favour of Bill’s widow and daughters will be of great significance. It will indicate the benefit under the Will which would have been retained by Neil, freed from the impugned dealings, and after effect had been given to the operation of Pt 4 of the Succession Act upon Bill’s testamentary dispositions. The estate must make provision for this element of benefaction to Neil by the testator if it is to have the assistance of equity by declaring the Deed to be of no effect. As we have indicated, the provision is made by an allowance in favour of Neil and Beryl against the disallowance of the forgiveness of their indebtedness to the estate. In submissions, reference was made to the striking out of the Family Provision Application on 17 May 1991, shortly before the institution of the action giving rise to this appeal. That circumstance does not debar the Court, when working out the appropriate relief in that action, from taking into account, in the manner indicated above, the subjection of the estate to the claims made in the Family Provision Application. In any event, the step on 17 May 1991 was taken at the instance of Neil after the solicitor for the appellants had notified his solicitor that they were contemplating the institution of the action, and in circumstances linked to those on which that action was founded. It would have been inexpedient for the appellants to have pressed on with the Family Provision Application whilst the validity of the Will and the quantum of Bill’s estate were undecided. The suggestion that the fate of the Family Provision Application is indicative of an acceptance by the appellants of the limited provision made for them by Bill lacks any firm foundation. Further, even if the principles expounded in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 apply to the appellants in their representative capacity, and not merely to them in their individual interests as applicants in the Family Provision Application, it should be noted that those principles are equitable in nature. They do not foreclose the framing of relief in the manner now proposed with respect to the consequences of Neil’s conduct. The appeal to this Court should be allowed with costs against the second respondents. The order of the Court of Appeal dismissing with costs the appeal to that Court should be set aside. In place thereof, 784 [10.105]

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Bridgwater v Leahy cont. there should be an order allowing the appeal from so much of the orders of de Jersey J as dismissed the claim of the present appellants and a declaration that the deed of forgiveness of debt executed on 19 July 1988 is of no effect as to an amount to be fixed and declared by the Supreme Court. There should also then be a declaration by the Supreme Court to the effect that Bill’s estate has a vendor’s lien upon the properties the subject of the Transfers to secure so much of that sum of $546,811 as, in accordance with the above declaration, is to be treated as due and owing but unpaid, together with interest at commercial rates allowed from time to time by the Supreme Court of Queensland from 28 November 1988. Upon the formulation of this declaration with respect to the vendor’s lien, the respondents may, if they be so advised, have leave to seek a determination that the lien should not extend to the Wonga Park Perpetual Lease Selection on the ground that, as a matter of law and by analogy to the reasoning in Davies v Littlejohn (1923) 34 CLR 174 (if it be a true analogy), the applicable legislation does not admit of such a remedy.

Transactions involving a family dependency

Garcia v National Australia Bank [10.110] Garcia v National Australia Bank (1998) 194 CLR 395 High Court of Australia GAUDRON, McHUGH, GUMMOW AND HAYNE JJ. In August 1979, the appellant and her then husband, Fabio Garcia, executed a mortgage over their home in favour of the Commercial Banking Company of Sydney Ltd (a bank with which the respondent later merged and to the rights of which the respondent succeeded). The mortgage secured all moneys which the mortgagors might owe the mortgagee, including moneys owing under future guarantees given by either of them to the mortgagee. It was given to secure a loan of $5,000 made to the husband for use in his business and was later used as security for a personal loan made to the appellant and her husband. The appellant’s husband conducted a number of businesses of which we need to refer only to one – a business of buying and selling gold conducted through a company called Citizens Gold Bullion Exchange Pty Ltd (“Citizens Gold”). Between 1985 and 1987 the appellant signed four guarantees in favour of the respondent. Three of the guarantees guaranteed repayment to the bank of debts owed by Citizens Gold; the fourth guaranteed debts owed by another company but the details of that transaction do not now matter. Of the three guarantees which related to debts of Citizens Gold, one dated 25 November 1987 was limited to $270,000 plus interest, costs and charges. It is convenient to refer to this guarantee as the November 1987 guarantee. On 1 September 1988, the appellant and her husband separated. The appellant told the bank of this and asked that “the bank account” (presumably of Citizens Gold) be kept within limits. After this, the balance of the Citizens Gold account fluctuated: in December 1988 and January 1989 it was in credit but by May 1989 it was again in debit. On 13 October 1989, an order was made for the winding up of Citizens Gold. On 30 November 1989, the appellant obtained a decree nisi for dissolution of her marriage; that decree became absolute on 1 January 1990. In June 1990, the appellant commenced proceedings in the Supreme Court of New South Wales seeking declarations that the mortgage which we have mentioned and the guarantees she had given of the indebtedness of Citizens Gold are of no force or effect and are void. In August 1990, the respondent demanded payment under the November 1987 guarantee and under the mortgage of amounts owing to it by Citizens Gold. It then made a cross-claim in the proceedings commenced by the appellant to claim possession of the mortgaged property and the sum which it had demanded (together with interest). No demand was made under the other guarantees. [10.110]

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Garcia v National Australia Bank cont. The trial judge granted relief to the appellant on the basis of the principles referred to in Yerkey v Jones (1939) 63 CLR 649. He held that the appellant’s alternative case founded on Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 was not made out. He found that, even if the behaviour of the appellant’s husband towards her in relation to the execution of the November 1987 guarantee had been unconscionable, the respondent had no notice of that unconscionability when “an intelligent articulate lady with a professional position called at the bank, appeared to be voluntarily signing a guarantee in respect of an account of which she was a director of the company concerned, and there was nothing to give the bank even suspicion … [T]here was nothing to show that the disability of the plaintiff was sufficiently evidenced to the bank to make it unconscientious that it accept the plaintiff’s assent to the impugned transaction.” Although the appellant had pleaded a case of actual undue influence by her husband, the trial judge made no positive finding that the appellant’s execution of the November 1987 guarantee had been procured by actual undue influence. He did find that “the husband pressured the wife to sign the document” and that “[s]he appeared to have done so because her husband consistently pointed out what a fool she was in commercial matters whereas he was an expert, and because she was trying to save her marriage”. But it was not contended (whether in the Court of Appeal or in this Court) that this was a positive finding of actual undue influence by the husband such that the appellant’s execution of the guarantee was not the exercise of her “independent and voluntary” will because it was overborne. The trial judge rejected an alternative case which the appellant put forward under the Contracts Review Act 1980 (NSW). The respondent appealed to the Court of Appeal and the appellant cross-appealed. The appeal was allowed; the cross-appeal was dismissed. Sheller JA, who gave the leading judgment in the Court of Appeal, considered the decision of the House of Lords in Barclays Bank Plc v O’Brien [1994] 1 AC 180 and, in several respects, found difficulty in accepting the reasoning therein. The New Zealand Court of Appeal has said that “the jurisprudential basis of O’Brien remains uncertain” [Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 689]. After referring to the English authorities decided after O’Brien, Sir Anthony Mason has observed [Mason, “The Impact of Equitable Doctrine on the Law of Contract”, (1998) 27 Anglo-American Law Review 1 at 15] that “[t]he plethora of cases may suggest that all is not well with the O’Brien principle”. It is unnecessary for us to enter upon the matter, beyond noting that in O’Brien the House of Lords discounted what it understood was the “special equity theory” supported by Dixon J in Yerkey v Jones. The Court of Appeal held that it was not bound to follow Yerkey v Jones. Sheller JA concluded that what had been said to be the principle in Yerkey v Jones is “a principle to which one judge only adhered”, namely Dixon J, and “at its heart … is based upon general assumptions about the capacity of married women rather than upon evidence of the circum-stances of the particular case”. He identified in some recent cases an expression of “doubts about a principle founded on the assumption that a married woman is ipso facto under a special disadvantage in any transaction involving her husband and that the husband is in this context the stronger party.” Accordingly, Sheller JA concluded that “the so-called principle in Yerkey v Jones should no longer be applied in New South Wales.” We consider the better view to be that the reasons for decision of Dixon J in Yerkey v Jones were not significantly different from the reasons of the other members of the Court. It should be emphasised that it is for this Court alone to determine whether one of its previous decisions is to be departed from or overruled. However, we do not base our decision upon some confined analysis of the case intended to identify its ratio decidendi. Rather, we consider that the principles spoken of by Dixon J in Yerkey v Jones are simply particular applications of accepted equitable principles which have as much application today as they did then. 786 [10.110]

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Garcia v National Australia Bank cont. Yerkey v Jones was said, in argument, to reflect outdated views of society generally and the role of women in society in particular. It was submitted that changes in Australian society since 1939, when Yerkey v Jones was decided, require that equitable rules move on to meet these changed circumstances. That Australian society, and particularly the role of women in that society, has changed in the last six decades is undoubted. But some things are unchanged. There is still a significant number of women in Australia in relationships which are, for many and varied reasons, marked by disparities of economic and other power between the parties. However, the rationale of Yerkey v Jones is not to be found in notions based on the subservience or inferior economic position of women. Nor is it based on their vulnerability to exploitation because of their emotional involvement save to the extent that the case was concerned with actual undue influence. So far as Yerkey v Jones proceeded on the basis of the earlier decision of Cussen J in The Bank of Victoria Ltd v Mueller [1925] VLR 642, it is based on trust and confidence, in the ordinary sense of those words, between marriage partners. The marriage relationship is such that one, often the woman, may well leave many, perhaps all, business judgments to the other spouse. In that kind of relationship, business decisions may be made with little consultation between the parties and with only the most abbreviated explanation of their purport or effect. Sometimes, with not the slightest hint of bad faith, the explanation of a particular transaction given by one to the other will be imperfect and incomplete, if not simply wrong. That that is so is not always attributable to intended deception, to any imbalance of power between the parties, or, even, the vulnerability of one to exploitation because of emotional involvement. It is, at its core, often a reflection of no more or less than the trust and confidence each has in the other. It may be that the principles applied in Yerkey v Jones will find application to other relationships more common now than was the case in 1939 – to long term and publicly declared relationships short of marriage between members of the same or of opposite sex – but that is not a question that falls for decision in this case. It may be that those principles will find application where the husband acts as surety for the wife but again that is not a problem that falls for decision here. This case concerns a husband and wife and it is to that relationship that the present decision relates, just as it is concerned only with the circumstance of the wife acting as surety for her husband. The resolution of questions arising in the context of other relationships may well require consideration of other issues. Thus to take one example, if cohabitation is taken as a criterion, what should a lender know or seek to find out about the nature of the relationship between the parties? But those issues did not arise and were not debated on the hearing of this appeal. In his reasons for decision in Yerkey v Jones, Dixon J dealt with at least two kinds of circum-stances: the first in which there is actual undue influence by a husband over a wife and the second, that dealt with in Mueller, in which there is no undue influence but there is a failure to explain adequately and accurately the suretyship transaction which the husband seeks to have the wife enter for the immediate economic benefit not of the wife but of the husband, or the circumstances in which her liability may arise. The former kind of case is one concerning what today is seen as an imbalance of power. In point of legal principle, however, it is actual undue influence in that the wife, lacking economic or other power, is overborne by her husband and goes surety for her husband’s debts when she does not bring a free mind and will to that decision. The latter case is not so much concerned with imbalances of power as with lack of proper information about the purport and effect of the transaction. The present appeal concerns circumstances of the latter kind rather than the former. In Yerkey v Jones Dixon J said at 684: But it is clearly necessary to distinguish between, on the one hand, cases in which a wife, alive to the nature and effect of the obligation she is undertaking, is procured to become her [10.110]

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Garcia v National Australia Bank cont. husband’s surety by the exertion by him upon her of undue influence, affirmatively established, and on the other hand, cases where she does not understand the effect of the document or the nature of the transaction of suretyship. In the former case the fact that the creditor, on the occasion, for example, of the actual execution of the instrument, deals directly with the wife and explains the effect of the document to her will not protect him. Nothing but independent advice or relief from the ascendancy of her husband over her judgment and will would suffice. If the creditor has left it to the husband to obtain his wife’s consent to become surety and no more is done independently of the husband than to ascertain that she understands what she is doing, then, if it turns out that she is in fact acting under the undue influence of her husband, it seems that the transaction will be voidable at her instance as against the creditor. Of the second of the two cases that we have referred to earlier, Dixon J said [(1939) 63 CLR 649 at 685-686]: In the second case, that where the wife agrees to become surety at the instance of her husband though she does not understand the effect of the document or the nature of the transaction, her failure to do so may be the result of the husband’s actually misleading her, but in any case it could hardly occur without some impropriety on his part even if that impropriety consisted only in his neglect to inform her of the exact nature of that to which she is willing blindly, ignorantly or mistakenly to assent. But, where the substantial or only ground for impeaching the instrument is misunderstanding or want of understanding of its contents or effect, the amount of reliance placed by the creditor upon the husband for the purpose of informing his wife of what she was about must be of great importance. If the creditor takes adequate steps to inform her and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing, cannot, I think, in itself give her an equity to set it aside, notwithstanding that at an earlier stage the creditor relied upon her husband to obtain her consent to enter into the obligation of surety. The creditor may have done enough by superintending himself the execution of the document and by attempting to assure himself by means of questions or explanation that she knows to what she is committing herself. The sufficiency of this must depend on circumstances, as, for example, the ramifications and complexities of the transaction, the amount of deception practised by the husband upon his wife and the intelligence and business understanding of the woman. But, if the wife has been in receipt of the advice of a stranger whom the creditor believes on reasonable grounds to be competent, independent and disinterested, then the circumstances would need to be very exceptional before the creditor could be held bound by any equity which otherwise might arise from the husband’s conduct and his wife’s actual failure to understand the transaction: Cf per Cussen J. If undue influence in the full sense is not made out but the elements of pressure, surprise, misrepresentation or some or one of them combine with or cause a misunderstanding or failure to understand the document or transaction, the final question must be whether the grounds upon which the creditor believed that the document was fairly obtained and executed by a woman sufficiently understanding its purport and effect were such that it would be inequitable to fix the creditor with the consequences of the husband’s improper or unfair dealing with his wife. Thus, Dixon J was dealing with two kinds of case. In the former, the case of actual undue influence, as Dixon J says, explaining the effect of the document to the surety will not protect the creditor and “[n]othing but independent advice or relief from the ascendancy of her husband over her judgment and will would suffice”. In the latter, “[i]f the creditor takes adequate steps to inform [the wife] and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing” cannot give her an equity to set the instrument aside. 788 [10.110]

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Garcia v National Australia Bank cont. … It was submitted that Yerkey v Jones has been overruled by Amadio or that the principles applied in Yerkey v Jones had been subsumed in principles applied in Amadio. There are several answers to this contention. First, there is nothing in Amadio that suggests that it was intended to overrule Yerkey v Jones or to subsume the rules applied there in some broader principle enunciated in Amadio. Secondly, far from anything said in Amadio suggesting that it was intended to mark out the boundaries of the whole field of unconscionable conduct, as Mason J said at 461: It goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. Thirdly, Amadio was a case of unconscionable conduct very different from the cases considered in Yerkey v Jones. In Amadio there was actual misconduct on the part of the son of the respondents which affected their entry into the mortgage and guarantee and the bank was on notice of that misconduct. There was no allegation of undue influence by the son with notice on the part of the bank (a situation corresponding to that in Bank of New South Wales v Rogers (1941) 65 CLR 42), nor was the alleged case of undue influence on the part of the bank made out. What Mason J identified as “[t]he critical issue” was whether the plaintiffs were entitled to relief on the ground of unconscionable conduct. The transaction was not enforced against the respondents because it would have been unconscionable for the bank to do so. And it was unconscionable for the bank to enforce it because the bank’s employee had shut his eyes to the vulnerability of the respondents and the misconduct of their son. The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a)

in fact the surety did not understand the purport and effect of the transaction;

(b)

the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed);

(c)

the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet

(d)

the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her.

To hold, as Yerkey v Jones did, that in those circumstances the enforcement of the guarantee would be unconscionable represents no departure from accepted principle. Rather, it “conforms to the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct”. It will be seen that the analysis of the second kind of case identified in Yerkey v Jones is not one which depends upon any presumption of undue influence by the husband over the wife. As we have said, [10.110]

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Garcia v National Australia Bank cont. undue influence is dealt with separately and differently. Nor does the analysis depend upon identifying the husband as acting as agent for the creditor in procuring the wife’s agreement to the transaction. Rather, it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction’s purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable. We acknowledge that the statement that enforcement of the transaction would be “unconscionable” is to characterise the result rather than to identify the reasoning that leads to the application of that description. But that the description of “unconscionable” can and should be applied in these circumstances is supported by reference to other circumstances in which that description has been applied. Thus, in Mueller, Cussen J drew support for his conclusion that a guarantee should be set aside in circumstances such as those now under consideration from a comparison with equity’s treatment of gifts made by a mistaken donor. He said at 649: In the first place, it is obvious that a large benefit is conferred both on the creditor and the debtor, which, so far as any advantage to the guarantor is concerned, is voluntary, though no doubt “consideration” exists so far as the creditor is concerned, so soon as forbearance is in fact given or advances are in fact made. It is, I think, to some extent by reference to the rule or to an extension of the rule that, in the case of a large voluntary donation, a gift may be set aside in equity if it appears that the donor did not really understand the transaction, that such a guarantee may be treated as voidable as between the husband and wife. In addition, some comparison can be drawn between the refusal to permit enforcement of the guarantee in the circumstances identified in Yerkey v Jones and the equally well recognised and long established principles which would preclude enforcement of a guarantee in some cases where the creditor has not disclosed to the intending surety some features of the transaction. We do not pause to attempt to specify what features of such a transaction should be identified by the creditor to the surety and we are not to be taken as suggesting that the principles dealt with in Yerkey v Jones are to be seen as no more than some particular application of these rules. Nevertheless, the intervention of equity in cases of that kind may also be seen as rooted in the conclusion that to permit enforcement of the guarantee against a mistaken surety (mistaken in that kind of case because the creditor should have, but did not, inform the surety of some particular fact) would be unconscionable. No doubt these cases are no more than analogies. They are not to be treated as defining what is meant by “unconscionable” or as, in some way, governing the present circumstances. They are, however, useful illustrations of why the enforcement of the guarantee in this case would be unconscionable. As is implicit in what we have said, we prefer not to adopt the analysis made by Lord BrowneWilkinson in Barclays Bank Plc v O’Brien [1994] 1 AC 180 at 195 which proceeded from identifying “the circumstances in which the creditor will be taken to have had notice of the wife’s equity to set aside the transaction”. Sir Anthony Mason has pointed out that: constructive notice in O’Brien is used in order to ascertain whether a transaction about to be entered into is impeachable, not so as to fix a person who acquires an interest in the property with knowledge of an antecedent interest in property, that being the traditional function of constructive notice. 790 [10.110]

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Garcia v National Australia Bank cont. Such an analysis may be required in ordering the priority of competing interests in property but in the present context it may well distract attention from the underlying principle: that the enforcement of the legal rights of the creditor would, in all the circumstances, be unconscionable. We consider that the only question of notice that arises is whether the creditor knew at the time of the taking of the guarantee that the surety was then married to the borrower. Other questions of notice do not intrude. As is apparent from what was said in Yerkey v Jones the creditor may readily avoid the possibility that the surety will later claim not to have understood the purport and effect of the transaction that is proposed. If the creditor itself explains the transaction sufficiently, or knows that the surety has received “competent, independent and disinterested” advice from a third party, it would not be unconscionable for the creditor to enforce it against the surety even though the surety is a volunteer and it later emerges that the surety claims to have been mistaken. What then of the present case? The trial judge found that the appellant did not understand the purport or effect of the transaction. She knew it was a guarantee but she thought it was a guarantee of limited overdraft accommodation to be applied only in the purchase of gold. Nor did she understand that her obligations under the guarantee were secured by the mortgage which she had given over her home. It being found that the bank took no step to explain the transaction to her and knew of no independent advice to her about it (there having been no such independent advice) the conclusion that the appellant was entitled to succeed in her claim to set the transaction aside was inevitable if she was a volunteer. The trial judge found that the appellant was not “directly involved” in Citizens Gold (1993) 5 BPR 11,996 at 12,006. And he made this finding notwithstanding that the surety was shown in records held by the Australian Securities Commission to be both a director of, and a shareholder in, the company. The records of Citizens Gold held at the Australian Securities Commission presented, however, a confusing picture of movements in shareholdings over the years: so confusing that the trial judge said [at 12,005] that it could be “seen from the records that the exact beneficial holding in the various companies [including Citizens Gold] is quite obscure”. Although the trial judge found that from time to time some benefit flowed to the family from the companies, he found that they were companies that were in the “complete control” of the appellant’s husband. Taken as a whole, those findings demonstrate that the appellant in fact obtained no real benefit from her entering the transaction; she was a volunteer. The fact that she was a director of the company is nothing to the point if, as the trial judge’s findings show, she had no financial interest in the fortunes of the company. We would therefore allow the appeal. [Kirby and Callinan JJ agreed in the result. Kirby J was however highly critical of the basis on which the majority decision was based.] KIRBY J 1. Historical anachronism: The first reason for rejecting Dixon J’s supposed principle in Yerkey is that, even in 1939, it represented an historical anachronism. This was pointed out by Latham CJ. His Honour explained that the cases invoked by the wife in that appeal would place her in an advantageous position that she would not have enjoyed had she not been married to the principal debtor. Central to Dixon J’s statement of principle in Yerkey are the equitable doctrines that arose out of the inability of married women to deal with property at common law. Even prior to the abolition by the series of Married Women’s Property Acts of the prescribed legal disabilities of married women, the apparent rigour of the common law was mitigated by the development of equitable doctrines which recognised a separate equitable estate in married women in certain circumstances. Equity did not prohibit married women from advancing a separate estate which its principles secured to them in cases involving [10.110]

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Garcia v National Australia Bank cont. guarantees of their husband’s business or other obligations. However, “courts of equity examine[d] every such transaction between husband and wife with an anxious watchfulness and caution, and dread of undue influence”. In Yerkey, Dixon J confirmed that although equity would not presume undue influence in the case of husband and wife, it still preserved a general watchfulness in guarantee transactions. According to Dixon J, the relationship of wife and husband had “never been divested completely of what may be called equitable presumptions of an invalidating tendency”. These equitable principles established for the benefit of married women prior to the Married Women’s Property Acts, and not, as such, the trust and confidence between marriage partners, form the true basis of the supposed rule in Yerkey. Today, the capacity of a married woman to deal with her property freely as a feme sole is long established. I would therefore conclude in the language of O W Holmes: It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past. One particular need for deriving a new principle rather than following the supposed rule in Yerkey is that, since Dixon J expounded the latter in 1939, there have been enormous social changes. 2. Rejecting discriminatory stereotypes: A principle which accords to all married women a “special equity” based on their supposed need for protection rests upon a stereotype of wives to which this Court should give no endorsement. All persons of full capacity, including married women, should ordinarily conform to commercial transactions which they enter unless statute or judicial law affords relief. Marriage, and being the female member to a marriage, is not, as such, a relevant reason for relief from legal obligations. Some additional or different basis is required if relief is to be afforded. Whatever may have been the position in Australian society of 1939, it is offensive to the status of women today to suggest that all married women, as such, are needful of special protection supported by a legal presumption in their favour. Other cohabitees of a borrower may, in particular circumstances, be in a position at least as vulnerable as some wives. Some may be more so. Given the very significant number of Australians who now live in relationships of potential dependence and vulnerability outside marriage, it is inappropriate to affirm as a binding principle of Australian law a rule expressed to derive from the married relationship itself and then to apply it only to one party to that relationship, namely the wife. Adopting that approach reinforces outdated assumptions without addressing the problem of people in vulnerable and dependent relationships which are only sometimes illustrated by the case of a married woman. The result to which I have come flows not from the fact that Mrs Garcia was a married woman in need of special protection, as such, from the law of equity. It flows from a broader doctrine by which equity protects the vulnerable parties in a relationship and ensures that in proper cases they have full information and, where necessary, independent advice before they volunteer to put at risk the major asset of their relationship for the primary advantage of those to whose pressure they may be specially vulnerable.

[10.115]

Notes and Questions

1. The case sits uneasily in a world of sexual equality. Do you agree with Kirby’s view that the case involves gender stereotypes inappropriate to current times? 2. The doctrine of a married woman’s equity was applied by the Victorian Supreme Court in Wenczel v Commonwealth Bank of Australia [2006] VSC 324. In that case the wife gave a third party mortgage supporting a loan her husband’s company. The court accepted the 792 [10.115]

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four tests set out above. In determining that the wife was a volunteer, it disregarded any indirect benefit which might ultimately flow to her. Furthermore although the wife had some business experience, her understanding of the transaction was superficial, incomplete and confused not the full understanding required. The doctrine applied once the bank had knowledge of the relationship; the details of the strength of the relationship and the fact that the parties were separated were irrelevant. 3. One means of avoiding the possibly inappropriate conclusion is to restate the principle of Yerkey v Jones (1939) 63 CLR 649 as a presumption against the validity of transactions entered into by a person under a special disability. The Victorian and Queensland Courts of Appeal have indicated that they would apply the doctrine to relationships such as that between elderly parents and their children: Krans v National Australia Bank Ltd [2003] VSCA 92; ANZ Banking Group Ltd v Alirezai [2004] QCA 6. Breach of a fiduciary relationship [10.120] An existing relationship between parties may be of a fiduciary kind because of the

dependance of one upon the other. The range of situations with this characterisation has been defined by equity. Once such a relationship exists the stronger party make not take any benefit from a dealing with the other without the required justification.

Maguire v Makaronis [10.125] Maguire v Makaronis (1997) 188 CLR 449 High Court of Australia BRENNAN, GAUDRON, GUMMOW, KIRBY, MCHUGH JJ: [Footnotes omitted] It is appropriate to begin the evaluation of these submissions with reference to the significance of the fiduciary element in the solicitor-client relationship. The claims which, from the relationship of solicitor and client, may arise in favour of the client include claims founded in contract, tort, and for breach of fiduciary duty. In so far as the solicitor has held moneys or other property on trust for the client there may be an allegation of breach of trust. Each cause of action may have its own strengths and weaknesses so that the client may fail in one and succeed in another. In particular, periods of limitation may differ. The courts and legislatures have tended to save from the imposition of arbitrary time limits complaints of breach of trust or other fiduciary duty. Thus, in Nocton v Lord Ashburton, the framing of the claim against the solicitor in respect of the original mortgage transaction of 1904 as one for breach of fiduciary duty “was probably deliberately done in order to endeavour to get over the difficulty occasioned by the Statute of Limitations as regards any mere case of negligence”. In Hospital Products Ltd v United States Surgical Corporation, Gibbs CJ said: The archetype of a fiduciary is of course the trustee, but it is recognized by the decisions of the courts that there are other classes of persons who normally stand in a fiduciary relationship to one another – for example, partners, principal and agent, director and company, master and servant, solicitor and client, tenant-for-life and remainderman. There is no reason to suppose that these categories are closed. The present case is not one in which there is a need to specify criteria by which it may be determined whether parties, not being within the accepted categories referred to by Gibbs CJ, stand in a fiduciary relationship. The solicitor is classically a fiduciary to the client and as such owes certain duties in each particular case. From various decisions in recent years there appear attempts to throw a fiduciary mantle over commercial and personal relationships and dealings which might not have been thought previously to [10.125]

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Maguire v Makaronis cont. contain a fiduciary element. In some instances the forensic advantage sought to be gained has been that already referred to – less stringent time limitations. In others, the advantage sought has been the remedial constructive trust with the edge thereby conferred over unsecured creditors in an insolvent administration of the affairs of a defendant. A notable instance of such an attempt, in the end unsuccessful, is the litigation arising from dealings in bullion which was determined by the Privy Council in In re Goldcorp Exchange Ltd. In Hospital Products, the apparent advantage to the plaintiff over counts in contract and deceit of the fiduciary duties said to arise from the exclusive distribution agreement was that specific equitable relief would enable the plaintiff to take over those businesses. In Canson Enterprises Ltd v Boughton & Co, the claim to recover pecuniary loss from the solicitors was framed as one for breach of fiduciary duty rather than for breach of contract or in tort (for negligence or deceit) because of the apprehension that on none of those other bases could there be the recovery of a substantial sum. The present case stands apart from those just mentioned because it involves both a fiduciary relationship within a well-recognised category as well as the claim to a well-established remedy. Nevertheless, even here, to say that the appellants stood as fiduciaries to the respondents calls for the ascertainment of the particular obligations owed to the respondents and consideration of what acts and omissions amounted to failure to discharge those obligations. The appellants were retained to act for the respondents on the purchase of the business and freehold of the poultry farm at Loch and in relation to the obtaining of finance to support that purchase. The provision of the bridging finance secured by the Mortgage was at the heart of the solicitor and client relationship. In Clark Boyce v Mouat, the Privy Council referred to the judgment of Lord St Leonards LC in Lewis v Hillman as authority for the proposition: The classic case of the [fiduciary] duty arising is where a solicitor acts for a client in a matter in which he has a personal interest. In such a case there is an obligation on the solicitor to disclose his interest and, if he fails so to do, the transaction, however favourable it may be to the client, may be set aside at his instance. To this several points may be added in elaboration. First, the situation here is to be distinguished from an action in tort to recover damages for a pecuniary loss caused, for example, by fraudulent misrepresentation. Equity intervenes, particularly where the fiduciary is a solicitor, not so much to recoup a loss suffered by the plaintiff as to hold the fiduciary to, and vindicate, the high duty owed the plaintiff. Thus, whilst significant, inadequacy of the consideration or other improvidence of the transaction is not determinative. The approach taken by the Judicial Committee in the passage set out above is consistent with the reasoning underlying a number of decisions of this Court. In CIBC Mortgages Plc v Pitt, Lord Browne-Wilkinson referred to the considerations of general public policy which found what he identified as the long-standing principle whereby those in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties labour under a heavy duty to show the righteousness of the transactions. Similar considerations are evident in the formulation by Lord St Leonards LC in Lewis v Hillman that, if a transaction between solicitor and client is to stand, it must be “open and fair, and free from all objection”, not merely “fair”. In the present case, the trial judge found that there had been a conflict between the duty of the appellants to the respondents and their personal interests in the transaction, in particular as mortgagee under the Mortgage. The conflict meant that the loyalty of the appellants to their clients had not remained undivided, with the result that they could not properly discharge their duties to their clients. The second matter concerns legislation which establishes a regime for control of the legal profession, including supervision of professional conduct. Where the question is one of professional conduct, the legislation may operate to qualify what otherwise would be the scope of the fiduciary 794 [10.125]

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Maguire v Makaronis cont. principle. But it by no means necessarily follows that the legislation, upon its proper construction, limits the well-entrenched equitable jurisdiction, in matters of private law, to remedy, at the instance of the client, abuses of what equity regards as the fiduciary duties of solicitors. The trial judge, correctly, concluded that compliance with the requirements of the Solicitors’ (Professional Conduct and Practice) Rules 1984 (Vic) would not necessarily satisfy the requirements of the fiduciary obligations of a solicitor to the client. Rule 10(2)(d) forbade a solicitor to act for both lender and borrower in connection with the loan of money unless and until the solicitor obtained written acknowledgment of the parties in or to the effect of Form 1. Rule 10(4) stated: A solicitor may obtain a general authority from a client authorizing the solicitor to act for that client and for other parties to any matter or transaction, and such general authority in or to the effect of Form 2 in the Schedule will satisfy the requirements of sub-rule 10(2) insofar as that client is concerned. Lynch & MacDonald took an instrument signed by Mr and Mrs Makaronis and dated 10 January 1990 headed “Form 2 GENERAL AUTHORITY”, which purported to authorise Lynch & MacDonald and Birch Ross & Barlow “to act for another party or parties to any transaction” in respect of which either firm was also acting on their behalf. Rule 10(2)(d) states a prohibition upon a solicitor acting for lender and borrower and goes on to qualify that prohibition. It does not restate, and therefore does not qualify, the fiduciary obligation to avoid a conflicting engagement where it is the solicitor who lends money to the client. Thirdly, in the circumstances disclosed above, if the appellants were to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for them to show, by way of defence, informed consent by the respondents to the appellants’ acting, in relation to the Mortgage, with a divided loyalty. What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given. The circumstances of the case may include (as they would have here) the importance of obtaining independent and skilled advice from a third party. On no footing could it be maintained that the appellants had taken the necessary steps of this nature to answer the charge of breach of fiduciary duty. However, it should be noted that, contrary to what appeared to be suggested by the respondents in argument, there was no duty as such on the appellants to obtain an informed consent from the respondents. Rather, the existence of an informed consent would have gone to negate what otherwise was a breach of duty. Fourthly, the breach of fiduciary duty having been established without satisfactory answer by the appellants, it then became necessary to determine the appropriate remedy. The nature of the case will determine the appropriate remedy available for selection by a plaintiff. Here the range of remedies was exclusively equitable in nature, the obligation which had been broken, that of a fiduciary, having been equitable in nature. Where the breach of duty was in a solicitor acting for a client in a transaction in which the solicitor had a personal interest, the court may order the solicitor “to replace property improperly acquired from the client” and achieve this by an order for rescission, unless it be shown that restitutio in integrum is no longer possible. Rescission and “causation” This equity to a decree of rescission is immediately generated by the preceding breach of fiduciary duty. Contrary to submissions by the appellants, issues of “causation”, by analogy with those found with the recovery of damages in tort or contract, do not emerge in this case. The fiduciary duty forbade, in the circumstances of the case, entry by the appellants into the transaction of which the giving of the Mortgage was a central part. There was no response by the appellants which showed, in the necessary sense, a fully informed consent. Subject to the need for restitution, the Mortgage was liable to be set aside at the suit of the respondents. The breach of the duty was patent at the creation of the very thing which is to be set aside. [10.125]

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Maguire v Makaronis cont. Where the subject-matter of the transaction is, for example, the sale of a business, intervening changes may render more complex the decree for rescission. In some circumstances, the purchaser seeking rescission by reason of fraudulent misrepresentations by the vendor, may be entitled to an indemnity for trading losses incurred, both before the purchaser disavowed the transaction and thereafter whilst the business was maintained for the benefit of the vendor; but the indemnity will extend only to that part of the trading losses which were “directly occasioned” by the falsity of the vendor’s misrepresentations. To this extent issues of “causation” may arise in cases of rescission for fraudulent misrepresentation. But that is not this case. Different considerations arise where the plaintiff seeks one or other of the further remedies referred to by the Lord Chancellor in Nocton v Lord Ashburton, namely an account of profits, as a personal rather than proprietary remedy, or, as another personal remedy, compensation for that which the plaintiff has lost “by [the fiduciary] acting”, to use the Lord Chancellor’s phrase, in breach of duty. Likewise where what is sought is a proprietary remedy in the nature of a constructive trust. In these instances, there directly arises a need to specify criteria for a sufficient connection (or “causation”) between breach of duty and the profit derived, the loss sustained, or the asset held. Where the plaintiff seeks recovery of a profit, the necessary connection has been identified in this Court by asking whether the profit was obtained “by reason of [the defendant’s] fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position”. Particularly where a complex course of dealing is in issue, minds reasonably may differ as to the outcome of the application of these principles. The point is illustrated by the narrow division of opinion in the House of Lords in Phipps v Boardman, as to the liability of the appellants, advisers to certain trustees, in respect of their profits on share dealings. However, what is clear is that the principles by which liability to account for profits is assessed against errant fiduciaries express the policy of the law in holding fiduciaries to their duty. In the joint judgment of this Court in Warman International Ltd v Dwyer, after making this point, their Honours continued: Thus, it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably. So, in Regal (Hastings) Ltd v Gulliver, although the directors acted in good faith and in the interests of the company of which they were directors in taking up shares in a subsidiary which the company could not afford to take up, they were held accountable for the profit made on the sale of the shares. And, in Phipps v Boardman, the solicitor was held accountable for the profit he made, notwithstanding that he acted bona fide and in the interests of the trust and that the opportunity would not have been availed of but for his skill and knowledge. Where the plaintiff seeks to trace in equity moneys which have been mixed by the errant fiduciary with his or her own moneys, the same interest is sought to be advanced by particular principles. Notably, there is the presumption (or, more accurately, the rule), famously formulated and applied in In re Hallett’s Estate. This is that, wherever an act “can be done rightfully, [the fiduciary] is not allowed to say, against the person entitled to the property or the right, that he has done it wrongfully”, so that as to any balance remaining in a mixed account, the fiduciary is taken to have drawn from it and to have dissipated first the fiduciary’s own moneys. Recovery is sought in respect of a loss. There, the same principle underlying Hallett should be understood as attending any exposition of the phrase used by Lord Haldane LC in Nocton v Lord Ashburton, “by [the fiduciary] acting”. It is appropriate to begin with those fiduciaries who are trustees. The obligation of a defaulting trustee is essentially one of effecting restitution to the trust estate. In Target Holdings Ltd v Redferns, Lord Browne-Wilkinson said: The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries’ rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic 796 [10.125]

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Maguire v Makaronis cont. rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate. His Lordship continued, with reference to decisions of Lord Eldon (when Master of the Rolls) in Caffrey v Darby, Lord Cottenham LC in Clough v Bond, Street J in Re Dawson (deceased) and Brightman LJ in Bartlett v Barclays Trust Co (Nos 1 and 2): If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed … Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred. Thus, there is no translation into this field of discourse of the doctrine of novus actus interveniens. Until restitution is made, it is presumed that the default continues. In Guerin v The Queen, the Crown, in what was held to be breach of a fiduciary duty to the plaintiffs, leased certain land for a term of 75 years and on other unsatisfactory terms. The Supreme Court of Canada evaluated the loss to the plaintiffs by presuming against the Crown that the plaintiffs would have made the most profitable use of the land by letting it for residential development not, as had the Crown, for use by a golf club. Thus, the presumption assisted in indicating the extent of the loss by relieving the plaintiffs from the need to prove that they would have let the land for such development. In all of these instances, presumptions, some elevated to rules, operate in aid of the underlying policy of the law in holding trustees to their duties and thereby protecting the interests of beneficiaries.

UNCONSCIONABLE EXERCISE OF RIGHTS Tanwar Enterprises Pty Ltd v Cauchi [10.130] Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 High Court of Australia [The case is extracted at [9.65] in relation to the nature of the interest arising under an uncompleted contract of sale of land.] 58. What Lord Wilberforce in Shiloh Spinners called “the special heads of fraud, accident, mistake or surprise” identify in a broad sense the circumstances making it inequitable for the vendors to rely upon their termination of Tanwar’s contracts as an answer to its claim for specific performance. No doubt the decided cases in which the operation of these “special heads” is considered do not disclose exhaustively the circumstances which merit this equitable intervention. But, at least where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation. Tanwar’s situation falls beyond that pale. The statement by Mason CJ in Stern respecting the insignificance of subsequent events for which the vendors were in no way responsible is fatal to the main thrust of Tanwar’s case. 59. It should be made clear that what is said above does not support any proposition that the circumstances must be “exceptional” before equity intervenes. In their joint judgment in Stern, Deane and Dawson JJ, with reference to what had been said by Mason and Deane JJ in Legione, said, in a passage which puts the point of present significance: [10.130]

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Tanwar Enterprises Pty Ltd v Cauchi cont. Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable – or, more accurately, unconscientious – conduct. 60. Thus, it remains for Tanwar to show that it is against conscience for the vendors to set up the termination of the contracts. In the present appeal, as already has been indicated, there was no representation by the vendors which could found any estoppel. Nor has Tanwar asserted that there was any mistake in any relevant sense. 61. In Ciavarella, the order for remittal made in Legione was seen to have been made on the footing that there were already in the evidence indications that the vendors in Legione had helped to lull the purchasers into the belief that they would accept completion provided it occurred within a few days. To relieve in those circumstances would be an exercise of the juris-diction with respect to “surprise”. That, as remarked earlier in these reasons, cannot be asserted in the present case. 62. The second matter which Mason and Deane JJ emphasised in Legione was the possibility that a case might be made out in the Supreme Court that the vendors were seeking to reap the benefits of the very valuable improvements to the property which the purchasers had effected whilst in possession under the contract. It is not clear from their Honours’ remarks whether the reaping of the benefit of the improvements as a consequence of termination of itself would be sufficient to deny insistence by the vendors upon their rescission. It is not readily apparent how that circumstance alone could be sufficient. The contract in Legione had permitted the purchasers to enter into possession and any improvements they then made were at risk of the operation of the contractual provisions for termination. Accident 63. In its extremity, Tanwar then founds upon the jurisdiction to relieve against the consequences of “accident”. 64. In Legione, Mason and Deane JJ referred to authorities disputing the treatment of cases of relief against penalties and forfeitures as instances of relief against accident. The jurisdiction with respect to accident was recognised at a time before the development of any settled body of equitable principles. The point is well made by Professors Keeton and Sheridan: “Accident” was a vague term which covered many situations, in their nature unforeseen, and it could, in particular situations, shade off into fraud. The law of mistake, particularly in relation to contracts and conveyances, is included under this head, and it led in turn to the development of the equitable rules governing the rectification of contracts and other instruments, and the rescission of documents of all kinds. 65. What then remains as the subject-matter of accident in modern equity? In Baird v BCE Holdings Pty Ltd, Young J referred to various writings on the subject which distinguish mistake as supposing an operation of the will of the agent in producing the event, albeit by reason of erroneous impressions on the mind. Spence, writing in 1846, said that the kinds of accidents or cases of extremity which might be relieved against were only to be ascertained from an examination of the cases. He instanced forfeiture and penalties. Other instances include the accidental diminution of assets in the hands of an executor, lost evidence and the defective execution of powers of appointment, all far from the present case. 66. However, the learned writers on the subject emphasise and put to one side those situations where the event which has come to pass is one for which an express exculpatory provision might have been made, but was not sought or was not agreed to, and where to relieve against its consequences after it has occurred would deprive the other party to the contract of an essential right. In particular, 798 [10.130]

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Tanwar Enterprises Pty Ltd v Cauchi cont. equity will not relieve where “the possibility of the accident may fairly be considered to have been within the contemplation of the contracting parties”. Story wrote: And this leads us naturally to the consideration of those cases of accident in which no relief will be granted by Courts of Equity. In the first place, in matters of positive contract and obligation created by the party (for it is different in obligations or duties created by law), it is no ground for the interference of equity that the party has been prevented from fulfilling them by accident, or that he has been in no default, or that he has been prevented by accident from deriving the full benefit of the contract on his own side. … The reason is, that he might have provided for such contingencies by his contract if he had so chosen; and the law will presume an intentional general liability where he has made no exception. (footnotes omitted) 67. It is here that the circumstances leading up to, and the terms of, the 2001 Deeds are of critical importance. The vendors withdrew the earlier notices of termination in return for the assumption by Tanwar of obligations to complete couched in unqualified terms. The obligation in the 2001 Deeds to settle by the stipulated time was not made subject to the avail-ability of Tanwar’s finance on that day. That there might be a failure by a third party to provide the finance was reasonably within the contemplation of Tanwar. The failure by Tanwar to avail itself of the advantages it obtained by negotiating the 2001 Deeds and by keeping the contracts on foot had the effect of exposing Tanwar again to the exercise by the vendors of their rights to terminate the contracts [92]. Equity does not intervene to prevent the effective exercise of those rights. The claim by Tanwar for relief against the consequences of the failure in the timely provision of the second mortgage does not succeed. Result 68. The appeal should be dismissed with costs.

[10.135]

Notes

1. The above case represents an apparent restriction on the circumstances in which relief against forfeiture will be granted. In particular, cases where a tenant is seeking relief to keep a leasehold interest in being despite breach of the tenant’s obligations have expressly adopted the view that relief should be granted unless there is some irremedial harm to the landlord’s interest. In the above case the consequences of breach became critical because of the clause (agreed after negotiation during performance of the contract) that time was of the essence. Whether drafting can produce a similar position beyond contracts of sale and whether courts will be as impressed by clauses not so evenly agreed remain to be explored. Should rights of tenants who are often in a disadvantageous position depend on drafting skills? 2. In Elsafty Enterprises Pty Ltd v. Mermaids Café & Bar Pty Ltd [2007] QSC 394, a more traditional approach was taken. The court’s conclusion was summed up as follows: [87] In the present case, the notice very substantially overstated the defaults. Save for the question of the security amount, the plaintiff was then in a position where it had been overpaid. All that the plaintiff was entitled to was the replacement of $10,529.13 by way of security. The defendant was entitled to provide that either in cash or by a bank guarantee. There was a wide gulf between what the defendant was obliged to do and what was demanded of it. Nevertheless the plaintiff argues that the defendant was not prejudiced because it was able to calculate the true extent of its obligations. But one difficulty was in relation to the error, conceded by the plaintiff, in allowing too little for the [10.135]

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adjustment in the plaintiff’s favour on the settlement of its purchase. This error would not have been apparent to the defendant: it is not suggested that the defendant had been informed of the true adjustment. At least for that reason, the defendant was not in a position to calculate the precise figure which it was to pay or to provide by way of security. And apart from that problem, the defendant was put to the task of properly calculating the relevant amounts for both rent and interest. Having regard to these difficulties and the large disparity between what was demanded and what the sublease in the circumstances required, this notice did not comply with s 124. [88] As a result the purported forfeiture of the sublease, said to have been made by the commencement of these proceedings, was ineffective. The sublease remains on foot. Had I been persuaded otherwise, I would have granted relief from forfeiture upon the usual conditions. I would have rejected the argument that relief should be refused because the defaults are said to have been deliberate and serious, at least in relation to the liquor licence. That breach had been remedied, and in any case, the breach did not involve such serious misconduct as to justify the refusal of relief. There was a claim for mesne profits. Had I upheld the plaintiff’s case for forfeiture, I would have awarded the plaintiff mesne profits upon the basis of the premises having a market rental of $360,000 plus GST, according to a valuation which I accept. The valuer was cross-examined but ultimately there was no submission that I should reject this evidence. The amount I would have allowed would have corresponded with this value less what has been paid for rent, outgoings and clause 10 payments.

800 [10.135]

DIVISION OF OWNERSHIP OF GOODS AND LAND

PART4

CHAPTER 11 Future Interests and Perpetuities [11.05]

FUTURE INTERESTS ................................................................................................ 803 [11.05] [11.10]

Introduction ......................................................................................... 803 Types of future interests ..................................................................... 804 [11.15]

[11.25]

Intervention of equity ......................................................................... 808 [11.30]

[11.40]

White v Summers .................................................................. 809

PERPETUITIES ......................................................................................................... 813 [11.40]

Background ......................................................................................... 813 [11.45]

[11.55]

[11.90]

Law of Property Act 1936 (SA), s 61(1) .................................. 814

The common law rule ........................................................................ 814 [11.60] [11.70] [11.80]

Re Villar ................................................................................ 815 Re Fawaz (dec’d) .................................................................. 821 Re Wood ............................................................................... 826

Class gifts ............................................................................................. 828 [11.95]

[11.105]

Hordern v Permanent Trustee Co ............................................ 806

Re Drummond’s Settlement ................................................... 828

STATUTORY SYSTEM OF PERPETUITIES (EXCEPT IN SOUTH AUSTRALIA) ........ 835 [11.110] [11.115]

The perpetuity period ......................................................................... 837 Certainty of vesting ............................................................................. 838 [11.120] [11.130]

[11.140]

Age reduction and class exclusion .................................................... 840 [11.145]

[11.150]

Perpetuities and Accumulations Act 1992 (Tas), s 24 ............... 840

Exceptions to the rule against perpetuities ...................................... 841 [11.155]

[11.165]

Perpetuities and Accumulations Act 1968 (Vic), s 6(1) ............. 838 Perpetuities and Accumulations Act 1968 (Vic), ss 8 and 10 ................................................................................. 839

Perpetuities Act 1984 (NSW), s 15 ......................................... 842

Possible further reforms ...................................................................... 843

FUTURE INTERESTS Introduction [11.05] Woodman describes a future interest in land as “an interest which confers a right to

enjoyment of the land at some future time, in that it follows on the expiry or termination of a present but limited interest” (The Law of Real Property in New South Wales, Vol 1 (Law Book Co, Sydney, 1980), p 68). In other words, future interests consist of all corporeal rights in land which do not give the holder the right of immediate possession. In everyday modern legal practice, future interests seldom cause difficulties in Australia. The Torrens legislation in each State gives registered proprietors of land widespread powers to create future interests. For example, the Real Property Act 1886 (SA), s 111 states: The registered proprietor of any estate or interest in land may transfer such estate or interest, or any part thereof, to the wife or husband of such registered proprietor, or to such registered [11.05]

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proprietor, and any other person or persons as joint tenants or tenants in common, and may limit any estates by remainder or otherwise, without limiting any use, or executing any re-assignment; and upon the registration of any such transfer the estate or interest thereby dealt with or transferred shall vest in the transferee or transferees, according to the intent and meaning appearing in and expressed by such instrument.

The legislation in the other jurisdictions is to similar effect (Real Property Act 1900 (NSW), s 100(2); Property Law Act 1958 (Vic), s 19; Land Title Act 1994 (Qld), s 55; Transfer of Land Act 1893 (WA), s 84; Conveyancing and Law of Property Act 1884 (Tas), ss 62, 80; Land Titles Act 1925 (ACT), s 79; Land Title Act (NT), s 56). Future interests of all types are now freely alienable throughout Australia regardless of whether the interests are created by deed or by will (Deeds: Conveyancing Act 1919 (NSW), s 50(1); Property Law Act 1958 (Vic), s 19(1); Property Law Act 1974 (Qld), s 31; Law of Property Act 1936 (SA), s 10; Conveyancing and Law of Property Act 1884 (Tas), s 80(1); Civil Law (Property) Act 2006 (ACT), s 225; Law of Property Act (NT), s 31; Wills: Succession Act 2006 (NSW), s 4; Wills Act 1997 (Vic), s 4(2); Succession Act 1981 (Qld), s 8(1); Wills Act 1936 (SA), s 4(2); Wills Act 1970 (WA), ss 4, 6; Wills Act 2008 (Tas), ss 4, 6; Wills Act 1968 (ACT), s 7(2); Wills Act (NT), ss 3, 6. Also see Fairbairn v Varvaressos (2010) 78 NSWLR 577, 598. The Torrens system also appears to permit the Registrar of Titles to create and issue separate certificates of title in respect of all future interests. In some jurisdictions, this is specifically authorised by the Torrens legislation (Real Property Act 1900 (NSW), s 100(2); Real Property Act 1886 (SA), s 75; Land Titles Act 1980 (Tas), s 33(6) (8)). In the remaining jurisdictions, the legislation is silent on the issue. However, in New Zealand, where the legislation is similarly silent, Edwards J held in Re The Land Transfer Act 1908; Ex parte Matheson (1914) 33 NZLR 838 that holders of future interest are entitled to require that they be shown in the body of the certificate of title as holding a future estate in the property. It is submitted that this is sufficient authority to require the creation of a separate certificate of title in respect of future interests in those Australian jurisdictions lacking express legislation on the issue. This seemingly benign and innocuous legislation belies the complex and turbulent history of the law of future interests at common law. It is perhaps in respect of future interests that common law formalism reached its zenith and that the application of common sense and justice reached its nadir. Types of future interests [11.10] Common law has historically subdivided freehold estates in land into estates granted

in possession, reversion or remainder. As its title implies, a possessory estate gives the grantee the right of immediate possession and does not create future interests. Future interests consist of freehold estates granted in possession, reversion or remainder. A remainder arises where a grant is designed to take effect on the natural termination of an earlier possessory freehold estate, while a reversion arises whenever the holder of the freehold estate grants a lesser estate to a grantee and thus does not dispose of his or her entire interest in the property. An illustration of a reversion and remainder is a gift by A, the fee simple owner, “to B for life, then to C for life”. B, of course, receives a life estate in possession, as possession is granted immediately pursuant to the terms of the gift. C receives a life estate in remainder, as C’s estate takes effect on the natural termination of B’s earlier possessory estate. A retains the fee simple absolute in reversion as he or she has not disposed of his or her entire interest in the property by the gift to B and C. 804 [11.10]

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Estates in land were further classified at common law as either vested or contingent. The distinction between vested and contingent interests is explained in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [10.30]ff. Vested interests raise no particular difficulties in the context of future interests. As all rever-sionary interest are vested, it follows that the law of future interests centres around contingent remainders and those interests (later called “executory interests”) which at first sight resemble contingent remainders, but which contain certain differences sufficient for common law to refuse to classify them as such: see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [10.75]. The crux of the problem was caused by the development at law in the 16th century of the so-called “legal remainder rules” concerning the enforceability of remainders. These rules, which appear absurdly restrictive today, made historical sense. They were designed primarily to ensure that some person remained seised of the land at all times so that feudal incidents of tenure would always be payable (Freeman d Vernon v West (1763) 95 ER 745; 2 Wils KB 165). The legal remainder rules declared void the following types of remainder: 1

A remainder limited after a fee simple estate (including determinable and conditional fees simple) (Duke of Norfolk’s Case (1682) 22 ER 931; 3 Ch Cas 1 at 949-950 (ER), 31(Ch); Earl of Stafford v Buckley (1750) 28 ER 111; 2 Ves Sen 170 (Ch)).

2

A remainder designed to vest in possession before the natural determination of the prior possessory estate. Thus, a gift “to B for life, but if she remarries, then to C” was invalid as it might cut short B’s life estate. Note, however, that if the gift had been rephrased “to B for life or until remarriage, then to C” it would have been valid. What is the distinction here? See Rochford v Hackman (1852) 68 ER 597; 9 Hare 475 (V-C); Brandon v Robinson (1811) 34 ER 379; 18 Ves Jun 429 (Ch).

3

A remainder which did not follow a prior possessory estate created by the same instrument. Thus, a gift by A “to B and his heirs commencing in five years’ time” would be totally invalid and A would retain the fee simple estate in possession. (For further illustrations, see Goodtitle d Dodwell v Gibbs (1826) 108 ER 264; 5 B & C 709 (KB); Boddington v Robinson (1875) LR 10 Ex 273; Barwick’s Case (1597) 77 ER 199; 5 Co Rep 93b (KB)).

4

A remainder which necessarily created an abeyance of seisin. An illustration is a gift by A “to B for life, remainder to such of B’s children who graduate in law after his death”. On the other hand, where uncertainty existed under the terms of the gift as to whether abeyance of seisin would arise, the common law applied a “wait-and-see” approach in determining whether the remainder was valid or void. An illustration of the latter would be a gift “to B for life, remainder to such of B’s children who may have graduated in law by the time of B’s death”. The inflexibility of the application of these rules, which were regarded as highly technical and quite arbitrary, provoked many cases of injustice. Over the years, many notorious decisions emerged from the common law courts as to the application of the rules. Perhaps the most famous of these was Shelley’s Case (1581) 76 ER 206; 1 Co Rep 93b (KB), where a gift by A “to B for life, then to the heirs of B” was construed by the court as bestowing a fee simple estate on B and giving B’s heirs nothing, despite the obvious intention of the donor to benefit the heirs and to limit B’s interest to a life estate. Consider the following more modern Australian application of Shelley’s Case. [11.10]

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Hordern v Permanent Trustee Co [11.15] Hordern v Permanent Trustee Co (1894) 10 WN (NSW) 190 Supreme Court of New South Wales in Equity [A settlor conveyed various properties to trustees upon certain uses declared in the settlement. In particular, one of the subsequent uses was declared “to the use of E for her life and the heirs of her body lawfully to be begotten under the same uses, limitations and restrictions as are hereinbefore expressed with regard to the said H” (H being the beneficiary under a prior use). The issue was the applicability of the Rule in Shelleys Case and whether in consequence of that rule E took an estate in fee tail. If the rule was not applicable, E would have taken only an estate for life.] OWEN CJ in Eq: This is a suit to obtain the construction of certain limitations contained in the settlement made by Catherine Slater on the 27th July, 1836. The settlor conveyed various properties to trustees upon certain uses declared in the settlement, and the uses which are there declared of the George Street property, the subject matter of this suit are as follows: To the use of Henry Slater, a son of the settlor, for his life, with remainder to trustees to preserve contingent remainders, “and immediately after the decease of the said Henry Slater to the use of all and every the child and children whether male or female of the said Henry Slater lawfully to be begotten to be equally divided between and amongst them if more than one share and share alike as tenants in common and not as joint tenants and of the several and respective heirs of all and every such child and children and if there shall be but one such child then to the use of such only child and his or her heirs but in the event of the said Henry Slater dying without leaving issue of his body lawfully begotten living at the time of his decease then to the use of Elizabeth Slater (daughter of the said Catherine Slater) for her life and the heirs of her body lawfully to be begotten under the same uses limitations and restrictions as are hereinbefore expressed and limited with regard to the said Henry Slater”. Henry Slater having died without leaving issue, the question to be determined is what estate Elizabeth Slater took in this property. It is contended by the plaintiff that she took an estate in fee tail; on the other side it is contended that she only took an estate for life, and that her children are entitled in fee in remainder as purchasers. Now there is no dispute as to the law governing cases of this kind. It has been clearly laid down that, where a settlor makes use of technical expressions, the Court must give full effect to the legal meaning of these expressions, unless in the context it is clearly and unequivocally expressed or implied by the settlor that the technical words are used in a restricted sense; nor will the Court cut down the estate conveyed by the technical words made use of, unless it sees that there is an equally clear intention on the part of the settlor that it should be so cut down. In the case of Jesson v Wright ((1820) 2 Bli 1 at 52), before the House of Lords, Lord Eldon lays down the principles I have stated. Referring to the words in the will then before the Court, which created a tenancy in tail, his Lordship says: In order to cut down this estate tail, it is absolutely necessary that a particular intent should be found to control and alter it as clear as the general intent here expressed. The words “heirs of the body” will indeed yield to a clear particular intent that the estate should be only for life, and that may be from the effect of superadded words, or any expressions shewing the particular intent of the testator; but that must be clearly intelligible, and unequivocal. In the same case Lord Redesdale, in his judgment, says: That the general intent should over-rule the particular, is not the most accurate expression of the principle of decision. The rule is, that technical words shall have their legal effect, unless, from subsequent inconsistent words, it is very clear that the testator meant otherwise. Now here, if the limitation to Elizabeth Slater had stopped at the words “heirs of her body”, there can be no doubt her estate would have been an estate tail; and the only question is whether the subsequent words used in the limitation shew that the settlor intended to use the words “heirs of her body” not in their full and strict legal signification, but with a more limited and restricted meaning. 806

[11.15]

Future Interests and Perpetuities

CHAPTER 11

Hordern v Permanent Trustee Co cont. These subsequent words are: “Under the same uses and limitations and restrictions as are hereinbefore expressed and limited with regard to the said Henry Slater.” And the uses and limitations declared with regard to Henry Slater are a life estate to Henry Slater, and after his decease to the use of all and every his child or children lawfully begotten to be divided equally between them as tenants in common and of the several and respective heirs of all such child or children and if only one such child to the use of that child and his or her heirs. It is clear that this limitation to Henry Slater would only give him a life estate, and that the children would take as purchasers. It appears to me that the settlor in expressing the limitations in favour of Elizabeth Slater used an abbreviated form which, if explained, would import the very words used in the previous limitations in respect of Henry Slater; that is to say, that these limitations are to be construed as if they were to the use of Elizabeth Slater for life, and after her decease to the use of all and every her child or children equally as tenants in common and their several heirs. In that case the children would take as purchasers, and Elizabeth Slater would only be entitled to a life estate. This interpretation is made more clear by referring to the limitations which, in a subsequent part of the will, are declared with reference to another property situated in Liverpool Street. The Liverpool Street property is limited to Elizabeth Slater to exactly the same uses as were declared with regard to the George Street property to Henry Slater, viz, to herself for life with remainder to her child or children as purchasers; and it continues: – “In the event of the said Elizabeth Slater dying without leaving issue of her body lawfully begotten living at the time of her decease then to the use of the said Henry Slater for his life and the heirs of his body lawfully to be begotten under the same uses limitations and restrictions as are hereinbefore expressed and limited in respect to the George Street property”, and the George Street property was left to him for life with remainder to his children as purchasers. So that in these other subsequent limitations the settlor clearly interprets the words “heirs of the body” to mean children, and did not intend those words to have their full and technical meaning. Under these circumstances I am clear that the settlor has herself shewn the meaning that is to be put on the words “heirs of her body” in the limitations now under consideration, and that the limitation was to the children of Elizabeth Slater as purchasers. That being so, I hold that the plaintiff is not entitled to the property as tenant in tail, but the Permanent Trustee Company, as trustees of the will of Elizabeth Grose (formerly Elizabeth Slater), are entitled to two-thirds, and the plaintiff and the defendant Percy Hordern are entitled respectively to one-sixth each.

[11.20]

Notes and Questions

1. The rule in Shelley’s Case (1581) 76 ER 206; 1 Co Rep 93b (KB) was even held to apply where an intermediate freehold estate to a third person was interposed between a grant of a life estate to a person and a remainder to the heirs of that person: Ambrose v Hodgson (1781) 1 ER 1405; 3 Bro Parl Cas 416 (HL). 2. For further illustrations of the rule in Shelley’s Case (1581) 76 ER 206; 1 Co Rep 93b, see, for example, Sheppard v Gibbons (1742) 26 ER 666; 2 Atk 441 (Ch); Ambrose v Hodgson (1781) 1 ER 1405; 3 Bro Parl Cas 416 (HL); Van Grutten v Foxwell [1897] AC 658 (HL); Perrin v Blake (1770) 98 ER 355; 4 Burr 2579 (KB); Jesson v Wright (1820) 4 ER 230; 2 Bli 1 (HL); Roddy v Fitzgerald (1858) 10 ER 1518; 6 HL Cas 823 (HL); Jones v Morgan (1783) 28 ER 1086; 1 Bro CC 206 (Ch).

[11.20]

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3. What do you consider could be the possible justification for the rule? On this point, see Van Grutten v Foxwell [1897] AC 658 at 668-669 per Lord Macnaghten. See also Hargreaves A, “Shelley’s Ghost” (1938) 54 LQR 70. 4. It appears that the Australian courts have attempted to avoid the application of the rule, wherever possible. In a number of cases the rule appears to have been overlooked: see, for example, Bouel v Cooktown Municipal Corporation (1885) 2 QLJ 93. In Mabey v Ramsey [1963] NSWR 599, McLelland CJ in Eq held that although the rule is capable of applying to equitable estates as well as legal estates, it does not apply where one estate is legal and the other equitable. No reasons were given for this decision. Shelley’s Case was also held inapplicable in Re Barber (1937) 37 SR (NSW) 470 and Goodwin v Baylis (1875) 13 SCR (NSW) Eq 27. 5. Shelley’s Case continues to apply in respect of general law land in South Australia, Tasmania and the Australian Capital Territory. It has been expressly repealed by legislation in the other jurisdictions (Conveyancing Act 1919 (NSW), s 17; Property Law Act 1958 (Vic), s 130; Property Law Act 1974 (Qld), s 28; Property Law Act 1969 (WA), s 27; Law of Property Act (NT), s 28). This legislation does not operate retrospectively, and any conveyance executed before the commencement date of the relevant sections is still subject to the operation of the rule. The relevant dates are: New South Wales, 1 July 1920; Victoria, 12 February 1929; Queensland, 1 December 1975; Western Australia, 1 August 1969; and Northern Territory, 1 December 2000. Note that Shelley’s Case has never applied in Australia to Torrens land, as the rule is based on the common law distinction between words of purchase and words of limitation, neither of which have ever had any relevance or application under the Torrens legislation. Intervention of equity [11.25] The legal remainder rules form a major part of the justification for the intervention of equity in real property law. Many persons, who were deprived by the inflexible operation of these rules of the grant of estates in land clearly intended for them, petitioned the Chancellor for a remedy. This remedy was first provided by means of the device of a system of uses, which enabled interests which would have been void at law to be validly created in equity. All that was required of the donor of a gift was to commence the gift with the expression “to X to the use of …” If this was done, any subsequent gift would be enforceable in equity and all the restrictive common law rules would be avoided. X would take the legal estate and hold in trust for the grantees of the beneficial interests in the land. The device of uses also had the effect of creating certain types of interests, referred to as “executory interests”, that common law had always refused to recognise as valid. These new interests, enforceable at equity, were “springing uses” and “shifting uses”. A springing use would arise, for example, in a gift “to X to the use of B when B reaches the age of 25 years”. This circumvented the prohibition at common law against the abeyance of seisin and allowed gifts to be created in futuro. A shifting use would arise in a case “to X to the use of B and his heirs, but if C qualifies as a medical practitioner then to C and his heirs”. This avoided the common law rule against remainders limited after a fee simple estate. In addition, and very importantly, the device of uses circumvented the common law prohibition against wills. The device of uses was later changed by the Statute of Uses 1535 (ENG). The relevance of this legislation is that it “executes the use”. In other words, the legal estate is vested in the beneficiary or beneficiaries (the cestui que use) rather than the person to whom the estate was 808 [11.25]

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formally granted subject to the use (the feoffee to uses). The legislation was soon held to have executed all uses regardless of whether they were consistent with the common law legal remainder rules, with the result that springing and shifting uses were recognised for the first time as valid legal future interests. The abolition of the distinction between legal and equitable estates, which was a necessary consequence of the Statute of Uses 1535, soon led to the introduction of a “use upon a use”. This effectively restored the status quo prior to the Statute, and forms the origin of the modern law of trusts. Unfortunately, the 1535 Statute did not have the effect of rendering redundant the legal remainder rules. It was held in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380 (KB) that if a limitation of a legal estate is capable of existing as a contingent remainder it must be regarded as a contingent remainder rather than as an executory interest, with the result that it may be destroyed by the application of the legal remainder rules. This was a quite unnecessary restriction imposed by the common law, and rivals in its injustice the rule in Shelley’s Case (1581) 76 ER 206; 1 Co Rep 93b (KB). The following case is a modern illustration of the rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380.

White v Summers [11.30] White v Summers [1908] 2 Ch 256 English High Court of Justice, Chancery Division A testator left a life estate to B, and then a fee tail to “the eldest or other son of the body of JS who shall first obtain or have obtained the age of 21 years”. This estate was followed by another, “to FS for life” and then to her sons in tail. When B died, the eldest son of JS was not yet 21 years of age. However, JS, a solicitor, entered into possession as guardian of his infant son until that son reached his majority. The son then took the estate, and was succeeded upon his own death by his own son. The plaintiff was the eldest surviving son of FS. He claimed possession on the grounds that the limitation to the eldest son of JS was a contingent estate, which failed because no such son had reached the age of 21 years when the prior estate of B terminated. The plaintiff argued that when the contingency failed, the estate should then have gone to FS, through whom he now claimed. PARKER J: The first question which arises for determination in this case is whether the limitation after the estates in tail made by the will conferred on the sons of John Bowen, severally and successively, according to seniority is a contingent remainder or an executory devise. The limitation is framed so as to take effect immediately on the determination of such estate tail, and is in favour of the eldest or other son of James Summers who shall first attain or have attained the age of twenty-one years. It is clearly a contingent limitation, but the contingency is such that it may happen before the determination of the preceding estate of freehold. Being limited to take effect immediately after the determination of a particular freehold estate upon a contingency which may happen before such determination, it has all the requisites of a good contingent remainder, and would have been valid as such if, together with the estates which precede it, it had been created by a common law conveyance operating irrespectively of the Statute of Uses. It is a well-known rule – except, of course, in cases where the Contingent Remainders Act 1877, is applicable – that no limitation capable of taking effect as a contingent remainder shall, if created inter vivos, be held to be a springing use under the Statute of Uses, or, if created by will, be held to be an executory devise under the Statute of Wills or the Wills Act 1837 (UK). If this rule be applied, the limitation in question must be held to be a contingent remainder. But it is suggested that the rule must always yield to a clear expression of a testator’s intention to the contrary, and that in the present case the testator’s intention to the contrary is clearly expressed. I propose to consider shortly how far it can be said to depend on a testator’s intention whether or not the rule be applicable. [11.30]

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White v Summers cont. In the case of limitations created inter vivos the rule has clearly arisen from judicial decisions as to the effect of the Statute of Uses, having regard to the principles of feudal tenure, and not from any consideration as to the real intention of the settlor. That this is so will appear from the following considerations. Take the case of a conveyance before the statute to A and his heirs to the use of B (a bachelor) for life, and after his death to the use of his eldest son who should attain the age of twenty-one years in fee simple. The intention of the settlor is clear. B’s eldest son is intended to take the fee simple if he attains twenty-one years whenever that event happens, and equity would compel A to give effect to the intention if and whenever B’s son attained that age. If, on the other hand, the conveyance had been by way of common law limitations and not to uses, B’s son could only have taken the fee simple if he had attained twenty-one years before the determination, whether by death or otherwise, of B’s estate for life. For the effect at the common law of limitations of real estate did not depend on the settlor’s intention, but on the principles of feudal tenure. When the Statute of Uses converted the equitable interest taken by B and his eldest son under the limitations we are considering into legal interests, the question at once arose whether the legal interest conferred by the statute on B’s eldest son was a contingent remainder liable to failure on principles of feudal tenure in the same manner as if it had been created before the statute by a conveyance to common law limitations, or whether it retained the immunity from failure which upon equitable principle it had possessed as a mere use before the statute. It fell, of course, to the Courts of Common Law, and not to the Courts of Equity, to decide this question, and, having regard to the preamble and avowed object of the Statute of Uses, it was not unnatural that the common law Courts should decide – as they in fact decided – that the interest conferred on B’s eldest son by the statute was a contingent remainder, and as such liable to failure, although it was manifest that this decision would defeat the settlor’s intention, to which the Courts of Equity would have given effect. That the decision turned on questions of law and public policy rather than any question of intention is clear from Chudleigh’s Case (1595) 76 ER 261; 1 Co Rep 113b, wherein may be found a dismal catalogue of the disasters which would befall the Commonwealth if a limitation operating under the statute and capable of taking effect as a contingent remainder were held to be free from that liability to forfeiture to which all contingent remainders were subject at common law. It was only when the statute created estates which could not be upheld as good common law limitations that the settlor’s intention was the material consideration, for to such estates, ex hypothesi, no principle of feudal tenure was applicable. After the Statute of Wills a precisely similar question arose as to contingent limitations contained in wills, and it was similarly held that if the limitation was such as to fulfil the requisites of a good contingent remainder at common law, it was and must be held to be a contingent remainder and liable to failure accordingly, and could never be given effect to as an executory devise free from such liability. This appears to have been first laid down by Lord Hale in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380, a case referred to by Lord Kenyon in Doe d Mussell v Morgan (1790) 100 ER 846; 3 Term Rep 763 as laying down a rule which has since prevailed without any exception to the contrary. Lord Hale gives no reasons for his decision; but I think it also must have been based on principles of law and policy rather than on the intention of the testator. That this is so will appear from the following considerations: Suppose there be a devise to A for life, with remainder to B if he attains twenty-one. B is clearly intended to take if he attains twenty-one, whenever that event happens. If, however, A survives the testator and dies, leaving B still a minor, the gift to B fails, because his interest is a contingent remainder, and as such liable to failure if the contingency does not happen before the determination of the particular estate. On the other hand, if A predeceases the testator, and B is still a minor at the testator’s death, B will be entitled when he attains twenty-one. In this case the gift to him never could by any possibility, under the circum-stances existing at the testator’s death, take effect as a remainder; therefore it will be held a good executory devise, and the testator’s intention will prevail: Hopkins v Hopkins (1738) Cas t Talb 44. In Holmes v Prescott (1864) 12 WR 636; 33 LJ Ch 264 real estate 810 [11.30]

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White v Summers cont. was devised to certain limitations, including a contingent remainder which failed, because the contingency did not happen before the determination of the particular estate, and it could not, on the principle I am considering, take effect as an executory devise. Personalty was, however, by the same will bequeathed in trust for the persons who should for the time being be entitled to the real estate, and to go in the same manner, or as near thereto as the rules of law and equity would permit. It was held by Wood V-C that the mere fact of the testator’s intention having, as to the real estate, been defeated by a rule of law could not operate to prevent its being given effect to with regard to the personalty, to which the rule of law had no application. The last-mentioned case also shews – as, indeed, had been decided twenty years earlier in the case of Festing v Allen (1843) 152 ER 1204; 12 M & W 279 (Ex) – that the rule in question applies to a devise to a contingent class; for example, to A for life, with remainder to all and every his children or child who shall attain twenty-one years, although in such a case it is quite certain that the rule is eminently calculated to defeat the testator’s intention. Next take the case of a devise to A for life, with remainder to the eldest son of B (a bachelor at the testator’s death). This is clearly capable of taking effect as a contingent remainder, and must so take effect affording to the rule. If, however, the devise be to A for life, and after his death and one day to the eldest son of B (a bachelor at the testator’s death), this would be an executory devise, because it could never take effect as a remainder, there being a gap between the determination of the particular estate and the following limitation. The testator’s intention would, however, be the same in each case. Again, if the limitation be to A for life, with remainder equally between the eldest son of B living at A’s death and the first son of B born after A’s death, clearly as to the limitation to the eldest son of B living at A’s death it is a good contingent remainder, but as to the limitation to the first son of B born after A’s death it cannot take effect as a contingent remainder, because the contingency cannot happen till after the determination of the particular estate vested in A, and therefore it must be good, if at all, as an executory devise. The same principle would apply where there is a gift to A for life, with remainder between a class all or some members of which could by no possibility be ascertained until after the determination of the particular estate; for example, a gift to A for life and after his death equally between the children of A then living and the children of B thereafter to be born. In this case, too, the gift to B’s children could never take effect as a contingent remainder, but, if good at all, could only be good as an executory devise. In my opinion a consideration of the foregoing examples shews that the real questions in each case are: (1) What limitations does the will create? And (2) Can such limitations take effect as remainders? And the question whether the testator intended the limitations to take effect in this way or that is immaterial. It must be remembered, however, that there can be no objection to a testator creating alternative gifts in favour of the same individual, one being a contingent remainder and one an executory devise, and leaving the question which gift is to take effect to abide the event. Thus, in the case of a devise to A for life, and after his death to B if he shall have then attained twenty-one years, but if B shall not have then attained twenty-one years, then to B if and when he attains that age, there would be alternative gifts to B, one being a remainder and the other an executory devise, and which ultimately took effect would depend upon whether B had or had not attained the age of twenty-one at the death of A. That such alternative limitations would be good appears from the case of Evers v Challis (1859) 11 ER 212; 7 HL Cas 531. It should be noticed, too, in the above instances that the estate given by way of remainder is not the same estate as the estate given by way of executory devise. The estate given by way of remainder takes effect, if at all, immediately on the determination of the particular estate; the estate given by way of executory devise arises subsequently, and during the interval the property the subject of the gift is undisposed of. I come to the conclusion, therefore, that the rule in question is a rule of law, and is applicable, whatever be the intention of the testator to the contrary, unless, indeed, such intention is expressed in language which, as a matter of construction is sufficient to create some other alternative limitation capable only of taking effect as an executory devise, in [11.30]

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White v Summers cont. which case the rule does not in reality yield to the intention, but the alternative gift comes into operation. For example, I think that, if a testator devised property to A for life, and after the death of A to B, if he should attain the age of twenty-one years, and then proceeded to declare that if the limitation to B shall fail to take effect as a contingent remainder it shall take effect as an executory devise, there would be no difficulty in construing this as an alternative executory devise to B upon his attaining the age of twenty-one years, after the determination of the particular estate supporting the contingent remainder limited in the first instance. If B were a minor at A’s death he would still get the benefit intended for him, not by virtue of a limitation as to which the testator had succeeded in excluding the application of a rule of law, but by virtue of another limitation contained in the will. The contingent remainder would still be defeated by the rule, but the executory devise whereby he obtained an estate, not commencing with the determination of the particular estate, but after such determination and a further interval, would take effect. The intention of the testator, as disclosed by the words of his will and the surrounding circumstances, is, of course, all-important in determining what limitations are created by the will, but it seems to me that when once those limitations have as a matter of construction been ascertained it is a pure question of law whether this or that limitation is a contingent remainder or an executory devise.

[11.35]

Notes and Questions

1. Note the comment of Parker J that the rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380 (KB) is a rule of law rather than a rule of construction and, therefore, operates regardless of the intention of the donor or testator. 2. In the extract in [11.30], what is the method stated by Parker J to be available to a donor or testator to avoid the operation of the rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380, and how would it operate? 3. For other cases on the rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380, see Festing v Allen (1843) 152 ER 1204; 12 M & W 279 (Ex); Chudleigh’s Case (1595) 76 ER 261; 1 Co Rep 113b (KB). 4. The rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380 has been abolished in all Australian jurisdictions. The Property Law Act 1974 (Qld), s 30(1) and the Law of Property Act (NT), s 30(1) state that all future interests shall henceforth take effect as equitable rather than legal interests. In the remaining jurisdictions, legislation copying or paraphrasing the effect of the Contingent Remainders Act 1877 (UK), s 1 has been adopted. This legislation abolishes the rule in Purefoy v Rogers (1671) 85 ER 1181; 2 Wms Saund 380, and in addition overturns the long-standing rule which declared a contingent remainder void if it failed to vest before the natural determination of the prior particular estate (Conveyancing Act 1919 (NSW), s 16(1); Property Law Act 1958 (Vic), s 191; Property Law Act 1969 (WA), s 26; Law of Property Act 1936 (SA), s 25; Conveyancing and Law of Property Act 1884 (Tas), ss 80(2), 81). The Statute of Uses 1535 was followed shortly afterwards by the Statute of Wills 1540 (Eng). The device of uses had become popular during the 15th and earlier 16th centuries as a means of making a valid devise, which had been impossible under the feudal system of land tenure. The effect of the Statute of Uses 1535 was to abolish the power to devise land. This proved extremely unpopular and led to the reinstatement of the power to devise land by the 1540 812 [11.35]

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legislation. In Australia, the Statute of Uses 1535 has been abolished by legislation in New South Wales (Imperial Acts Application Act 1969, s 8), Victoria (Imperial Acts Application Act 1980, s 5), Queensland (Property Law Act 1974, s 7) and the Northern Territory (Law of Property Act, s 6). The effective dates for the operation of this repeal are: New South Wales, 1 January 1971; Victoria, 2 July 1980; Queensland, 1 December 1975; Northern Territory, 1 December 2000. The effect of this repeal is to return the law in these jurisdictions to its pre-1535 condition and to allow trusts to be created without employing a use upon a use. In these jurisdictions legal executory interests can no longer be created, although the creation of legal contingent remainders is possible (except in Queensland and the Northern Territory, where s 30(1) of the Property Law Act 1974 and s 30(1) of the Law of Property Act (respectively) state that future interests shall henceforth only exist as equitable interests).

PERPETUITIES Background [11.40] The law relating to perpetuities, in particular the rule against perpetuities, has as its

rationale the proposition that land must be freely alienable. The free alienability of land has long been protected by common law and the rule against perpetuities is merely one aspect, albeit a very important aspect, of its operation. Put simply, the rule against perpetuities arose as a compromise between the right of landowners to dispose of their land as they might wish, a right which arose only after the collapse of the feudal system of land tenure, and the need to prevent land from being removed from the market for an indefinite period by the terms of a grant or will. In modern times, although the right of a testator to leave property by will is universally respected, it is nevertheless considered appropriate to impose some restraints on the extent to which he or she can “tie up” the property and to prevent people from “dictating for ever from the grave”. The common law rule against perpetuities was aptly described by Creswell J in Dungannon v Smith (1845) 8 ER 1523 at 1530; 12 Cl & Fin 546 at 563 (HL) as follows: It is a general rule-too firmly established to be controverted, that an executory devise to be valid must be so framed that the estate devised must vest, if at all, within a life or lives in being and twenty-one years after; it is not sufficient that it may vest within that period; it must be good in its creation; and unless it is created in such terms that it cannot vest after the expiration of a life or lives in being, and twenty-one years, and the period allowed for gestation, it is not valid, and subsequent events cannot make it so.

This common law rule, developed by the English courts between the late seventeenth and early nineteenth centuries, was held by the Privy Council in Cooper v Stuart (1889) LR 14 App Cas 286 to be appropriate for adoption in Australia. As a result of this decision, the common law rule has been applied identically in this country. The sole difference has been in its application to Torrens land. Young J of the Supreme Court of New South Wales, held in Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 that if a person achieves registration of an interest which would be void at common law for infringing the rule, the rule will be overridden by the Torrens legislation and the interest will become indefeasible. The onus is thus on the Registrar of Titles to ensure that by the act of registration he or she does not create an interest which would otherwise be invalid. [11.40]

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In South Australia, the rule against perpetuities has been abolished. Section 61(1) of the Law of Property Act 1936 (SA) states in part:

Law of Property Act 1936 (SA), s 61(1) [11.45] Law of Property Act 1936 (SA), s 61(1) A disposition of property is not invalid – (a)

because of the remoteness from the date of the disposition of the time an interest will, or may, vest in pursuance of the disposition; or

(b)

because, under the terms of the disposition, an interest is limited, for life, to a person who was unborn at the date of the disposition, with a remainder over to a child or other issue of that person

[11.50] Section 62 indicates that the intention of the legislature was not to allow donors and testators to tie up the land indefinitely. By s 62(1), if, 80 years after the disposition of property, there remain interests that have not yet vested, the court may on application vary the terms of the disposition so as to enable the interests to vest immediately. By s 62(2), if there are interests in property which the court believes may not or cannot vest under the terms of a disposition within 80 years, the court may on application vary the disposition so as to ensure that the interests vest within the 80 year period. The South Australian legislation applies to all dispositions of property whether occurring before or after the commencement of the perpetuities provisions (1 May 1996). However, by s 59(2) the legislation does not validate a disposition of property if, before 1 May 1996, property subject to the disposition had been wholly or partly distributed on the basis that the disposition is invalid. In all other Australian jurisdictions, the common law has been amended by legislation. This new legislation only applies, however, to the wills of testators who die after the commencement date of the legislation and to instruments taking effect after the commencement of the Act or after an appointed day. The relevant dates are: New South Wales, 31 October 1984; Victoria, 10 December 1968; Queensland, 1 December 1975; Western Australia, 6 December 1962; Tasmania, 1 December 1992; Australian Capital Territory, 19 December 1985; Northern Territory, 1 August 1994. There are thus (except in South Australia) two systems of perpetuities operating in Australia at the present time: the common law, applicable to older instruments in the other jurisdictions, and the statutory system, applicable to newer instruments in all jurisdictions. It is instructive to examine the essential features of each system separately.

The common law rule [11.55] The rule seeks to achieve its aim of preventing land from being removed from the marketplace for an indefinite period by imposing a limit on the amount of time which may elapse between the creation of a future interest and the ultimate vesting of that interest. Consistent with the notion of vesting, ultimate vesting will occur when the final owner of the interest is identifiable and the only thing preventing him or her from taking the interest in possession is the termination of any prior estate. For obvious reasons, the rule does not apply to vested interests, but extends to all legal and equitable contingent interests in real property. 814 [11.45]

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Simply stated, the rule is that “no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest”. The rationale for the length of a life in being plus 21 years was to permit parents to leave gifts to their children which would vest on the children’s majority. The 21-year period has not been changed in Australia despite the reduction in the age of majority to 18 years. If there are no life or lives in being, the perpetuity period has been held to be limited to 21 years (Re Raphael; Permanent Trustee Co of New South Wales Ltd v Lee (1903) 3 SR (NSW) 196; Re Hooper [1932] 1 Ch 38). The period commences to run from the date of the testator’s death, where the gift is made by will (Re Mervin [1891] 3 Ch 197; Abbiss v Burney (1881) LR 17 Ch D 211), from the date when the instrument takes effect, in the case of an inter vivos gift, and from the date of delivery of the deed, where the interest is in deed form (Robinson v Hardcastle (1788) 2 Term Rep 241; 100 ER 131; Routledge v Dorril (1794) 30 ER 671; 2 Ves Jun 357). Certain exceptions to the common law rule against perpetuities have been recognised over the years. The most controversial one relates to possibilities of reverter. The existence of this exception was recognised in Re Chardon [1928] Ch 464, and can be justified on the basis that the interest is vested. On the other hand, a gift over following a possibility of reverter may not operate for hundreds of years, and therefore possibilities of reverter may be argued to contradict in spirit, if not in strict theory, the overall policy of promoting the free alien-ability of land. Possibilities of reverter should be distinguished from rights of entry for condition broken attached to a fee simple estate, the right remaining in a grantor who disposes of land by way of a fee simple subject to a condition subsequent. In the latter case the grantee’s right does not determine automatically, as in the case of a possibility of reverter, but only upon formal entry by the grantor or her or his heirs or assigns. This highly technical and artificial distinction is nevertheless sufficient to distinguish the two interests for the purposes of the application of the rule against perpetuities. Rights of entry for condition broken attached to a fee simple estate have been consistently held to be subject to the rule (see, for example, Re Da Costa [1912] 1 Ch 337; Re Smith (dec’d) [1967] VR 341; (1966) 18 LGRA 403; Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209). Other exceptions to the rule against perpetuities recognised by common law include a transfer of a proprietary interest from one charity to another upon a contingency (Re Tyler [1891] 3 Ch 252; Royal College of Surgeons of England v National Provincial Bank Ltd [1952] AC 631; [1952] 1 All ER 984; [1952] 1 TLR 978), an option based on contract (Hutton v Watling [1948] Ch 26), and a limitation following an estate in tail (still valid in South Australia and Tasmania) (Heasman v Pearse (1871) LR 7 Ch App 275). Over the years there have been many reported incidents of donors, particularly testators, attempting to avoid the spirit of the rule against perpetuities, while respecting its letter. One method of doing this is to include a large number of lives in being, as no restriction on their number is contained in the common law rule.

Re Villar [11.60] Re Villar [1929] 1 Ch 243 English Court of Appeal [A testator gave his property upon certain trusts, so that the property was not to vest until the expiration of “the period ending at the expiration of 20 years from the day of the death of the last survivor of all the lineal descendants of her Late Majesty Queen Victoria who shall be living at the time [11.60]

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Re Villar cont. of my death”. There were believed to be at least 120 such descendants living at the time of the testator’s death in 1926. The question was whether the trusts were void, either for uncertainty, or as infringing the rule against perpetuities.] LORD HANWORTH MR: This is an appeal from Astbury J, who had to determine whether or not in the main the will of the testator ought to be declared ineffective and that the proposed trust disposition of his residuary estate failed on the ground that it was void for uncertainty, or, in other words, that it was impracticable. [His Lordship then stated the facts and continued] It is said that the terms of the residuary gift which are easy to carry out as regards the payment of income at the present time are to be treated as invalid, because of the period of restriction to the end of which distribution of the capital was postponed. The argument is that as the ascertainment of the end of this period will create serious difficulty in time to come, the residuary gift ought to be set aside as invalid. The period of restriction is defined as “the period ending at the expiration of 20 years from the day of the death of the last survivor of all the lineal descendants of Her Late Majesty Queen Victoria who shall be living at the time of my death”. We have the evidence of a member of the College of Arms, who says the descendants of Queen Victoria numbered not less than 120 in 1922, and that they might have increased in number by 1926. On the other hand I suppose they might have decreased in number, for I do not know whether the births of new descendants between 1922 and 1926 were sufficient to fill the vacancies among the descendants caused by death. However it is quite clear that there were a large number of the descendants of Queen Victoria in being on September 6, 1926, and obviously there may be great difficulty in ascertaining whether and when the last of these lineal descendants had passed away. That is what has to be ascertained, and it depends on the existence of one single life out of many others. I recognise that serious difficulty might well arise in the future in ascertaining the date when that life ceased. It is plain from the judgment of Astbury J that it was with reluctance that he decided that the provisions of the will were valid. He said if he could have seen his way to say that this tying up of the capital was invalid he would gladly have done so. For myself, I hold the same view. Indeed, I think I may use the words of Lord Eldon in Thellusson v Woodford (1805) 32 ER 1030; 11 Ves Jun 112 at 145, when he says: If it were possible, speaking judicially, to say, you entertain a wish upon the subject, your Lordships may all concur in the regret, that such a will should be maintained. But that goes no further than as a motive to see whether it contains any thing, resting upon which we may as judges say it is an attempt to make an illegal disposition. I join with Lord Eldon and Astbury J in regretting that a will may be validly made in terms which give rise to great difficulty at present or in the future without any corresponding advantage to any one, except to give latitude to the vanity of the testator. But while I hold these views, it is plain that I have to set them aside when acting judicially, and consider what is the law applicable to the case. In this respect much assistance can be obtained from Thellusson v Woodford 11 Ves Jun 112 at 135, where Sir A Macdonald CB says, in reference to an observation of Lord Nottingham in Howard v Duke of Norfolk 2 Freem Ch 72: “When he declares, that he will stop, where he finds an inconvenience, he cannot, consistently with sound construction of the context, be understood to mean, where judges arbitrarily imagine, they perceive an inconvenience; for he has himself stated, when inconvenience begins; namely, by an attempt to suspend the vesting longer than can be done by legal limitations.” And Lord Eldon says (Thellusson v Woodford, 11 Ves Jun 112 at 146) that the decision to be reached cannot depend on the number of lives, “but the question always is, whether there is a rule of law, fixing a period, during which property may be unalienable. The language of all the cases is, that property may be so limited as to make it unalienable during any number of lives, not exceeding that, to which testimony can be applied, to determine, when the survivor of them drops.” Applying these 816 [11.60]

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Re Villar cont. passages and the rules adhered to in Thellusson v Woodford, we have to ask ourselves whether the testator has by his will offended against any rule of law. He has defined the period of restriction as a period lasting during the lifetimes of a number of ascertainable persons or the survivors or survivor of them. It is true that the number is considerable, amounting to 120 or 130, but they can be ascertained at the present time. It follows that the testator has selected a period of restriction during which division of the capital is postponed, which, inconvenient though it may be, offends against no canon of law at the present time. But it is said that the Courts ought to take into consideration the difficulty that will arise in the future when, it may be 100 years hence, their successors will be faced with the problem of finding out who is the last survivor of this body of 120 or 130 persons and when he died. That is a difficulty which may arise by reason of the vicissitudes of life, but it may not. It is possible that 120 years hence the Court may find a number of problems relating to the births, marriages and deaths of various persons; but they appear to me to be matters which we ought not to take into account. The difficulties are not insurmountable, and they may in fact never arise. Therefore I return to the view that the only matter I have to consider is whether the residuary gift of the testator can be declared invalid on the ground that it has transgressed some rule of law at the present time. The answer must be that it has not so transgressed, and, if so, we cannot by reference to difficulties that may arise hereafter make a new will for the testator. I regret the decision, as there is no reason for such a fanciful disposition; but testing it by the rules which have to be applied, I can find no breach of the existing law, and the will must therefore stand. The appellant has suggested that the whole residuary gift should be set aside, but at the present time there is no difficulty in dealing with the estate as directed by the testator. It seems impossible to set aside a gift which works well in the present but which may in the future cause difficulty. I think that the decision of Astbury J was right, and that the appeal must be dismissed. Lawrence and Russell LJJ agreed. Appeal dismissed

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Notes and Questions

1. For another illustration of the use of the lineal descendants of a named monarch as the lives in being, sometimes referred to as the “royal lives clause”, see Re Leverhulme (No 2) [1943] 2 All ER 274. Also see Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd (2009) 14 BPR 27, 213 and Re McDonald Trust No 1 [2010] VSC 324, in which the court had to construe the meaning of a royal lives clause where there had been an obvious error in the drafting. 2. Re Kelly [1932] IR 255 held that animals cannot be used as lives in being. Only human lives will suffice. 3. Re Villar [1929] 1 Ch 243 makes it clear that the lives in being chosen by the testator or donor need not be connected to the interest other than by merely being mentioned in the instrument which creates it. For other illustrations of this, see Thellusson v Woodford (1805) 32 ER 1030; 11 Ves Jun 112; Cadell v Palmer (1833) 6 ER 956; 1 Cl & Fin 372. [11.65]

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The failure of the common law to impose a requirement that the life or lives in being be relevant to the gift or will was responsible in large measure for the abuse by donors and testators of the rule against perpetuities. 4. Hardebol v Perpetual Trustee Co Ltd [1975] 1 NSWLR 221 held that the rule against perpetuities is not infringed by a gift or will where the life or lives in being are not ascertained at that time, provided that such lives are definitely in existence and do not form part of a class which may increase in number. In this case, the testator left property to her daughters for life; and then to their children, born in the testator’s lifetime, for life; then to the widows (born in the testator’s lifetime) of such children for life; and then to the children of such children. At issue was the question whether the gift to the testator’s great-grandchildren was void for perpetuity. Holland J, of the Equity Division of the Supreme Court of New South Wales, held that the gift was valid because all the beneficiaries to take before the final gift to the great-grandchildren were lives in being at the testator’s death; although the two grandsons alive at the testator’s death were unmarried at that time, and consequently their widows were unknown, they must become known at the death of the last surviving grandson. His Honour stated (at 224-225): Now it is true that, at the date of death, all living females were potential widows of a grandson, and it was impossible to say whether any one of them would be his widow, but it would not be impossible to say it at the death of the last surviving grandson. It could then be said with certainty. The fact would prove itself. In other words, there could be no difficulty in determining when the last survivor of the class dropped, and no risk that the trust for great grandchildren might take effect outside the period permitted by the law. Indeed, it would take effect within a group of lives in being and without waiting a further twenty-one years. It has been held that in a gift to “A” for life, and then to any widow who may survive him for life, and then to such of the children of “A” as may be living at the death of the survivor of “A” and his widow, the gift to the children is too remote, because “A’s” widow may not be a life in being: Hodson v Ball (1845) 14 Sim. 558, 574; 60 ER 474, 480-481; Lett v Randall (1855) 2 Sm & G 83; 65 ER 572; Re Frost (1889) 43 Ch D 246; but it has not been held that if, by the limitation, “A’s” widow must be a person born before the date of the limitation in order to take her interest, the gift to “A’s” children would be too remote. Indeed, Theobald on Wills 12th ed, par 1483, 507 records that it was a recommendation of the Law Reform Committee (Fourth Report, par 28): that any limitation which under the present law would be void for perpetuity solely by reason of the possibility of some person marrying a spouse who is not a life in being should take effect as if a reference to the spouse were confined to any spouse who was born before the date of the limitation and so is a life in being. If the argument in the present case was correct the recommendation would not save the gift, because one could not tell at the outset who the spouse might be. A recommendation for reform may not always truly reflect the present law, but in this case, I believe it does, as did the author of Theobald on Wills. The draughtsman of the codicil apparently had the same idea as the Law Reform Committee and, in my opinion, he has saved the gift to the great grandchildren.

5. The perpetuity period includes any actual periods of gestation, since an unborn child is treated as a life in being for the purposes of the rule (see, for example, Re Stern (dec’d) [1962] Ch 732; Re Wilmer’s Trusts [1903] 2 Ch 411). 6. Dukeminier, “Wait-and-See: The Causal Principle” (1986) 102 LQR 250 (at 251-254) gives an interesting discussion as to the method of determining who is a relevant life in being: 818 [11.65]

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To understand who are the measuring lives under wait-and-see, it is first necessary to understand the logical process underlying the application of the common law Rule against Perpetuities. The Rule against Perpetuities is a rule of proof. The task is to prove that an interest will vest or fail within 21 years after the death of some person now alive. If you can find that person, such person in the validating life – the person who enables you to make the proof required to validate the interest. Now, how do you go about looking for, and perhaps finding, the validating life? You start with this proposition: If a validating life is found it will necessarily be found among lives that can affect vesting, or such life will not be found at all. Therefore you first assemble the lives who can affect vesting (who might be called candidates for the validating life), and, second, you test each one to see if that life enables you to make the required proof. Since a validating life must necessarily be a person who can affect vesting, the persons worthy of testing – the lives relevant to the search – are persons causally related to vesting. A conclusion that a gift is void implicitly asserts that you have tested all the causally-related lives and found them useless in making the requisite proof … When we look at how students are taught to find the measuring lives, we see that they are taught a two-step process. This can be illustrated by two well-known English cases often used by teachers to show what this measuring lives business is all about. In Jee v Audley (1787) 1 Cox Eq 324 the testator bequeathed £1,000 to Mary Hall, and if Mary Hall dies without issue, to the daughters then living of John and Elizabeth Jee. When we explain this case to students we do not waste any time showing how George III (who was king at the time) and Lord Kenyon (who rendered the decision) are not relevant, except possibly to say, “You can prove nothing by them because they cannot affect vesting”. What we do is to assemble the causally-related lives: Mary Hall, John and Elizabeth Jee, and the four Jee daughters living at the testator’s death. Observe that we cannot say whether the gift is valid or void without doing this. If we were to say to the students, “I won’t tell you whether the Jees are alive”, the students cannot solve the perpetuities problem. Having assembled the causally-related lives, we explain why each life is useless in furnishing the requisite proof. Mary Hall is useless because the indefinite failure of her issue may occur more than 21 years after her death. John and Elizabeth Jee are useless because, although they can affect vesting by begetting another beneficiary, the indefinite failure of Mary Hall’s issue will not necessarily happen within 21 years of their deaths. And, finally, the four living Jee daughters do not validate the gift because the gift may vest in an afterborn daughter of John and Elizabeth Jee long after the four living daughters are dead. Without this explanation, the students cannot learn how to test for the validating life. If these lives are not relevant, as Allan and Maudsley insist, then it is not apparent to me how students can be taught to apply the Rule against Perpetuities. And if the “fertile septuagenarian”, Elizabeth Jee, is not relevant, this will come as a surprise to teachers who for nearly 200 years, have regarded Elizabeth Jee’s existence as crucial to the application of the Rule in Jee v Audley. In Ward v Van der Loeff [1924] AC 653 (HL), the testator executed a will that, put simply, devised his property in trust for his wife for life, remainder to his nephews and nieces. He then executed a codicil to his will providing that the life estate given his wife by his will should be terminable upon her remarriage to a man not a natural-born British subject. The codicil further provided that after the death of his wife the trust fund should go to his nephews and nieces “who shall be living at the death of my wife or born at any time afterwards” and who should reach 21. Observe again, as in Jee v Audley, that we cannot say whether the remainder in the will or the remainder in the codicil is valid or void without first assembling the causally-related lives. Validity depends upon the existence of certain causally-related persons. So let us assemble the pool of lives. The testator left surviving his widow, his parents, two brothers and sisters, and several nephews and nieces. These are the causally-related lives. As for the remainder interest given by the will, it is valid because, and only because, the testator had a nephew or niece alive at his death, who, under the rule of Andrew v Partington (1791) 3 Bro CC 401 could demand possession and close the class at the widow’s death, thus vesting the gift. Hence the widow is the validating [11.65]

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life because of the existence of a nephew or niece in the pool of causally-related lives. As for the remainder given by the codicil, it is void if the testator left parents alive, which he did, because all the presently-living brothers and sisters and nephews and nieces might die tomorrow and the parents might procreate another child who procreates a child long after the widow’s death. To solve Ward v Van der Loeff, we do not need to know about the existence of Australian aborigines, but we must know who is in the pool of causally-related lives. Ward v Van der Loeff is a lovely classroom case not only because it teaches students about the desirability, indeed the necessity in that case, of assembling the causally-related lives before proceeding. It also permits discussion of several hypothetical variations to show how a causally-related life may be turned into a validating life: If the words “or born at any time afterwards” were eliminated, the widow would be the validating life. If the parents were dead, the brothers and sisters would be the validating lives. If the phrase “brothers and sisters” were construed to mean living brothers and sisters, which would be quite appropriate in view of the advanced age of the parents, the living brothers and sisters would be the validating lives. Observe that all of these variations, so useful in teaching, involve the causally-related lives. They are the only ones that can, under some change in circumstances, provide the necessary proof of validity. With experience, one learns to make the calculations of the Rule rather swiftly in many cases. An expert, remembering calculations previously made, can often pronounce a gift valid or void at once. Take a gift “to A for life, remainder to A’s children who reach 25”. An expert will ask first if A is alive, and if told yes, the expert pronounces the remainder void immediately. The expert can do this because in the past he has tried to make the requisite proof with A, and failed, and has tried to make the requisite proof with A’s children (assuming, first, that the eldest is over 25 and assuming, second, that the eldest is under 25), and failed on both assumptions. Every correct judgment of invalidity rests upon the knowledge that the requisite proof cannot be made with any causally-related life, and the expert stores in his memory the knowledge learned in working with the same limitation a few times. An expert may also pronounce validity swiftly. If the age in the previous example is reduced to 21, an expert will immediately say that A is the validating life. An expert can reach into the pool of causally-related lives and find the validating life, but in doing so the expert is implicitly rejecting all other causally-related lives as the validating life. In teaching the Rule, if we are worth our salt as teachers, we explicitly show why A is the only validating life and why A’s children, regardless of their ages, are not validating lives. One simply cannot learn how to find the validating life from among the causally-related lives without learning why other causally-related lives cannot serve that role. The thought process described here (assembling the causally-related lives and testing them in search of a validating life) closely resembles the position taken by Dr Morris and Professor Wade, Morris & Wade (1964) 80 LQR 486, 497-500. See also R E Megarry & HWR Wade, The Law of Real Property (5th ed, 1984), 254, though it is articulated in different language. Using the traditional phrase “measuring lives”, rather than the more exact “validating life”, Morris and Wade say, “The question is not whether the lives are expressly specified; it is whether, as a matter of causality, they restrict the vesting period; and if they do, the next question is whether they restrict it sufficiently to satisfy the Rule.” Morris & Wade, op cit supra note 10 at 497. In Morris and Wade’s language, the causally-related lives assembled for testing restrict the vesting period because the interest is valid only if it will vest within 21 years after the death of some life in the pool (or within 21 years in gross). The next question, under Morris and Wade’s analysis, is whether among the causally-related lives you can find a life that satisfies the Rule, ie, that validates the interest. There appears to be no difference between Morris and Wade’s position and the two-step process used to solve perpetuity problems discussed here.

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7. In the first paragraph of his judgment extracted above, Lord Hanworth MR raised the possibility that a disposition might be declared void for uncertainty. As is clear from the decision in this case, however, inter vivos gifts and wills will not lightly be struck down on this ground. Mere inconvenience or difficulty in ascertaining and identifying the number of lives in being is insufficient. In certain cases, however, the uncertainty principle will operate so as to defeat the donor’s or testator’s intention. An illustration is Re Moore [1901] 1 Ch 936, where a gift in a will “21 years from the death of the last survivor of all persons who shall be living at my death” was struck down as void for uncertainty. Another reason why the common law rule against perpetuities fell into disrepute was that the courts have insisted that for a gift or will to be declared valid there must be absolute certainty that it will vest within the stipulated period (the life or lives in being plus 21 years). This standard of proof, which is in excess of that applied in other contexts by civil or criminal courts, means that it is not sufficient for the rule that the gift is extremely likely or even virtually certain to vest within the period. Nothing less than absolutely certainty at the time the perpetuity period begins to run that the gift or will will vest within the perpetuity period will suffice. The result of this bizarrely strict requirement has been a number of cases of patent injustice where a gift or will has been unfairly struck down. Consider the following two cases.

Re Fawaz (dec’d) [11.70] Re Fawaz (dec’d) [1958] VR 426; [1957] ALR 999 Supreme Court of Victoria A testator devised his house to his niece for life, and then on trust for the use of her unmarried children until the marriage of the last of such children. He left his residuary estate upon trust for those children, with an ultimate trust for charity “upon the death of the last survivor of the children”. The niece was 52 years of age at the date of the will. Her husband lived in Lebanon. The will contained a declaration allowing one of the niece’s daughters to reside in the said dwelling-house whether she is married or unmarried as she is the person eminently suited to maintain the said dwelling-house as a home for her unmarried brother and sisters. The issue was whether the possibility that the niece might have another child, thus postponing vesting outside the perpetuity period, had the effect of making the dispositions to her children void. DEAN J: This originating summons raised a number of questions each of which turned upon the validity of a separate provision of the will of the testator. The source of invalidity relied upon in each case was the Rule against Perpetuities. I shall have to examine the will in more detail presently, but for the immediate purpose of stating the nature of the problems a brief summary is desirable. The will contains two sets of dispositions. Clause 3 deals with the testator’s house at 1040 Drummond Street, North Carlton and its contents. The remaining provisions deal with the rest of his considerable estate. The scheme of the provisions dealing with his house and its contents is this: He gives to his niece Rose Kurban a life interest therein, and after her death he provides for its use as a home by her unmarried children; upon the marriage of the last of her children the house and contents are to be sold, the proceeds being held upon the trusts relating to his residuary estate; then a power to postpone sale and to allow any of the children to occupy the premises at a fair rental. It is said that these trusts infringe the Rule against Perpetuities because the children of Rose Kurban include not only those in existence at the date of the will but also any who may thereafter be born to her, and that the interests of the children may vest more than twenty-one years from her death, and discretionary trusts in their favour may be exercised beyond the permitted period. [11.70]

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Re Fawaz (dec’d) cont. The residuary estate is given upon trusts for the benefit of Rose Kurban and her children, contained in cl 4 and cl 5 of the will, and for similar reasons it is said that they are invalid. Clause 7(c) contains trusts of income which last during the lives of the children, including, in subclause 7(c)(iii), provision for assisting needy students of Lebanese parents at The American University of Beirut, at Beirut, Lebanon. Clause 8 contains an ultimate trust for that University to come into operation, “upon the death of the last survivor of the children of Rose Kurban”. These gifts are likewise said to be obnoxious to the Rule. It will be convenient to take in order the questions asked by the summons, to consider the relevant provisions of the will, and so to deal with the various questions raised. Question (a) asks: “Is the disposition contained in paragraph (b) of cl 3 of the will void to any and what extent as infringing the Rule against Perpetuities?” No argument was advanced against the validity of this paragraph and it appears to me to be valid. Whatever view be taken as to who are the children included in the gift, they must all be born in the life-time of Rose Kurban, and she is a life in being for the purposes of the Rule. The right of use and occupation accrues to them at once and is not dependent upon any exercise of any discretionary or other power by the trustees. The interest vests at her death and it is no objection to a gift that it may last beyond the period allowed for vesting. This question is therefore answered “No”. Question (b) is: “Is the disposition contained in paragraph (a) of cl 4 of the will void to any and what extent as infringing the Rule against Perpetuities?” Clause 4 directs the trustees to make certain payments out of the income from the residuary estate. Paragraph (a) is: “So long as the said dwelling-house is held in trust for the said Rose Kurban and her children my trustees shall pay the rates taxes fire insurance premiums and all other outgoings payable rated charged or assessed in respect of the said property”. No argument was advanced against the validity of this provision and I do not think it is invalid. It is a right accruing at the death of Rose Kurban to those of her children who occupy the premises pursuant to cl 3(b). If, as I think, the right to occupy is valid, then the right to have the payments referred to made out of income during such occupation must be valid also. Question (b) should therefore be answered “No”. Question (c) is: “Is the disposition contained in paragraph (c) of cl 4 of the will void to any and what extent as infringing the Rule against Perpetuities?” It is necessary to set this paragraph out at length: It is as follows: “(c) If my trustees shall in their discretion think it justifiable having regard to all the circumstances to pay to the said Rose Kurban or direct to her children or any one of them a sum not exceeding Two pounds per week for the maintenance of each child as shall not be working. In exercising their discretion under this clause my trustees shall consider whether the child in respect of whom the payment is being made is reasonably justified in not working and in particular shall have regard to whether the said child is prevented from working by illness or inability to obtain work in which cases my trustees shall exercise the discretion conferred upon them hereunder. I declare that the discretion to make payments to the children of the said Rose Kurban conferred upon my trustees by this clause shall not be confined to the lifetime of the said Rose Kurban but may be exercised by my trustees at any time so long as my residuary trust estate or any part thereof remains in their hands.” It appears quite clear that if the expression “children of Rose Kurban” includes any who may be born after the death of the testator, the clause contravenes the Rule. The children who are alive at the death of Rose Kurban acquire no vested interest in any share of the income. No one of them can take anything unless and until there is an exercise of the discretion of the trustees in his or her favour. This may be at any time beyond the period of twenty-one years from the death of Rose Kurban or of those children born in the testator’s life time. This is too remote. A power exercisable beyond the period 822 [11.70]

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Re Fawaz (dec’d) cont. allowed by the Rule is void – Re Blew [1906] 1 Ch 624; Re De Sommery [1912] 2 Ch 622; Jarman on Wills 8th ed, p 316; Morris & Leach, The Rule Against Perpetuities, pp 134-5. But those who seek to uphold the will challenge the interpretation upon which the contention of invalidity proceeds. They contend that, properly construed, the expression “children of Rose Kurban” is limited to those in existence at the date of the will. This contention, if well-founded, preserves the validity of other clauses of the will which are said to be invalid, namely, cl 5, cl 7(c)(iii) and cl 8. It is therefore one of very great importance. Before examining the contention I propose to set out certain facts in evidence before me, while for the moment expressing no opinion whether they can be admitted in evidence on a question of construction. Rose Kurban was born in Lebanon in 1897, and was thus fifty-two years of age in 1949 when the will was made. She was married and had had four children, all of whom are still living. They are, a daughter, Najla, born in 1923, a daughter, Nadia, born in 1928, a son, Nageeb, born in 1929, and a daughter, Nouhad, born in 1934. All were unmarried at the date of the will. Testator had lived in Victoria for many years, and Rose Kurban, who was his niece resided with her husband and children in Lebanon until 1947, when two of the children came to Victoria. In 1949 Rose Kurban and the other two children came here, arriving three months before the date of the will. The daughter, Nadia, married in 1950, and thereafter lived in Ormond, but Rose Kurban and the other three children resided with the testator from the dates when they respectively came to Victoria at the house at 1040 Drummond Street, North Carlton, until his death in May 1955. Rose Kurban’s husband is still alive, and living in Lebanon. I turn now to the question whether the expression in the will “children of Rose Kurban” is confined, as a matter of construction, to those in existence at the date of the will. Unless it is so confined, the clause under consideration is void. If by any possibility further children could be born to Rose Kurban, the gift would fail. The attitude of the law on this matter would scarcely commend itself to an intelligent layman. It is prepared to concede that a deceased person cannot have children, but it will concede no more. The fact that by a surgical operation a woman’s organs of generation have been removed, or the fact that she is of an advanced age will not, in the eye of the law, exclude the possibility of further children being born to her. As Dr Morris and Professor Leach observe, the rule dates from a time when the science of gynaecology was almost unknown. See op cit at 74-75, 79-81. I am, however, bound by authority: Jee v Audley (1787) 29 ER 1186; 1 Cox Eq Cas 324; Re Dawson (1888) 39 Ch D 155; Ward v Van der Loeff [1924] AC 653; Ker v Hamilton (1880) 6 VLR (Eq) 172; Re Breheney (dec’d) [1915] VLR 242; Re Deloitte [1926] Ch 56; but I am not prepared to agree with Lord Brougham that the doctrine is “one of the corner-stones of the law” – Dungannon v Smith (1846) 8 ER 1523; 12 Cl & Fin 546 at 631. There have been suggestions that some court of high authority may some day reconsider the matter – see per Lord Maugham in Berry v Green [1938] AC 575 at 584; [1938] 2 All ER 362. I must resist the temptation, which I feel is very strong in this case, to look at the facts I have referred to above and to say that the testator was probably intending to provide for those who had come to share his home, namely his niece and her four children. But the true use of extrinsic evidence is not to use it to ascertain intention, but only as a guide to the meaning of the will. In Ward v Van der Loeff [1924] AC 653 at 663, Viscount Cave, quoting Rigby LJ, said there was a “fundamental distinction between evidence simply explanatory of the words … themselves, and evidence sought to be applied to prove intention itself as an independent fact”. It is well settled that prima facie a reference to the children of a person means the children born or to be born of that person. If a child be in fact a child of such person, there is no reason for excluding him from the class – Re Breheney [1915] VLR 242. But it is possible to find sometimes in a will an indication of the testator’s intention that the word “children” was confined to children born at the date of the will. Cussen J, was able to arrive at such a [11.70]

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Re Fawaz (dec’d) cont. conclusion in Re Hobson [1907] VLR 724. In doing so, he derived some support from the discredited decision of Shadwell V-C, in Elliott v Elliott (1841) 12 Sim 276. See Jarman on Wills, 8th ed, p 1676; Gray on Perpetuities, 4th ed, s 640 – and see per Isaacs and Gavan Duffy JJ, in Reid v Earle (1914) 18 CLR 493, 504-505. One further matter should be referred to. It is very tempting to construe the will in a way which would avoid the defeat of the dispositions by the Rule against Perpetuities, by taking at its face value the maxim which states that documents should be interpreted ut res magis valeat quam pereat. But it has been frequently laid down that it is not permissible to take the existence of the Rule against Perpetuities into account in construing a will. Thus in Dungannon v Smith (1846) 8 ER 1523; 12 Cl & Fin 546 at 599, Parke B, said: Our first duty is to construe the will; and this we must do, exactly in the same way as if the Rule against Perpetuities had never been established, or were repealed when the will was made; not varying the construction in order to avoid the effect of that rule, but interpreting the words of the testator wholly without reference to it. See also, per Lord Macnaghten in Edwards v Edwards [1909] AC 275 at 277; Pearks v Moseley (1880) LR 5 App Cas 714; Ward v Van der Loeff [1924] AC 653, 660; Gray on Perpetuities, 4th ed, p 599. Having administered to myself these necessary warnings and cautions, I proceed to consider the contention that there are in this will definite indications that the testator intended to refer and to refer only to those children of Rose Kurban whom the testator knew and who were living at the date of his will. I turn now to the will. Clause 3(b) provides that upon the death of Rose Kurban and until the date of sale Nadia Kurban “and such of the children of the said Rose Kurban as shall be unmarried” are to have the use and occupation of his dwelling-house and contents. He adds “I declare that it is my intention to permit the said Nadia Kurban to reside in the said dwelling-house whether she is married or unmarried as she is the person eminently suited to maintain the said dwelling-house as a home for her unmarried brother and sisters”. Great significance is attached to the use of the word “brother” in the singular, as showing that he did not have in mind the use of the house by any future son of Rose Kurban. This is said to show that he was providing a home solely for the existing children. Rose Kurban had only one son, the brother of Nadia. This is a circumstance of considerable significance even if it were the sole indication to be found in the will. It supports the view that when in Clause 3(c) he directs a sale “upon the date upon which the last of the surviving children of the said Rose Kurban shall marry”, he is referring to the marriage of the last of her then existing children to marry. But there are other indications of a similar intention – cl 4 begins the series of trusts in relation to his residuary estate. It is concerned only with the application of the income of his residuary estate. I need not repeat cl 4(a). Clause 4(b) provides: “My trustees shall during the lifetime of the said Rose Kurban pay to her the sum of Six pounds per week until such time as Nouhad Kurban the youngest daughter of the said Rose Kurban commences to work or in the opinion of my trustees should have commenced to work and shall thereafter pay to the said Rose Kurban the sum of 1 pound per week for life”. The only beneficiary under this clause being Rose Kurban herself it has no direct bearing upon this case. But what is important is that Nouhad Kurban is referred to as the “youngest daughter” of Rose Kurban. So she was at the date of the will, but if Rose Kurban were to have another daughter she would not be the youngest. This is relied on for the contention that the testator did not have any intention of benefiting any children of Rose Kurban except those known to him. If it be assumed, as Counsel for the next-of-kin contended, that by the words “children of Rose Kurban” testator was intending to include future children, then the description of Nouhad as the youngest daughter was one which he would have regarded as not necessarily correct. If, on the other hand, he was intending 824 [11.70]

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Re Fawaz (dec’d) cont. to benefit the then existing children alone, it is, and always will be, correct so to describe Nouhad. But cl 4(b) is important in another way. He provides that an additional 2 pounds per week is to be payable to Rose Kurban until Nouhad, who was aged 15 at the date of the will, commences to work. If testator had contemplated the possibility of other children being born to Rose Kurban it would have been expected that he would have made a similar provision in respect of any such child. The fact that this provision is made only in respect of Nouhad tends to show that he was not concerned to provide for any subsequent children. Similar conclusions can be drawn from cl 4(c) which I have already set out in full. He does not appear to treat infancy as a ground for making the extra payments which the trustees are empowered by this clause to make. Such a case is dealt with by cl 4(b) as regards Nouhad, but in cl 4(c) he is contemplating the case of a child old enough to work but prevented from working by some circumstance such as ill-health or inability to obtain work. In my opinion the matters to which I have referred appear to show with some definiteness that testator was intending to confine the benefits given by the will to those of Rose Kurban’s children who were alive when he made his will. The matters referred to indicate that these were the only children he had in mind as the persons to be benefited thereby. It may be said that while testator himself did not contemplate the possibility that further children might be born, nevertheless his language is wide enough to cover such children, and the fact that they were not contemplated is not sufficient to exclude them. But if the testator has made the dispositions in his will upon the basis that the persons who would benefit thereby would fall within a restricted class, then even though the actual description of the donees is prima facie wide enough to include members of a wider class, the actual words of description must be read in the light of other indications of his intention to be found in the will. If, whether by design or because he gave no thought to the possibility of additional children, he has shown an intention to confine the gift to the existing children, it would be contrary to his intention to extend it to possible future children. I am satisfied from a perusal of the will as a whole that testator had no other intention beyond that of providing for the family group, providing a home for them, and empowering his trustees to make other payments to them. In my opinion question (c) should be answered “No”.

[11.75]

Notes and Questions

1. On the facts of this case, Dean J manages to avoid the conclusion that the 52-year-old niece might have another child which would render the will void under the rule against perpetuities by holding that the testator intended only to include within the scope of the will those children living at the time of his death. This intent was found in the will as a matter of construction. There are a number of other modern cases where the courts have used rules of construction to save a gift from the operation of the rule against perpetuities: see, for example, Re Hobson’s Will [1907] VLR 724; 13 ALR 703 and Brownfield v Earle (1914) 17 CLR 615. Whether this can be done depends, of course, on the wording of the instrument. Despite their inclination to do so, the courts will not always be able to construe the words so as to hold a gift to be vested in order to save it. 2. The issue raised by the facts in Re Fawaz (dec’d) [1958] VR 426; [1957] ALR 999 as to the child-bearing potential of older women has featured in several cases. As indicated by Dean J in his judgment extracted above, the common law adopted a conclusive presumption of fertility, whereby women of any age, even those of advanced years, are deemed at common law capable of producing children. The High Court held in Teague v [11.75]

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Trustees, Executors and Agency Co Ltd (1923) 32 CLR 252 that a future grandchild might be born to the testator, even though his only surviving child was a woman aged 69 years. It was similarly assumed by the House of Lords in Ward v Van der Loeff [1924] AC 653 that a couple each aged 66 years might produce another child, even though it was over 30 years since their last child had been born. These and other similar cases have been nicknamed “the fertile octogenarian cases”, the origin of which appears to have been Jee v Audley (1787) 29 ER 1186; 1 Cox 324. 3. Common law not only recognised “fertile octogenarians”, but also “precocious toddlers”, as children of any age were conclusively presumed to be capable of childbearing. A classic illustration is Re Gaite’s Will Trusts [1949] 1 All ER 459; 65 TLR 194, where Roxburgh J did not deny the physical possibility that the testator’s widow (aged 65 years) could remarry and bear a child, who in turn could bear a child, all within five years of the testator’s death. The gift was only saved in this case because the Age of Marriage Act 1929 (UK) forbade persons under the age of 16 years to marry, which inevitably meant that any hypothetical grandchild would have had to be illegitimate and so be disqualified under the terms of the will. See also Re Atkins’ Will Trusts [1974] 1 WLR 761. 4. There is also the “unborn widow(er)” category of cases. Re Frost (1889) 43 Ch D 246 concerned a will in respect of which the beneficiaries were the testator’s daughter Emma (unmarried at the date of the will) during her life and upon her death a life estate to any husband Emma might marry, followed by a remainder, on the husband’s death, to any children of the marriage. The gift to the children was held to be invalid because of the possibility that Emma might marry a man not born at the testator’s death, who might die more than 21 years after Emma (the only life in being). In this case, the gift would vest outside the perpetuity period (Emma’s life plus 21 years). See also Harris v The King (1936) 56 CLR 177; [1937] ALR 78.

Re Wood [11.80] Re Wood [1894] 3 Ch 381 English Court of Appeal A testator directed his trustees to work out gravel pits he owned, which were nearly exhausted by the time of his death, and then to sell them when this had been done. The proceeds were to be held on trust for such children of his as were “then living” and such issue living of any children who were deceased, who, if sons, should attain twenty-one years or, if daughters, should attain that age or marry. The testator left 11 children surviving him, and one who had predeceased him, leaving issue who were living. The gravel pits were fully worked out 6 years after the testator’s death. LINDLEY LJ: This appeal from a decision of Mr Justice Kekewich turns entirely upon the construction of the will of a testator who owned some gravel pits. There are two questions: (1) whether the directions contained in the will for the sale of the gravel pits and the division of the proceeds of sale are void for remoteness; (2) whether the Appellant is entitled to a share of the residue of the testator’s estate, which would include the proceeds of the sale of the gravel pits, if the gift of those proceeds is too remote. The first question is, whether the direction to sell the gravel pits and to divide the proceeds of sale is void under the doctrine of perpetuities. Mr Rowden contended that on the construction of the will it is reasonably clear that the sale must take place within the lifetime of some one of the testator’s sons, and he relied upon two of the clauses of the will – the power given to the sons, or any of them, to bid 826 [11.80]

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Re Wood cont. at the sale, and the provision that, until the sale, the sons, or such of them as might be willing to do so, should continue to be employed in the business as theretofore at the usual wages. In my opinion that argument is not tenable. Then arises the question, whether the fact that the pits were nearly worked out at the death of the testator, and that they were worked out about six years after his death, will exclude the operation of the rule against perpetuities. I think the law on this subject is correctly stated in Theobald on Wills, 3rd ed p 401 thus: In applying the rule against perpetuities, the state of things existing at the testator’s death, and not at the date of the will, is to be looked at. But possible and not actual events are to be considered, and, therefore, if at the testator’s death a gift might possibly not have vested within the proper time, it will not be good, because, as a matter of fact, it did so vest. The learned writer refers to Lord Dungannon v Smith 12 Cl & F 546, and In re Roberts 50 LJ (Ch) 265. We have also been referred to In re Dawson 39 Ch D 155, where the cases were reviewed by Mr Justice Chitty. The law on that point is as old as Lord Kenyon; it was settled in Jess v Audley 1 Cox, 324. The time for the sale of the gravel pits would not necessarily arise within the period of a life in being at the death of the testator and twenty-one years afterwards. Then when you endeavour to ascertain the class who are to take the proceeds of the sale you cannot do it within the period. Both the direction to sell and the disposition of the proceeds are therefore void as being within the rule against perpetuities. Then comes the question whether the Appellant can take under gift of residue. [His Lordship read the residuary clause.] The Appellant is a child of a daughter of the testator who was dead at the time when he made his will. We have not to deal with the case of a child of a child of the testator who died between the date of his will and the date of his death. Is it possible to say that the words “during their respective lives” could have been intended to apply to a child who was dead at the date of the will? You cannot include the Appellant’s mother within the residuary gift, and therefore, apart from all authorities, it is impossible to include the Appellant himself. But, looking at the authorities, and with all deference to the decision of Vice-Chancellor Malins in In re Potter’s Trust Law Rep 8 Eq 52, I think they are clear that the child of a child of the testator who was dead at the date of his will cannot take under this gift. The decision of Mr Justice Kekewich was right, and the appeal must be dismissed. Davey and Lopes LJJ agreed.

[11.85]

Notes and Questions

1. Would it have been possible for the court to order the trustees to work the gravel pits out before the end of the perpetuity period, so as to save the gift from being declared invalid? See Leach, “Perpetuities Reform: London Proposes, Perth Disposes” (1964) 6 UWALR 11 at 12. 2. In Haggerty v City of Oakland 161 Cal App 2d 407; 326 P 2d 957; 66 ALR 2d 718 (1958) the existence of a covenant to build an auditorium in good faith and with due diligence was held to be irrelevant in a case where a lease in respect of the building was held void on the ground that the building might not be completed within 21 years. 3. For other cases analogous to Re Wood [1894] 3 Ch 381, see Re Jones (dec’d) (1950) 66 TLR (Pt 2) 51; Re Bewick [1911] 1 Ch 116; Re Lord Stratheden & Campbell [1894] 3 Ch 265; Belyea v McBride [1942] 3 DLR 785 (PC). [11.85]

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Class gifts [11.90] The common law rule against perpetuities has to be applied taking into account the

law on class gifts. A class gift refers to a situation where a gift is made in favour of a number of persons which is uncertain in number when the gift is created and which is to be ascertained in the future; in other words, a situation where the amount to be received by each member of the group depends upon the total number of persons within that group. An illustration of a class gift is a gift “to my children who shall reach the age of 21 years”. This should be contrasted with a bequest “to each of my sons”, or “to the three daughters of B”, where the exact shares to be received by the beneficiaries is certain from the outset. For illustrations of gifts declared at common law to constitute class gifts, see, for example, Dimond v Bostock (1875) LR 10 Ch App 358; Re Jackson (1883) 25 Ch D 162; Boreham v Bignall (1850) 68 ER 302; 8 Hare 131(V-C). Illustrations of gifts declared not to be class gifts can be found in Wilkinson v Duncan (1861) 54 ER 831; 30 Beav 111 (Rolls Ct); Re Stansfield (1880) 15 Ch D 84; Rogers v Mutch (1878) 10 Ch D 25. The original common law rule in relation to class gifts was that the precise proportion of the gift which is to vest in each member of the class of beneficiaries must be ascertainable within the perpetuity period. If the class was capable of increase outside the perpetuity period, the gift would fail totally for all members of the class, not just for any additional members who might be born after the end of the perpetuity period. This original rule was modified in 1791 by the rule in Andrews v Partington (1791) 29 ER 610; 3 Bro CC 401. This latter rule imposes a system of “class-closing”, whereby the class of people designated in a gift as contingent beneficiaries closes at the date when the first member of the class becomes entitled to take, irrespective of whether the class is capable of further growth in the future. An illustration of the operation of the class-closing rule is a devise “To my nephews and nieces when they reach the age of 25 years”. The class (ie, the nephews and nieces) will close once the first nephew or niece reaches 25 years of age. Any other nephew or niece currently under 25 years will acquire a share on reaching that age. If any nephew or niece dies before the age of 25 years, the proportion given to the others is proportionately increased. Any nephew or niece born after the class closes will be excluded from the gift. The operation of the class-closing rule is explained in more detail by Sir Denys Buckley in his judgment in the following case.

Re Drummond’s Settlement [11.95] Re Drummond’s Settlement [1988] 1 WLR 234 English Court of Appeal After a life interest to himself, a settlor provided that his estate be held on trust for such of his three daughters who survived him or left issue who survived him. Both daughters and issue had to attain the age of 21 years or marry to be entitled. If a daughter died without issue living, then cl 2(c) took effect and provided that her share was to be divided equally “amongst such of the daughters as shall then be living and the issue of any of them who may be then dead”. One of the daughters did indeed die without issue. The question then was whether cl 3(c) of the trusts was valid or void as a perpetuity. This in turn depended upon the point of time to which the words “shall then be living” referred. SIR DENYS BUCKLEY: This is an appeal from a judgment dated 30 April 1986 of Mervyn Davies J (Re Drummond’s Settlement [1986] 3 All ER 45, [1986] 1 WLR 1096) whereby he declared certain trusts of a settlement dated 26 August 1924 and made by the late George Henry Drummond void for perpetuity. The settlor had three children living at the date of the settlement. I shall refer to them as 828 [11.90]

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Re Drummond’s Settlement cont. Eve, who was born in 1918 and is the second defendant, Rosemary, who was born in 1919 and is the first defendant, and Edwina, who was born in 1920 and is now dead. They are defined in the settlement as “the daughters”, and I shall so describe them and use the term “daughter” to refer to one or other of them as occasion requires. The settlor had five other children born after the date of the settlement, none of whom took any interest under the settlement. The settlor died in 1963. Edwina died in 1984, having had no issue. Eve is now a widow aged 69 and has had no children. Rosemary is married and has had two children, both of whom have attained the age of 21 years. The present trustees of the settlement are the plaintiffs and Eve. In these circumstances the plaintiffs issued an originating summons for the determination by the court of the question whether on the true construction of the settlement and in the events which have happened the one-third share of the trust fund in which Edwina was entitled to a life interest in possession is now held in trust for Eve and Rosemary in equal shares, or on a resulting trust for the settlor’s estate by reason of the failure for perpetuity of the material trusts of the settlement, or on some other and, if so, what trusts. The third defendant is one of the settlor’s legal personal representatives and is joined in these proceedings to represent the settlor’s estate. The judge held that the trusts of the one-third share in question have failed, and that that share is consequently held on a resulting trust for the settlor’s estate. Eve and Rosemary appeal against that decision. The settlement by reason of its date was unaffected as regards perpetuity by the Law of Property Act 1925 or the Perpetuities and Accumulations Act 1964, and the question for our decision must accordingly be determined in accordance with the old common law rule against perpetuities, that is the rule, commonly so designated, to the effect that every limitation of property, unless it depends on an estate tail, must, to be valid, be such that the estate or interest so limited must vest, if at all, within a life or lives in being at the date of its creation and 21 years thereafter. In applying the test, we have to take into account all contingencies which were possible at the date of the settlement, for the limitation must be shown to have been valid ab initio and cannot be rendered valid by supervening events. Our task is, first, to construe the relevant trusts without regard to the rule, and then to determine how far they offend against the rule and what the consequent effect is on the trusts. The beneficial interests created, or intended to be created, by the settlement were set out therein in one continuous and unpunctuated paragraph (which also lacked any apostrophes), but for the sake of clarity and ease of reference Mervyn Davies J in his judgment helpfully divided it into three numbered cll ((1), (2) and (3)) and subdivided the last into three sub-clauses ((a), (b) and (c)). So divided, the trusts read as follows: And the Trustees shall stand possessed of the said messuages lands and hereditaments or the investments for the time being representing the same (hereinafter referred to as “the Settled Estate”) Upon trust [1] to pay the rents profits and income arising or to arise therefrom to the Settlor during his life and [2] from and after his decease Upon trust to pay the income thereof to such of the Daughters as shall be living at the time of his decease and shall have attained or shall attain the age of twenty one years or marry under such age and the issue of any of the Daughters who may have predeceased the Settlor such issue taking their parents share only equally amongst them if more than one on their attaining the age of twenty one or marrying under such age in equal shares and so that the Daughters shall not have power to anticipate charge or incumber the same and [3] after the decease of each of the Daughters [a] Upon trust to pay transfer and divide such share unto and amongst one or more of the children or other issue of that said Daughter in such shares and proportions and subject to any conditions as she shall by Will or Codicil direct and appoint [b] And in default of any such directions and appointments and subject thereto and so far as the same shall not extend Upon trust to pay transfer and divide such share unto and amongst all the children or any child of such Daughters who shall attain the age of twenty one years or being a daughter marry under such age and if more than one in equal shares [c] And in case there shall be no such child who shall [11.95]

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Re Drummond’s Settlement cont. live to take a vested interest in such share Upon trust to pay transfer and divide such share equally amongst such of the Daughters as shall then be living and the issue of any of them who may be then dead such issue taking their parents share only on attaining the age of twenty one years or marrying under such age. These trusts are not happily expressed and require some analysis. The judge held that “issue” in cl 3(c) of the trusts extends to issue of all degrees, and there is no appeal against that part of his decision. It will be seen that the beneficial trusts of the settlement fall into three parts; firstly, a trust of the whole of the income of the trust fund for the settlor during his life; secondly, a further income trust in equal shares for such of the daughters as should survive the settlor and the issue of any daughter who should predecease him who, in the case both of any surviving daughter and of any issue of any predeceasing daughter, should attain the age of 21 or marry “such issue taking their parents share only equally amongst them if more than one”. No predeceasing daughter is herself given in terms any share of either capital or income under the trusts. This reference to “their parents share” must, in my judgment, be understood to refer to such hypothetical share of the income of the settlement as the predeceasing daughter would have taken if she had survived the settlor and attained a vested interest under cl 2 of the trusts. In this context only a child of a predeceasing daughter could have attained a vested interest in that daughter’s hypothetical share, because any child of hers would have attained a vested interest in that hypothetical share on that child’s marriage, without which the child could have no legitimate issue, thus excluding remoter issue. There could have been no more than three shares under cl 2 of the trusts; there might have been less; but all persons to take vested interests under cl 2 would necessarily be ascertained within 21 years from the death of the last survivor of the daughters. The third of the parts into which the beneficial trusts fall is that covered by cl 3 introduced by the words “after the decease of each of the Daughters”. That clause disposes of the capital of the settled property. I need not, I think, pause to consider cl 3(a), which confers powers of appointment which could be validly exercised only within perpetuity limits. Sub-clause 3(b) cannot be perpetuitous because everyone who could attain a vested interest under it must do so before the end of the 21 years from the death of the last surviving daughter. The suspect limitation is cl 3(c), which the judge held to have been capable of infringing the rule against perpetuities. The “shares” are effectively called into existence at the settlor’s death. Thereafter each “share” is consistently referred to as “such share”. From the settlor’s death, unless only one daughter, or only one stirps, were to qualify or be capable at his death of qualifying to benefit under the trusts, the trust fund was effectively divided into distinct settled shares, each held on distinct, although similar, trusts. The disposition of the capital of each settled share is contained in cl 3 of the trusts. The question consequently is, in my opinion, whether, in the event of any of the daughters having no child who should attain the age of 21 years or (if female) marry under that age, her settled share could, under cl 3(c) of the trusts, devolve on anyone whose interest might not vest until a date more than 21 years after the death of the last survivor of the settlor and the daughters. The judge dealt with this question as follows ([1986] 3 All ER 45, 48, [1986] 1 WLR 1096, 1100): I now proceed to consider the second question that is whether the limitation in cl 3(c) is void for perpetuity, bearing in mind that “issue” therein means issue of all degrees. If there is no date for closing the class of issue within the perpetuity period then there is a perpetuity. For example, looking at the matter from the standpoint of 1924, there was the possibility that a daughter would die leaving a child of, say, two years. That child might not attain 21 and so not take a vested interest. On the other hand such child might leave a child (that is, issue of the “daughter”) and such child would not take a vested interest (on attaining 21) within 21 years of the death of its grandmother, or other life in being. 830 [11.95]

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Re Drummond’s Settlement cont. Let me suppose that the daughter to whom the judge’s hypothesis relates is the last survivor of the three daughters and that she has survived the settlor, so that we are concerned with the position at the dropping of the last relevant life in being at the date of the settlement. She is assumed to die leaving a child of tender years. If that child is assumed to be female, she would attain a vested interest under cl 3(b) at twenty one or her earlier marriage. No issue of hers could attain a vested interest because cl 3(c) would be inapplicable by reason of her having herself attained a vested interest. Her own interest would necessarily vest within the perpetuity period. If, however, that child were male, he would not attain a vested interest unless he were to attain 21. If he were to survive his mother and die under 21 leaving issue born after his mother’s death and such issue were to attain 21 or marry, that issue (the relevant daughter’s grandchild or grandchildren) might attain a vested interest under cl 3(c) in the daughter’s settled share of the trust fund more than 21 years after the daughter’s death, ie, beyond the permitted perpetuity period. I will refer to the risk of this happening as “the perpetuity risk”. There would be the possibility that that grandchild’s interest might be defeated by some other child of the relevant daughter attaining a vested interest, in which case cl 3(c) would be inapplicable, so that that other child would take all the relevant daughter’s settled share to the exclusion of any participation by the issue of his or her brother who is assumed to have died under 21. I mention this only to indicate the possibility arbitrary nature of the operation of the trusts. This analysis does not result in a consistently stirpital distribution of the settled fund as one might have expected. It does involve possible infringement of the rule against perpetuity. It indicates, I think, that the draftsman almost certainly did not appreciate the consequences of the language he employed, but that cannot justify any modification of the language to avoid risk of infringement of the rule. I would have readily discovered some other and more acceptable interpretation of the language, but I find myself unable to do so. In reaching the conclusion indicated in the preceding paragraphs I have assumed (as I think must be the case) that the daughter, the destination of whose settled share is under consideration, can herself be regarded as a daughter “who may be then dead” within the meaning of cl 3(c). It is, I think, only on that basis that any issue of the relevant daughter more remote than a child of hers could benefit. But I must go on to consider what would be the position, in the case supposed, if another of the three daughters, having predeceased the last of them to die, had had issue who had attained or should attain the age of 21 or had married or should marry. On the death of the last of the daughters to die leaving no child of hers to take a vested interest in her settled share, the issue of that other daughter would be entitled under the closing words of cl 3(c) to participate in the settled share of the last of the daughters to die. Issue of such another daughter are not required by cl 3(c) to survive any event other than the attainment of the age of 21 or earlier marriage. They might consequently qualify to participate in the settled share of the last of the daughters to die while the last surviving daughter was still alive or after her death, but must, in my judgment, qualify to participate therein within 21 years from the death of the last surviving daughter, for in this context, as I think, the words “such issue taking their parents share only” must preclude the possibility of a child (issue of any degree of the daughter) taking in competition with that child’s parent, who would necessarily attain the age of 21 or marry within the permissible period. This leads, in my view, to the conclusion that the only risk in this case of an infringement of the rule against perpetuities is the perpetuity risk referred to earlier, but as at the date of the settlement that risk existed in respect of every possible settled share. This must, in my judgment, invalidate the trust in favour of issue contained in cl 3(c), but there remains the question whether it infects the trust in favour of “such of the daughters as shall be then living”. The legal effect of a limitation being void under the rule is that the instrument takes effect as if the void limitation and all limitations dependent on it were omitted. Special considerations arise in the case of a limitation in favour of a class of beneficiaries. For [11.95]

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Re Drummond’s Settlement cont. this purpose a class gift is a limitation in favour of a number of persons which is uncertain in number when the limitation is created and is to be ascertained in the future, such persons all coming within a common classification or description, taking one divisible subject matter in specified proportions dependent on the number of takers, all of whose interests must, it seems, vest at the same time. That formulation accords, I believe, with the decisions of the House of Lords in Pearks v Moseley (1880) 5 App Cas 714 and Kingsbury v Walter [1901] AC 187, and the earlier case of Leake v Robinson (1817) 2 Mer 363, [1814-1823] All ER Rep 363; see in this connection 35 Halsbury’s Laws (4th ed) para 973. So long as the proportions in which members of the class are to participate remain uncertain, it seems that no member of the class is to be regarded as having an interest vested in possession in any part of the subject matter, notwithstanding that it may have become clear that some member or members of the class must ultimately become entitled to at least an ascertained minimum share or shares. This is presumably on the ground that, until the precise share of the subject matter which any particular member of the class is to receive is known, what is to vest in him cannot be identified, so that there can be no vesting: see Megarry and Wade The Law of Real Property (5th ed, 1984) pp 260-262. Speaking for myself, I am not at present fully convinced that this is logical, but I am prepared to accept it for the purposes of this judgment. It follows that, until all potential participants are known to have qualified to participate, the interest of no potential participant can vest in him although he may have already qualified. On this basis, so long as any potential participant’s interest may vest in possession later than the end of any appropriate perpetuity period, the whole class gift will be void. The effect of this in the present case will depend on whether cl 3(c) in its entirety constitutes a single class gift under which daughters “then living” and the issue of any daughters “then dead” constitute an integral class, or whether the only class gift comprised in cl 3(c) is that in favour of issue of daughters “then dead”, daughters “then living” taking benefits not as members of a class but as individually designated beneficiaries. I should next consider the effect on the preceding analysis of the doctrine relating to closure of classes in cases of class gifts to see whether the perpetuity risk can be eliminated in this way. Let me do so first on the assumption that the relevant class consists exclusively of the issue referred to in cl 3(c) and does not include any daughter “who shall then be living”. To qualify, such issue must attain the age of 21 or marry. The relevant rule is conveniently and, I think, accurately stated in Megarry and Wade Law of Real Property (5th ed, 1984) p 263 thus: For the sake of convenience the courts have laid down the rule, often called the Rule in Andrews v Partington ((1791) 3 Bro CC 401, [1775-1802] All ER Rep 209) that a numerically uncertain class of beneficiaries normally closes when the first member becomes entitled to claim his share. This is based on a presumed intention on the part of the settlor (in the absence of any express provision about when the class should close) that the class should close as soon as a share first vests in possession. The authors of the cited work go on to explain that, if such a gift is preceded by a life interest, as in the instant case, the class will not close until the death of the tenant for life at the earliest, since not before then can any share vest in possession, and that, if there is then no member of the class who has yet attained a vested interest, the class will remain open after the life tenant’s death until some member attains a vested interest, whereupon it will close. It has been argued in the present case that the class of issue referred to in cl 3(c) should be treated as closed at the death of the daughter whose settled share is under consideration. In my judgment, that argument cannot prevail. Reliance was placed in this connection on the opening words of cl 3, “after the decease of each of the Daughters”, as indicating that the class should close at her death. I for my part do not feel able to accept that submission. The language of the settlement does not appear to 832 [11.95]

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Re Drummond’s Settlement cont. me to require explicitly that only issue born before the death of the relevant daughter should be within the class. The language does not relate the ascertainment of the class to any particular event or time. The implied intention on which the doctrine of Andrews v Partington (1791) 3 Bro CC 401, [1775-1802] All ER Rep 209 is founded, viz that the settlor must have intended that, once a member of the class has qualified for a vested interest in possession in some share of the fund, he should be able to receive it without having to wait to see whether any further competitor members of the class come into existence, does not eliminate the perpetuity risk, because the first member of the class to qualify for a vested interest in possession might not do so until after any available perpetuity period. My analysis of the trusts has led me to the conclusion that the earliest occasion on which issue of a daughter might attain a vested interest in possession under cl 3(c) might occur later than 21 years after the death of the last daughter to die (ie, the perpetuity risk). In my judgment, the language of the trusts contains no indication that the class of issue to take under cl 3(c) should close earlier than the occasion of a member of the class first obtaining a vested interest in possession under that sub-clause. It is true that the Andrews v Partington doctrine is sometimes called a rule of convenience, but it is, in my opinion, truly a rule of construction which requires any instrument to which the doctrine is applicable to be construed and carried into effect in accordance with the intention imputed by the court to the settlor or testator in consequence of the way in which he has framed his disposition. It follows that, in my judgment, on the true construction of cl 3(c) the disposition contained in it in favour of issue is void for perpetuity. What is the effect of that on the rest of the sub-clause? Both counsel for the appellants, Eve and Rosemary, and counsel for the respondent third defendant representing the estate of the settlor were disposed at the outset of this appeal to treat the whole of cl 3(c) as one integral class gift. When the case came back for further arguments, however, counsel for the appellants presented an argument to the effect that cl 3(c) of the trusts contains a direction that, on the death of the daughter whose settled share of the trust fund is under consideration, that share should thereupon be paid, transferred and divided in the appropriate number of sub-shares which, as regards surviving daughters, vest at once in possession, leaving the ultimate destination of the sub-share given to issue of daughters “then dead” to await, if necessary, the event of such issue either attaining the age of 21 years or marrying or failing to do so. He thus submits that as regards the surviving daughters the disposition in their favour in cl 3(c) is not a class gift, but a gift to individual donees of quantified sub-shares. It was inevitable that one of the three daughters should die first, leaving both her sisters surviving her. It was equally inevitable that another of the three daughters should predecease her surviving sister, leaving the last surviving daughter then living. It would seem, therefore, to be clear that ab initio each of the three daughters had a contingent right, subject to the antecedent trusts in cll 2 and 3(a) and (b) and contingently on her surviving her sisters respectively, to at least a one-third share of the settled share of the first of her sisters to die and at least a half share of the settled share of the second of her sisters to die. If at the death of that daughter the destination of whose settled share is under consideration there were no issue of any daughter “then dead” capable of taking or qualifying to take an interest under cl 3(c), each surviving daughter would in that contingency, and disregarding the possible effect of the perpetuity rule, be entitled to a half share of the settled share of the first of her sisters to die and the whole of the settled share of the second of the sisters to die. In no possible case could the proportion of a surviving daughter’s share of a deceased daughter’s settled share of the trust fund be affected by the number of issue capable of participating in the share of that deceased daughter’s settled share given to issue of daughters “then dead”. Although the proportions of the sub-shares to arise on the division under cl 3(c) of a deceased daughter’s settled share of the trust fund depends on the number of sub-shares to be constituted, which in turn depends on the contingencies which have occurred or may occur in relation to the persons to take benefits, the entire disposition in cl 3(c) is not, in my opinion, a class gift. It lacks the [11.95]

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Re Drummond’s Settlement cont. following characteristics of a class gift as I have described such a gift earlier in this judgment. The beneficiaries do not come within a common classification or description. They do not take benefits in proportions dependent on the number of takers, and, in my judgment, their interests in the deceased daughter’s settled share need not necessarily all vest at the same time. Moreover, the persons to benefit under cl 3(c) are not all required to satisfy the same qualifications. Daughters, to participate, must be living at a particular date; issue of daughters, to participate, must attain the age of 21 years or marry. Although I do not intend on this occasion to decide that a requirement that all takers should satisfy the same qualifications is an essential feature of every class gift, it is, I think, where it exists, a strong indication that the gift may be a class gift, and its absence is a contrary indication. In my judgment, each of the daughters had ab initio identifiable contingent interests in shares of each of her sisters’ settled shares of the trust fund, the proportion of which depended on which of various foreseeable alternative contingencies should occur. If the first of the three daughters to die had no child who attained a vested interest in her share, but had issue living at her death capable of qualifying to participate under cl 3(c) but not yet so qualified, the two surviving daughters would, in my judgment, have each become entitled under cl 3(c) to an immediate vested right in possession to one-third of the deceased daughter’s settled share and, if all issue of the deceased daughter were thereafter to fail to qualify, each of the surviving daughters would, in my view, (but for the rule against perpetuity) thereupon become entitled, by way of substitution for the issue, to a further one-sixth of the deceased daughter’s settled share. But the contingency on which surviving daughters might become entitled to such further shares might (as at the date of the settlement) not occur until after any available perpetuity period (ie, the substitutional gifts would be affected by the perpetuity risk). Consequently, in my judgment, those contingent interests are rendered void by the perpetuity rule. In the events which happened Edwina had no issue and, since she was the first of the daughters to die, there was no daughter other than herself who at her death was “then dead”. Consequently nobody other than Eve and Rosemary ever came into existence who could have qualified to benefit under cl 3(c), but to the extent of two-sixths of Edwina’s settled share Eve and Rosemary’s contingent interests were void for perpetuity. The judge declared that Edwina’s settled share of the trust fund is in the events which have happened held on a resulting trust for the estate of the settlor by reason that the trusts in respect thereof contained in cl 3(c) have failed for perpetuity, that is to say he regarded the perpetuity risk as infecting the whole disposition contained in cl 3(c) and not merely the trust in favour of issue. For the reasons indicated in this judgment, I do not agree with that conclusion. I would allow this appeal in part, substituting for the declaration made by the judge a declaration that, on the true construction of the settlement and in the events which have happened, the one-third share of the trust fund in which Edwina was entitled to a life interest in possession is now held as to one-third of that share in trust for Rosemary, as to one-third of that share for Eve and as to the remaining one-third of that share on a resulting trust for the estate of the settlor. Fox and Nourse LJJ concurred. Appeal allowed.

[11.100]

Notes and Questions

1. Based on your reading of the above case, list the essential prerequisites and relevant factors for a court to consider when determining whether to apply the class-closing rule. 834 [11.100]

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2. What is the justification for applying the class-closing rule? Do you agree with it? 3. Note that the class-closing rule can be excluded by the expression of a contrary intention by the donor (Re Clifford’s Settlement Trusts [1981] Ch 63; Re Chapman’s Settlement Trusts [1978] 1 All ER 1122; [1977] 1 WLR 1163; Re Ketby-Fletcher’s Will Trusts [1969] 1 Ch 339; [1968] 2 WLR 34). 4. What is the significance of Sir Denys Buckley’s statement that “the Andrews v Partington doctrine is sometimes called a rule of convenience, but it is, in my opinion, truly a rule of construction”? 5. While the normal expectation for a class gift is that all beneficiaries should satisfy the same qualifications, Sir Denys Buckley stated that it is not an essential feature but rather that where it exists, it is a strong indication that the gift may be a class gift, and where it is absent, it is a contrary indication. This point is still moot. If correct, it may amount to a relaxation of the strict rules as to what constitutes a class gift and would lead to a significant increase in the incidence of such gifts. Note, however, that there is no suggestion of any relaxation in the requirement for a valid class gift that all of the beneficiaries’ interests must vest at the same time. 6. Where the gift is preceded by a life estate, the class closes at the date of the death of the life tenant. For example, in a gift “to my wife for life, remainder to the children of A in equal shares” the class closes on the death of the wife. 7. The class-closing rule has been held to be inapplicable where the class members are to take at birth, and there are no members of the class at the date of the distribution of the property. Here the class remains open indefinitely (Re Ransome [1957] Ch 348; [1957] 1 All ER 690; Shepherd v Ingram (1764) 27 ER 296; Amb 448). 8. The class-closing rule is important in that in certain circumstances it can save a gift from being declared void under the rule against perpetuities. Can you give an illustration of such a case? See Harpum, Bridge and Dixon, Megarry and Wade: The Law of Real Property (8th ed, Sweet and Maxwell, London, 2012), pp 346 - 347. 9. For further reported illustrations of the operation of the class-closing rule, see, for example, Tidex v Trustees Executes & Agency Co Ltd [1971] 2 NSWLR 453; Re Lord’s Settlement [1947] 2 All ER 685; Re Breheney (dec’d) [1915] VLR 242; Re Deane (dec’d) [1913] VLR 272; Re Wernher’s Settlement Trusts [1961] 1 All ER 184; [1961] 1 WLR 136. 10. The class-closing rule is discussed in detail in Bailey, “Class-Closing, Accumulations and Acceleration” [1958] CLJ 39; Morris, “The Rule Against Perpetuities and the Rule in Andrews v Partington” (1954) 70 LQR 61; Ford and Lee, Principles of the Law of Trusts (Thomson Reuters, subscription service) at [7.11150]; and Morris and Leach, The Rule Against Perpetuities (Stevens, 1962), p 110 ff.

STATUTORY SYSTEM OF PERPETUITIES (EXCEPT IN SOUTH AUSTRALIA) [11.105] Despite the fact that the class-closing rule has saved some gifts from the operation of the rule against perpetuities and the fact that some courts have been able to avoid the latter rule by determining the validity of the gift on the particular wording of the document (see, for example, the judgment of Nourse LJ in Re Drummond’s Settlement [1988] 1 WLR 234 at [11.105]

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[11.95]), the common law rule has undoubtedly produced many unfair results during the centuries of its application. It has been consistently ridiculed by legal commentators. For example, Leach stated in his article “Perpetuities: Staying the Slaughter of the Innocents” (1952) 68 LQR 35, 35-37: A heavy corporate responsibility rests upon the legal profession – lawyers as solicitors, lawyers as conveyancers, lawyers as barristers, lawyers on the Bench, and lawyers in the legislative bodies – to provide the public with a sensible, workable body of law relating to the devolution of property. As a practical matter the public must entrust to us the leading role in the preparation of wills and trusts and in the resolution of disputes concerning these instruments. As judges and legislators we make the rules; as solicitors and conveyancers we seek to conform to them; and as barristers and judges we apply them. If there should be among our rules one which is so abstruse that it is misunderstood by a substantial percentage of those who advise the public, so unrealistic that its “conclusive presumptions” are laughable nonsense to any sane man, so capricious that it strikes down in the name of public order gifts which offer no offence except that they are couched in the wrong words, so misapplied that it sometimes directly defeats the end it was designed to further – then, in performance of our corporate responsibility we should take corrective action. It will not do for us to watch our judges press fingertips together, gaze slightly above the horizontal and say, “The law has been violated. The gift must fail. The testator [sic] must take consequences” – and then leave it at that. “The law” did not make itself. We made it. If it has been made badly, or so intricately that it is a dangerous instrumentality in the hands of most members of our profession, our corporate responsibility to the public is not being met. By a natural sequence of thought this leads us to the Rule against Perpetuities. … I do not recall a single twentieth-century case, English or American, in which the will or trust could not have been so drafted as to carry out the client’s essential desires within the limits of the Rule. This means that our courts in applying the Rule are not protecting the public welfare against the predatory rich but are imposing forfeitures upon some beneficiaries and awarding windfalls to others because some member of the legal profession has been inept. The superfluous technicalities and complexities of the Rule are especially evident to a law teacher. Dealing with the subject year after year, he develops a confident legerdemain that bemuses the students and caresses his ego. But these are not the primary objectives of university education. Any course involving the Rule is likely to be considered among the most difficult, absorbing student attention and energy to an exceptional degree. Why should this be so? In terms of present importance to the body politic is this Rule comparable to those governing commercial transactions, labour relations, taxation, planning of land use and many others? I cannot give an affirmative answer; and this is a declaration against interest in view of my heavy professional investment in the intricate learning of the Rule. In the classroom we spend many precious hours learning how to ferret out and neutralise the booby-traps that two centuries of decisions have strewn in the path of perfectly reasonable wills. Our students, entering a great profession which carries increasingly important burdens, should spend their time upon more constructive studies. Yet, at the deadly peril of their clients’ welfare and of their own reputations, they cannot neglect the Rule as it now stands. In palliation it may be said that all students acquire mental agility by dealing with the Rule, some are fascinated by it as a puzzle, and a few give evidence of affection.

This, and other similar critical comments, eventually led to the introduction in the United Kingdom of the Perpetuities and Accumulations Act 1964 (UK), which was designed to amend the common law so as to remove the difficulties and inequities associated with the operation of the previous rule against perpetuities. In Australia, similar reforming legislation has been adopted in a piecemeal fashion in recent times, except in South Australia where the rule against perpetuities has been abolished. Elsewhere, the legislation is currently contained in the Perpetuities Act 1984 (NSW), Perpetuities and Accumulations Act 1968 (Vic), Property Law 836

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Act 1974 (Qld), Pt 14, Property Law Act 1969 (WA), Pt XI, Perpetuities and Accumulations Act 1992 (Tas), Perpetuities and Accumulations Act 1985 (ACT) and Law of Property Act (NT), Pt 11. The relevant dates of operation of these statutes are listed at [11.50]. The Acts apply to all instruments taking effect after the respective dates and to the wills of testators who die after those dates. In the United Kingdom, the Perpetuities and Accumulations Act 2009 (UK), which applies to instruments taking effect from 6 April 2010, establishes a perpetuity period of 125 years for interests created under a trust or a will. See Harpum, Bridge and Dixon, Megarry and Wade: The Law of Real Property (8th ed, Sweet and Maxwell, London, 2012), pp 321, 326 – 329, 342 – 343. Unfortunately, as has been the case historically in respect of Australian real property law, no attempt has been made to adopt uniform State and Territory legislation in relation to perpetuities. Each jurisdiction has examined the issue separately, the inevitable result of which is that significant differences exist between the terms of the various perpetuities statutes. A further preliminary point to note is that in no jurisdiction does the perpetuities legislation operate as a code. Rather, the legislation leaves intact the common law base and merely imposes certain statutory variations. For this reason a knowledge of the old common law position is still essential throughout Australia. It is instructive to examine briefly the essential features of the perpetuities legislation under the following headings. There appear to be no major cases to date construing the legislation. The New South Wales legislation is considered at length by Sappideen, “Perpetuities – Age Reduction and the Application of the Eighty-Year Period: Some Unexpected Problems” (1986) 60 ALJ 471; Sappideen and Butt, The Perpetuities Act 1984 (Law Book Co, 1986); Butt, Land Law (6th ed, Lawbook Co., Sydney, 2010), Ch 12. Detailed discussions of the Victorian legislation can be found in Hogg and Ford, “Victorian Perpetuities Legislation in a Nutshell” (1969) 7 MULR 155; Doane and McCredie, “Perpetuities Reform in Victoria” (1969) 43 ALJ 366. Detailed discussions of the Western Australian legislation can be found in Simes, “Reform of the Rule Against Perpetuities in Western Australia” (1963) 6 UWALR 21; Allan, “The Rule Against Perpetuities Restated” (1963) 6 UWALR 27. The perpetuity period [11.110] The Perpetuities Act 1984 (NSW) (s 7(1)) and the Perpetuities and Accumulations Act 1985 (ACT) (s 8(1)) replace the common law perpetuity period with a mandatory 80-year period. The common law period cannot be used as an alternative to the common law period. The major advantage of this change is that the problems associated with determining who is a “life in being” for the purposes of determining whether a disposition is valid or not are totally avoided. In the other jurisdictions the donor is allowed a choice between a statutory period and the common law formula. For example, by s 101 of the Property Law Act 1969 (WA) the donor may specify any period of years not exceeding 80 in the disposition as the perpetuity period; if no period is specified, the common law “lives in being plus 21 years” period will apply. The Property Law Act 1974 (Qld), s 209(1), the Perpetuities and Accumulations Act 1968 (Vic), s 5(1), the Perpetuities and Accumulations Act 1992 (Tas), s 6(1) and the Law of Property Act (NT), s 187 are to similar effect. In relation to the commencement of the perpetuity period, the Perpetuities Act 1984 (NSW) (s 3(2)) and the Perpetuities and Accumulations Act 1985 (ACT) (s 5) enact the common law rule that a will is deemed to take effect upon the death of the testator. In respect to other forms [11.110]

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of disposition, the Acts are silent as to the commencement date. Under these circumstances, as at common law, the perpetuity period presumably commences in respect of an inter vivos gift when the instrument takes effect, and in respect of a deed on the delivery of the deed. The legislation in the other jurisdictions does not contain a specific provision stating when the perpetuity period begins to run. The Perpetuities and Accumulations Act 1968 (Vic) (s 6(4)) increases the number of persons who may be held to be lives in being. It states that in the disposition to a class of persons or to one or more members of a class, any person living at the date of the disposition whose life is so expressed or implied as relevant for any member of the class may be reckoned as a life in being when ascertaining the perpetuity period. A similar provision exists in the Property Law Act 1974 (Qld) (s 210(4)). In some jurisdictions it is left uncertain whether gestation periods may be added to the new 80-year statutory period in order to save a settlement. The addition of the gestation period is supported by Sappideen and Butt (The Perpetuities Act 1984 (Law Book Co, 1986) p 48) on the ground that it is consistent with the general policy of the law to treat a child en ventre sa mère as living where it is for the child’s benefit. The Perpetuities and Accumulations Act 1992 (Tas) (s 3(2)(c)) and Perpetuities and Accumulations Act 1985 (ACT) (s 8(3) and (4)) has clarified the issue, and states that a person en ventre sa mère but subsequently born alive is treated as person who was alive at the relevant time. Certainty of vesting [11.115] All jurisdictions have enacted provisions in their perpetuities legislation designed to

replace the common law requirement of certainty of vesting as at the date the disposition takes effect by a “wait and see” system. Under this system the court examines what actually happens instead of determining all the possibilities as at the date the perpetuities period commences. The gift is not declared invalid unless either it is incapable from the outset of vesting within the 80-year period (or other perpetuity period) or if at any time during the course of the perpetuity period it becomes clear that the gift cannot vest within the period. Otherwise, the court will wait to see what actually happens before determining the validity of the disposition. Section 6(1) of the Perpetuities and Accumulations Act 1968 (Vic) is an illustration:

Perpetuities and Accumulations Act 1968 (Vic), s 6(1) [11.120] Perpetuities and Accumulations Act 1968 (Vic), s 6(1) Where apart from the provisions of this section and of section 9 a disposition would be void on the ground that the interest disposed of might not become vested until too remote a time the disposition shall be treated until such time (if any) as it becomes established that the vesting must occur, if at all, after the end of the perpetuity period as if the disposition were not subject to the rule against perpetuities; and its becoming so established shall not affect the validity of anything previously done in relation to the interest disposed of by way of advancement, application of intermediate income or otherwise.

[11.125] The legislation in other States is similar, although not identical (Perpetuities Act 1984 (NSW), s 8; Property Law Act 1974 (Qld), s 210; Property Law Act 1969 (WA), s 103; Perpetuities and Accumulations Act 1992 (Tas), s 9; Perpetuities and Accumulations Act 1985 (ACT), s 9; Law of Property Act (NT), s 190). 838

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In addition to the “wait and see” requirement, the perpetuities legislation in Victoria (Perpetuities and Accumulations Act 1968 (Vic), ss 8, 10), Queensland (Property Law Act 1974 (Qld), ss 212, 214), Western Australia (Property Law Act 1969 (WA), ss 102, 108), Tasmania (Perpetuities and Accumulations Act 1992 (Tas), ss 7, 10) and Northern Territory (Law of Property Act (NT), ss 188, 189) contains provisions repealing the common law conclusive presumption of fertility and avoiding the harsh effects of the “unborn widow(er)” cases. The Victorian legislation reads as follows:

Perpetuities and Accumulations Act 1968 (Vic), ss 8 and 10 [11.130] Perpetuities and Accumulations Act 1968 (Vic), ss 8 and 10 8(1) Where in any proceedings there arises on the rule against perpetuities a question which turns on the capacity of a person to have a child at some future time, then – (a)

it shall be presumed, subject to paragraph (b), that a male can have a child at the age of twelve years or over but not under that age and that a female can have a child at the age of twelve years or over but not under that age or over the age of fifty-five years; but

(b)

in the case of a living person evidence may be given to show that he or she will or will not be capable of having a child at the time in question.

(2) Where any such question is decided by treating a person as incapable of having a child at a particular time and he or she does so, the Court may make such order as it thinks fit for placing the persons interested in the property comprised in the disposition so far as may be just in the position they would have held if the question had not been so decided. (3) Subject to sub-section (2), where any such question is decided in relation to a disposition by treating a person as capable or incapable of having a child at a particular time then he or she shall be so treated for the purpose of any question which may arise on the rule against perpetuities in relation to the same disposition in any subsequent proceedings. (4) In the foregoing provisions of this section references to having a child are references to begetting or giving birth to a child; but those provisions (except sub-section (1)(b)) shall apply in relation to the possibility that a person will at any time have a child by adoption, legitimation or other means as they apply to his or her capacity at that time to beget or give birth to a child. 10. The surviving partner of a person who is a life in being for the purposes of the rule against perpetuities shall be deemed to be a life in being for the purpose of – (a)

a disposition in favour of that surviving partner; and

(b)

a disposition in favour of a charity which attains or of a person who attains or of a class the members of which attain according to the terms of the disposition a vested interest on or after the death of the survivor of the said person who is a life in being and that surviving partner, or on or after the death of that surviving partner or on or after the happening of any contingency during her or his lifetime.

[11.135] No such legislation has been enacted in New South Wales and the Australian Capital Territory, in the former case despite a recommendation in favour of such legislation by the New South Wales Law Reform Commission, Report on Perpetuities and Accumulations, Report No 26, Pt 10 (1976). In relation to the presumption of fertility, Sappideen and Butt state (The Perpetuities Act 1984 (Law Book Co, 1986)pp 65-66): The [New South Wales] Act apparently proceeds upon the view that presumptions as to child-bearing capacity are unnecessary where the validity of an interest is to be tested by waiting [11.135]

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and seeing whether the relevant contingency occurs within the perpetuity period. The argument in favour of this view runs as follows: at common law, it was the factually unreal possibility of procreation at any age which caused some gifts to breach the rule against perpetuities; presumptions as to child-bearing capacity remove that unreal possibility, but the reality remains that people do not in fact bear children outside the selected ages; in a system of wait-and-see, what might (theoretically) happen is irrelevant; all that is relevant is what does happen or has happened.

Whilst presumptions as to child-bearing capacity may be helpful in jurisdictions which have retained a modified common law perpetuity period based on lives in being, they will not be of relevance in determining validity where a mandatory period of 80 years has been adopted as the perpetuity period. In relation to the unborn widow(er) situation, Sappideen and Butt note (p 64) that there is no need for remedial legislation as in New South Wales the adoption of a mandatory 80-year perpetuity period has rendered irrelevant the concept of lives in being. Age reduction and class exclusion [11.140] The legislation in all jurisdictions contains provisions abolishing the common law “all or nothing” provision and replacing it with provisions which endeavour to prevent a gift being declared void under the rule against perpetuities. One such provision provides for the ages of potential beneficiaries to be reduced to allow them to take if they are only prevented from doing so by reason of an age contingency (Perpetuities Act 1984 (NSW), s 9(1); Perpetuities and Accumulations Act 1968 (Vic), s 9; Property Law Act 1974 (Qld), s 213; Property Law Act 1969 (WA), s 105; Perpetuities and Accumulations Act 1992 (Tas), s 11(1), (2); Perpetuities and Accumulations Act 1985 (ACT), s 10(1); Law of Property Act (NT), s 191). Another such provision provides for the exclusion of actual or potential class members where that is necessary to prevent a gift from infringing the rule against perpetuities, unless such exclusion would exhaust the class completely (Perpetuities Act 1984 (NSW), s 9(4); Perpetuities and Accumulations Act 1968 (Vic), s 9; Property Law Act 1974 (Qld), s 213; Property Law Act 1969 (WA), s 106; Perpetuities and Accumulations Act 1992 (Tas), s 11(3), (4); Perpetuities and Accumulations Act 1985 (ACT), s 10(3); Law of Property Act (NT), s 191). Except in Tasmania and the Australian Capital Territory, the legislation also specifies the order in which the remedial provisions are to be applied. In each case, the order is stated to be wait-and-see, followed by age reduction and finally the exclusion of class members (Perpetuities and Accumulations Act 1968 (Vic), s 10; Perpetuities and Accumulations Act 1968 (Vic), s 9; Property Law Act 1974 (Qld), s 213; Property Law Act 1969 (WA), s 107; Law of Property Act (NT), s 192). In Tasmania, the Perpetuities and Accumulations Act 1992 contains in s 24 a provision giving the Supreme Court a general discretion to reform a disposition so as to prevent it from being declared void under the rule against perpetuities and so as to give effect as far as possible to the intentions of the donor. Section 24 reads:

Perpetuities and Accumulations Act 1992 (Tas), s 24 [11.145] Perpetuities and Accumulations Act 1992 (Tas), s 24 (1) Subject to this section, where – (a)

the Supreme Court has, under section 23, declared a disposition of property to be invalid; or

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Perpetuities and Accumulations Act 1992 (Tas), s 24 cont. (b)

it appears to the Court that a disposition, whether made before or after the commencement of this Act, would be invalid solely on the ground that it conflicts with the rule against perpetuities – and the general intentions originally governing the disposition can be ascertained, the Supreme Court must reform the disposition so as to give effect as far as possible to those general intentions within the limits permitted under the rule against perpetuities as affected by this Act. (2) A disposition of property that was made before the commencement of this Act is not to be reformed under subsection (1) – (a)

if the disposition has been declared invalid before that commencement by an order or judgment made or given in legal proceedings; or

(b)

if any property comprised in the disposition has, before that commencement, been paid or transferred to, or applied for the benefit of, or set apart for, a person entitled by reason of the invalidity of the disposition; or

(c)

so as to prejudice a person who has, before that commencement, reasonably altered his or her position in reliance on the invalidity of the disposition if, in the opinion of the Supreme Court, having regard to all possible implications in respect of other persons, it is inequitable to reform the disposition wholly or in part.

(3) In hearing an application to reform a disposition under this section, the Supreme Court (a) (b)

may admit extrinsic evidence of the general intentions originally governing the disposition and must apply liberal rules of construction for the purpose of ascertaining them; and must have no regard to the rights of any person other than – (i) a person born or en ventre sa mère when the disposition was made; and

(ii) a person entitled on the death of any such person – and in reforming the disposition the Supreme Court may specify the perpetuity period in accordance with section 6. (4) An application for reformation under this section may be made by – (a)

a trustee of any property comprised in the disposition; or

(b)

the settlor or the settlor’s personal representative; or

(c)

a person having an interest, whether vested or contingent, under the disposition or the personal representative of that person to whom the interest passes.

(5) Where a trustee of property comprised in a disposition becomes aware that the disposition requires to be reformed under subsection (1), the trustee has a duty to make an application under this section. (6) A disposition that has been reformed under this section – (a)

is valid notwithstanding that it would have been invalid under any rule of law or construction if it had been effected in any other way; and

(b)

is to be construed as if it had not been effected under this section.

Exceptions to the rule against perpetuities [11.150] The perpetuities legislation in each jurisdiction contains a list of certain property interests in respect of which the application of the rule against perpetuities may be considered questionable. The legislation declares in respect of each interest whether that interest is subject to or is an exception to the rule. These lists are not designed to be an exhaustive treatment of each type of property interest, but rather are designed to remove certain doubts in individual cases. [11.150]

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The only significant change to the common law position is that both possibilities of reverter and rights of entry are declared to be subject to the rule against perpetuities (Perpetuities Act 1984 (NSW), s 14(2); Perpetuities and Accumulations Act 1968 (Vic), s 16; Property Law Act 1974 (Qld), s 219; Property Law Act 1969 (WA), s 111; Perpetuities and Accumulations Act 1992 (Tas), s 16; Perpetuities and Accumulations Act 1985 (ACT), s 15(1); Law of Property Act (NT), s 196). This legislation appears to take into account the criticism of legal commentators as to the exclusion of possibilities of reverter from the operation of the rule (see, for example, Leach, “Perpetuities: Staying the Slaughter of the Innocents” (1952) 68 LQR 35 at 55; Allan, “The Rule Against Perpetuities Restated” (1963) 6 UWALR 27 at 61-63). It is also consistent with the recommendation of the New South Wales Law Reform Commission (Report No 26 (1976), Pt 10). Allan states: Possibilities of reverter probably were not subject to the rule against perpetuities at common law, firstly because they are in the nature of reversions and are therefore vested, and secondly because “the rule against perpetuities is not dealing with the duration of interests but with their commencement”. There is, however, a decision of the Chancery Court of Lancaster (Hopper v Liverpool Corp (1943) 88 Sol J 213) holding that they are subject to the rule.

As a matter of policy, it was agreed by both the English and Western Australian Law Reform Committees that the Palatine Court was right and that they should be subject to the rule. Their indefinite duration is an inconvenience with little real utility and effectively ties up the land in a manner the rule against perpetuities was designed to prevent; they are perhaps the worst offenders against the principle of alienability; and they give rise to considerable difficulties in tracing the persons entitled to the reverter, to whom it no doubt comes as a surprise windfall. For example, in Brown v Independent Baptist Church of Woburn 325 Mass 645; 91 NE 2d 922 (1950) the interest determined after 90 years and the land then reverted to the successors in interest of the testatrix’s ten residuary devisees. The perpetuities legislation of all jurisdictions also exempts certain specified options from the rule against perpetuities. The New South Wales provision (s 15) is typical:

Perpetuities Act 1984 (NSW), s 15 [11.155] Perpetuities Act 1984 (NSW), s 15 The rule against perpetuities does not apply to – (a)

any option to renew a lease of property;

(b)

any option to acquire a reversionary interest in property comprised in a lease;

(c)

any right of pre-emption given for valuable consideration or by will in respect of property; or

(d)

any other option given for valuable consideration or by will to acquire an interest in property.

[11.160] See also Perpetuities and Accumulations Act 1968 (Vic), s 15; Property Law Act 1974 (Qld), s 218; Property Law Act 1969 (WA), s 110; Perpetuities and Accumulations Act 1992 (Tas), s 15; Perpetuities and Accumulations Act 1985 (ACT), s 16; Law of Property Act (NT), s 197. This legislation largely reaffirms the common law position. See the discussion in Denham Bros Ltd v W Freestone Leasing Pty Ltd [2004] 1 Qd R 500; [2003] ANZ ConvR 522; [2003] QCA 376. Also reaffirmed is the common law rule that the rule against perpetuities does not apply to a gift over from one charity to another (Perpetuities Act 1984 (NSW), s 14(4); Perpetuities and Accumulations Act 1968 (Vic), s 16(2); Property Law Act 842

[11.155]

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1974 (Qld), s 219(2); Property Law Act 1969 (WA), s 111(2); Perpetuities and Accumulations Act 1992 (Tas), s 16(5); Perpetuities and Accumulations Act 1985 (ACT), s 15(3); Law of Property Act (NT), s 196(5)). Miscellaneous lists of other minor exceptions also exist in some States (see Perpetuities and Accumulations Act 1968 (Vic), s 13; Property Law Act 1974 (Qld), s 217; Perpetuities and Accumulations Act 1992 (Tas), s 20). Possible further reforms [11.165] Do you consider that the approach adopted in South Australia of entirely repealing the rule against perpetuities is the best response to the defects in the common law rule? What are the policy issues for and against this approach? In other jurisdictions, do you consider that all the problems associated with the common law rule against perpetuities have been resolved by the perpetuities legislation? Are further reforms desirable? Consider the following law reform suggestion made as long ago as 1952 by Leach, “Perpetuities Staying the Slaughter of the Innocents” (1952) 68 LQR 35 at 59: [There is need for]: (a) A provision that the Rule [against Perpetuities] will be applied to any interest on the basis of events which have actually occurred at the termination of preceding interests, not on the basis of events which might have occurred but did not. (b) A provision that the physical capacity of a particular person to have further children is a question of fact which is the subject of proof and decision on the same basis as other questions of fact. (c) A declaration that violation or non-violation of the Rule against Perpetuities is a matter of the substance of the interests created and not of the form in which the instrument is couched. (d) A provision that, where a violation of the Rule is found, the offending interest will be reshaped by the court if this can be done within the limits of the Rule without alteration of the essential purpose of the testator or settlor. (e) A provision exempting from the Rule administrative powers in trustees. (f) A provision exempting from the Rule commercial options to purchase and placing upon such options any time limitations which a study of the realities of commercial dealings in land may show to be desirable. (g) A provision exempting from the Rule rights of entry for condition broken and possibilities of reverter but declaring that such interests shall become void after a specified period of years or at such earlier date as the condition ceases to have any utility.

Consider also the need for reform in light of the following issue raised by Sappideen, “Life After Death – Sperm Banks, Wills and Perpetuities” (1979) 53 ALJ 311, 311: Many a teacher of perpetuities has remind[ed] students that although the rule against perpetuities is a rule against the possibility of vesting outside the perpetuity period which accepts such extravagant possibilities as fertile octogenarians and precocious toddlers, it concedes that dead men cannot (children en ventre sa mère apart) sire further children. The existence of sperm banks and technology aiding conception by use of sperm banks has in the past made it theoretically possible for conception after the death of the biological father. It is now an actuality. Cases are reported of a widow giving birth to a child more than a year after the death of the deceased husband who before his death had deposited sperm in a sperm bank. The sperm deposit has also bred a perpetuity problem, raising the issue whether the rule against perpetuities must now also take into account the further possibility that a man may have children conceived and born after his death. [11.165]

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On the same issue, see also Leach, “Perpetuities in the Atomic Age: The Sperm Bank and the Fertile Decedent” (1962) 48 Am Bar Assoc J 942.

844 [11.165]

CHAPTER 12 Co-ownership [12.00]

TYPES OF CO-OWNERSHIP OF LAND, GOODS AND INTANGIBLE PROPERTY ............................................................................................................... 846 [12.05] [12.12]

[12.15]

CREATION OF CO-OWNERSHIP OF LAND .......................................................... 854 [12.15] [12.20]

Introduction ......................................................................................... 854 Creation at law .................................................................................... 855 [12.20]

[12.30] [12.45]

Robertson v Fraser ................................................................. 855

Creation in equity ............................................................................... 856 [12.35]

Malayan Credit Ltd v Jack Chia Mph Ltd ................................. 856

Creation under statute ....................................................................... 859 [12.45] [12.55]

[12.65]

Aoun Investments Pty Ltd v Chief Commissioner of State Revenue ....................................................................... 846 Dennis v Dennis .................................................................... 851

Hircock v Windsor Homes (Development No 3) Pty Ltd ............ 859 Delehunt v Carmody ............................................................. 863

RIGHTS OF ENJOYMENT AND MANAGEMENT AS BETWEEN CO-OWNERS .... 867 [12.65]

Compensation for possession by other co-owners and for expenditure by the claimant .............................................................. 867 [12.65] [12.75]

[12.85]

Ryan v Dries ......................................................................... 867 Callow v Rupchev .................................................................. 872

Compensation for improvements ..................................................... 877 [12.85] [12.95]

Brickwood v Young ................................................................ 877 Stone v Owen ....................................................................... 880

[12.105] Occupation rent, repairs, maintenance, improvements, accounting – The Victorian position ......................................................................... 881 [12.110]

Property Law Act 1958 (Vic), ss 233 and 234 ......................... 881

[12.120] EXPLOITATION OF THE LAND .............................................................................. 883 [12.120] [12.130]

Ferguson v Miller ................................................................... 883 Paroz v Paroz ....................................................................... 885

[12.140] DISPOSITION OF A CO-OWNER’S SHARE DURING CO-OWNERSHIP ............. 887 [12.145] [12.150]

Catanzariti v Whitehouse ...................................................... 887 Hedley v Roberts ................................................................... 888

[12.160] SEVERANCE: THE CONVERSION OF A JOINT TENANCY INTO A TENANCY IN COMMON .............................................................................................................. 892 [12.160] [12.165] [12.170] [12.175] [12.180]

Williams v Hensman .............................................................. Wright v Gibbons .................................................................. Corin v Patton ...................................................................... Hedley v Roberts ................................................................... Guthrie v Australian and New Zealand Banking Group ............

892 893 897 897 897

[12.190] THE KILLING OF A CO-OWNER ............................................................................ 902 [12.190]

Rasmanis v Jurewitsch ........................................................... 902 845

Australian Property Law: Cases and Materials

[12.200] TERMINATION OF A CO-OWNERSHIP: SALE, PARTITION AND APPOINTMENT OF TRUSTEES .......................................................................................................... 904 [12.200] Application to the Court .................................................................... 904 [12.200]

Francis v Francis .................................................................... 904

[12.210] Statutory trusts for sale ....................................................................... 908 [12.210]

Jolevski v Jolevska .................................................................. 908

[12.220] Victorian procedures ........................................................................... 911 [12.225]

Property Law Act 1958 (Vic), ss 225, 228-231 ........................ 911

[12.235] SALE OF CHATTELS ................................................................................................ 913 [12.235]

Disputes Between Co-owners Report ....................................... 913

TYPES OF CO-OWNERSHIP OF LAND, GOODS AND INTANGIBLE PROPERTY [12.00] Persons hold interests in co-ownership when they are entitled to simultaneous

enjoyment of land or goods or intangible property. In relation to land, co-ownership may exist at law or in equity and in possession or remainder in respect of freehold and leasehold estates. Today the joint tenancy and the tenancy in common are the two main forms of co-ownership of land. The essential feature of both forms of co-ownership is that each co-owner has a right to possession of the whole of the land. The other types of co-ownership of land are coparcenary and tenancy by entireties.

Aoun Investments Pty Ltd v Chief Commissioner of State Revenue [12.05] Aoun Investments Pty Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1394 Supreme Court of New South Wales [In this case Gzell J undertook a review of co-ownership at common law and the concept of joint proprietors in the Torrens system statutes.] Co-ownership 20. The joint tenancy and tenancy in common are forms of co-ownership. Each expression has a technical legal meaning. It is to be presumed that the legislature intended the terms to have that technical meaning, unless a contrary intention appears, where they are used in the Duties Act 1997, s 30(1) (Attorney-General for NSW v Brewery Employés Union of NSW [1908] HCA 94; (1908) 6 CLR 469 at 531). No contrary intention was asserted or is divined from the legislation. 21. Each joint tenant is seised of the whole of the estate or interest in the land, subject only to the rights of other tenants. A joint tenant does not hold a right to any particular part of the land. In Wright v Gibbons [1949] HCA 3; (1949) 78 CLR 313 at 330, Dixon J cited with approval from Radcliffe’s Real Property Law, at 33 the rights of joint tenants: Each of them has a right shared with his co-tenants to the whole common property, but no individual right to any undivided share in it…for this reason, joint tenants should not be spoken of as holding undivided shares. 22. A tenant in common has an undivided share and a right to occupy the whole of the property in common with others. In Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1992-1993) 177 CLR 635 at 643-644, Brennan J analysed the concept thus: The share or interest which a tenant in common has in land is an “undivided” share, that is to say, “a distinct share in property which has not yet been divided among the co-tenants”. A division of the property is repugnant to the nature of a tenancy in common, for it is an 846 [12.00]

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Aoun Investments Pty Ltd v Chief Commissioner of State Revenue cont. essential characteristic of a tenancy in common that each of the tenants has the right to occupy the whole of the property in common with the others. Like joint tenants, tenants in common have a unity of possession; unlike joint tenants, they need not have a unity of interest, nor a unity of title, nor need there be a unity in the time when the interests of the co-owners vest. Each tenant in common has a separate and individual title to the property, limited according to the estate or term granted to or acquired by the tenant. Thus one tenant in common may be seised of an estate in fee simple, another seised of an estate for life, while a third may be a tenant for term of years, each of their interests being separately acquired at different times. There is no right of survivorship among tenants in common. (footnotes omitted). Joint proprietors 23. Peter Butt at [1422] suggests that the term “joint proprietors” was used by the framers of the early Torrens statutes to replace the term “joint tenants” so that the Real Property Act 1900, s 100(1) merely provided that when registered as joint tenants, parties enjoyed the entitlements of joint tenants at common law. 24. The plaintiffs submitted that in the absence of a technical legal meaning of the phrase, joint proprietors should be given their ordinary meaning. Joint means shared, held by two or more people and a proprietor is a holder of property. Hence, the plaintiffs were joint proprietors because they held lot 24 and, subsequently, lots 1, 2, 4, 5, 6, 8, 9, 10 and 12 together. 25. Reference was made to Kidson (Inspector of Taxes) v Macdonald [1974] 1 All ER 849. But that decision does not assist the plaintiffs because at 858, Foster J interpreted the word “jointly” in its ordinary meaning as including an equitable tenancy in common: In my judgment, “jointly” in its ordinary sense means “common to two or more”, and therefore is wide enough to include an equitable tenancy in common of English real property. 26. There is a heading to the Real Property Act 1900, s 100 in the document containing the text of the Act as printed by the Government Printer. It says “Registered co-tenants.” The Interpretation Act 1987, s 35(2) provides, with exceptions irrelevant for present purposes, that a heading to a provision of an Act is taken not to be part of the Act. But s 35(5) provides that that does not limit s 34, and s 34(1)(b)(i) provides that in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material to determine the meaning of the provision if the provision is ambiguous or obscure. Section 34(2)(a) provides that the material that may be considered in the interpretation of a provision of an Act includes all matters not forming part of the Act that are set out in the document containing the text of the Act as printed by the Government Printer. 27. In my view the meaning of the Real Property Act 1900, s 100(1) is obscure. The heading to the section does not form part of the Act but is included in the Government Printer’s text of the Act. Recourse may, therefore, be had to the heading in aid of the interpretation of the provision. 28. A co-tenant is one of two or more persons who hold property. There is, in my view, a suggestion of co-ownership that connotes a joint tenancy or a tenancy in common. The Oxford English Dictionary defines a co-tenant as a joint tenant and hence co-tenancy and co-tenure.

[12.10]

Notes

1. The classic statement of co-ownership of land in Australia remains, Mendes Da Costa D, “Co-ownership under Victorian Land Law” (1961) 3 MULR 137. Professor Mendes Da Costa at pp 149-153 sets out the essence of a joint tenancy as follows: [12.10]

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There are two vital characteristics of a joint tenancy, the four unities and the so-called right of survivorship. (A) Four unities The personalities of joint tenants, so far as they relate to the land, the subject of the joint tenancy, are in all respects indistinguishable. From this is deduced the four unities of a joint tenancy, that is, the unities of possession, interest, title and time. They should not, however, be regarded as conditions necessary to the creation of a joint tenancy, but rather as the natural and necessary results flowing from the basic concept of a joint tenancy. Unity of possession This has been discussed above, but it may here be reiterated that every co-owner, a tenant in common as well as a joint tenant, is entitled, concurrently with the other co-owners, to possession of the whole of the land. A co-owner is not, however, exclusively entitled to possession of any part, as this would be repugnant to the nature of co-ownership, and cannot therefore, turn out any other co-owner. In this respect it is true to say of tenants in common as well as joint tenants that they are seised per my et per tout. Unity of interest The interest of each of the joint tenants must be the same in nature, extent and duration. For example: X, the fee simple owner of Blackacre, conveys a life estate to A and term of fifty years to B. A and B do not take as joint tenants. Clearly, the basic notion of a joint tenancy is absent as they are not jointly seised of the same estate. Instead their interests are dissimilar, both in nature (A acquiring a freehold and B a leasehold estate), and duration (A being entitled for his life and B for fifty years). Similarly, if land is conveyed to A and B, A to take a three-quarter interest and B the remaining quarter interest, they take as tenants in common, for there is no unity of interest. If, however, land is limited to A and B for life as joint tenants, it is irrelevant that by the instrument of grant either is also given the fee simple estate in remainder. This is apparent if it is recalled that the subject matter of a joint tenancy is an estate; A and B are jointly seised of the life estate, and the additional grant of the estate in fee simple in remainder is, for this purpose, of no more significance than if the additional grant had been of an estate in other land. Unity of title All the joint tenants should have derived their interest from the same title; that is, under the same document or by the same act of adverse possession. If X conveys Blackacre to A and B in fee simple as joint tenants, and A conveys his interest to C, B and C are tenants in common as B acquired his interest from the conveyance by X, while C acquired his interest from the conveyance by A. As will be discussed below, the conveyance by A operates to sever the joint tenancy. Unity of time The interests of each joint tenant must have vested (in interest or possession) at the same time and by virtue of the same common event. For example: Blackacre is conveyed to X for life, remainder to A and B when they graduate in law. A and B graduate in law in 1957 and 1958 respectively. X dies in 1959. A and B take as tenants in common as their interests vested at different times. Limitations contained in a conveyance to uses provide an exception to this requirement, an exception formulated, apparently, with the object of giving effect to the intention of the grantor and extended to limitations contained in a will. For example: X conveys Blackacre to Y in fee simple to the use of H and W for life and after their deaths to the use of their children who attain the age of twenty-one years, in fee simple. Although the interests of the children of H and W may vest at different times, nevertheless they take as joint tenants … (B) Jus accrescendi Each joint tenant is seised of the whole estate, the subject matter of the co-ownership. Thus, if A, B and C are joint tenants of the fee simple estate in Blackacre, they are each seised of the entire estate, subject to the like seisin of the others. A dies and by his will 848

[12.10]

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devises Blackacre to X. B and C remain seised of the entire fee simple, but subject now only to the like right of the other. On B’s subsequent death, C, therefore, becomes entitled absolutely, because no one but he is seised of the estate. To state this result it is said that the right of survivorship, the jus accrescendi, applies between joint tenants. It seems, however, inaccurate to speak of the interest of one joint tenant passing on his death to the other. Although as a practical consequence of the death, considerable benefits do accrue to the survivor in that he alone is now exclusively entitled, it appears that the interest of a joint tenant lacks the capacity to devolve upon that joint tenant’s death, and so is thereupon exhausted, neither adding to nor subtracting from the seisin of the surviving joint tenants. As stated by Latham CJ, in Wright v Gibbons: If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged. The fact that A devised Blackacre to X is irrelevant. The interest of a joint tenant is no more capable of devolution by will than it is capable of devolving upon an intestacy, and as a will cannot take effect until the death of a joint tenant, it is too late to convert the joint tenancy into a tenancy in common. If the deaths of two joint tenants occur in circumstances which render the order of death uncertain, s 184 of the Property Law Act 1958, resolving the difficulties that existed at common law, provides that the deaths shall be presumed to have occurred in the order of seniority, and accordingly the younger shall be deemed to have survived the elder. The right of survivorship has been described as “… the most important incident of a joint tenancy, and unless the right of survivorship exists, the tenancy is not joint.” Moreover, there must here be mutuality, which is satisfied by the fact that, in the natural course of events, there is no certainty who shall die first, notwithstanding that the deaths occur in an unexpected order. For these reasons the common law held that a corporation was incapable of being a joint tenant, either with another corporation or with a natural person. Section 28 of the Property Law Act 1958, however, now provides that a body corporate shall be capable of acquiring and holding any real or personal property in joint tenancy in the same manner as if it were an individual. [The equivalents to the Victorian section are: Conveyancing Act 1919 (NSW), s 25; Property Law Act 1974 (Qld), s 34; Law of Property Act 1936 (SA), s 24C; Property Law Act 1969 (WA), s 29; Conveyancing and Law of Property Act 1884 (Tas), s 62(4); Civil Law (Property) Act 2006 (ACT), s 209; Law of Property Act (NT), s 34.] In the case of land under the Transfer of Land Act 1958 (Vic), s 30(2) provides that two or more persons who are registered as joint proprietors of land shall be deemed to be entitled thereto as joint tenants. [The equivalents to the Victorian Torrens system statute are: Real Property Act 1900 (NSW) s 100(1); Real Property Act 1886 (SA), s 74; Transfer of Land Act 1893 (WA), s 60; Land Titles Act 1980 (Tas), s 44; Land Titles Act 1925 (ACT), s 54(2). By contrast, the Land Title Act 1994 (Qld), s 56(1) and Land Title Act (NT), s 57(1) provide that the Registrar must register co-owners as holding as tenants in common or as joint tenants. By Land Title Act 1994 (Qld), s 56(2) and Land Title Act (NT), s 57(2), if the instrument does not show the form of co-ownership, the Registrar must register the co-owners as tenants in common. Also the Land Titles Act 1925 (ACT), s 54(1) provides that a transfer cannot be registered unless the transfer states whether the transferees are joint tenants or tenants in common.] Section 50 of the Act provides [in its current wording]: Subject to this Act upon the death of any person registered with any other person as joint proprietor of any land the Registrar, on application in an appropriate approved form by the survivor and proof to the satisfaction of the Registrar of the death, shall register the applicant as the proprietor thereof, and thereupon such survivor shall become the transferee of such land and be the registered proprietor thereof. [12.10]

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Thus, if A and B are registered as joint proprietors, on proof to the satisfaction of the Registrar of the death of A, B is entitled to be registered as proprietor of the land. … [The equivalents to the Victorian s 50 are: Real Property Act 1900 (NSW), s 101(1); Real Property Act 1886 (SA), s 188; Transfer of Land Act 1893 (WA), s 227; Land Titles Act 1980 (Tas), s 100; Land Titles Act 1925 (ACT), s 55. By Land Title Act 1994 (Qld), s 114 a joint tenant may apply to the Supreme Court for a vesting order.]

2. In New South Wales, Queensland, Tasmania and the Australian Capital Territory, the rules as to survivorship in the case of simultaneous death are that the elder co-owner is presumed to have died first: Conveyancing Act 1919 (NSW), s 35; Succession Act 1981 (Qld), s 65; Presumption of Survivorship Act 1921 (Tas), s 2; Civil Law (Property) Act 2006 (ACT), ss 213(1), (2), (3). In Western Australia and the Northern Territory, Property Law Act 1969 (WA), s 120(d) and Law of Property Act (NT), s 216(2)(d) provide that if there is any uncertainty in respect of the time of death the disposition is to take effect as if the property had been given to the possible beneficiaries as tenants in common in equal shares. There is no provision in South Australia. 3. The concept that each joint tenant is seised of the whole estate meant that, at common law, one joint tenant could not transfer her or his interest by a conveyance: the joint tenant had nothing to convey for the other co-owner was already seised of the whole. Such a transaction had to be by way of release of the estate. In Burton v Camden London Borough Council [2000] 2 AC 399, however, the House of Lords took a more modern pragmatic view and held that a release by a joint tenant was an attempted assignment for the purposes of a particular statutory provision. In dissent Lord Millett upheld the established view that a joint tenant cannot “assign” her or his interest. 4. The Victorian Law Reform Commission has considered whether it should be possible for joint tenancies to exist in the absence of any of the four unities: see Victorian Law Reform Commission, Disputes Between Co-owners Discussion Paper (2001), p 36ff. One of the Commission’s suggestions was that, in relation to Torrens land, it should be mandatory for the nature of the co-ownership to be specified on documents presented for registration. If such a change were undertaken, the Commission questioned the need to meet other requirements for the creation of the joint tenancy: in particular the Commission questioned the need for the unities of time and title. In its final report, the Victorian Law Reform Commission decided not to recommend any change to the four unities requirement. The Commission considered that such a change would lead to more complexity and confusion: see Victorian Law Reform Commission, Disputes Between Co-owners Report (2002), p 29. 5. An exception exists to the requirement of unity of time in order for a joint tenancy to be. In a conveyance to a trustee for a beneficiary or a disposition in a will, a joint tenancy may arise in the grantees even if unity of time does not exist. See Kenworthy v Ward (1853) 11 Hare 196; 68 ER 1245; McGregor v McGregor (1859) 1 De GF & J 63, 73; 45 ER 282, 286. As to the position in New South Wales, Western Australia and the Australian Capital Territory, it is arguable that Conveyancing Act 1919 (NSW), s 44(2), (2A); Property Law Act 1969 (WA), s 39; and Civil Law (Property) Act 2006 (ACT), s 224 may have the effect of unity of time no longer being a criterion for joint tenancy: see Butt, Land Law (6th ed, Thomson Reuters, Sydney, 2010), p 216. 850 [12.10]

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Dennis v Dennis [12.12] Dennis v Dennis [1971] HCA 50; (1971) 124 CLR 317 High Court of Australia WINDEYER J This case is about the ownership of a horse, called “Harwood Brigade”, of some considerable value because of performances in trotting races. The appellant says that the horse is his absolutely; the respondent says that they are coowners in equal shares. This issue was litigated before Hope J., sitting in the Supreme Court of New South Wales in Equity, in a suit in which the respondent was plaintiff, the appellant defendant. The suit was instituted in equity as a claim for a declaration that, as it was expressed, “the horse is owned by the plaintiff and the defendant equally between them as tenants in common”. I criticized this terminology on the ground that tenancy in common is not, except by analogy, a technically correct expression for the co-ownership of a chattel. My criticism was perhaps pedantic, for did not Blackstone say that “things personal may belong to their owners, not only in severalty, but also in joint tenancy, and in common, as well as real estates”? He gave as an example a horse belonging to two or more persons. They might be joint tenants or tenants in common thereof: Commentaries, vol. 2, p. 399. Ownership in common of a chattel connotes that the owners have a unity of possession, but a distinct and several title to their shares, which need not be equal. The way in which the first claim in the statement of claim is to be understood is therefore clear. It was followed by a claim that an account be taken of prize moneys received by the defendant by the running of the horse in trotting races, to half of which prize moneys the plaintiff claimed to be entitled. (at p325). 2. The ownership of the horse is a matter of a legal title. It is hard to see how the question could be properly brought into the equity jurisdiction of the Supreme Court, except perhaps on the basis that only there could a declaratory decree of title be had; and that this was an appropriate form of relief because one co-owner of a chattel still has procedural difficulties in asserting his rights against another at common law. Sometimes an action of trover will suffice but there are ancient restrictions upon this: see Halsbury’s Laws of England, 3rd ed, vol. 38, p. 790 and the article by Professor Derham in The Law Quarterly Review, vol. 68, p. 507. However, we in this Court need not be concerned with purely procedural aspects of the question in the Supreme Court. The only disadvantage of it being there heard in the equity jurisdiction is that this may have led to some blurring of the distinction between contract and conveyance, between an agreement for sale and a sale. It may well be that a contract concerning a particular racehorse is of a kind that is specifically enforceable: but the case that the respondent, the plaintiff, sought to make is not that he was entitled to have the appellant, the defendant, transfer to him a half-interest in the horse. It is that such an interest was effectually transferred to him and that he has since April 1967 been a part owner of the horse. In the argument that we heard it was suggested by counsel for the respondent that the case was analogous to partnership, the horse being in the nature of partnership property. Further it was argued that there was an equitable jurisdiction to order the account claimed whether or not co-ownership was established. I do not think that either of these propositions can be sustained. The case would not be one for the taking of an account in equity even if it were held that the parties owned the horse in common. The case of French v. Styring [1857] EngR 509; (1857) 2 CB (NS) 357 (140 ER 455) , although it arose more than a hundred years ago, is interesting because of resemblance to this case, and because it supplies the answers to the respondent’s contentions that I have mentioned. It was a case in which an owner and trainer were undoubtedly co-owners of a horse. I quote one passage only, from the judgment of Willes J. (1857) 2 CB (NS), at p 366 (140 ER, at p 458):

[12.12]

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Dennis v Dennis cont. The effect of the agreement seems to be this - that the plaintiff should keep and train and have the exclusive management of the horse, entering it and conveying it to the different races, and doing everything necessary to put it in a condition to run, and, in the event of the horse winning, paying over to the defendant one half of the amount of such winnings. It in truth amounts to no more than a contract between two tenants in common, whereby the one agrees, in consideration of certain things to be done by the other, to abstain from exercising his rights in respect of the chattel held by them in common.″ (at p326) 3. The case before us turns on the effect of an oral agreement the parties made one weekend in April 1967. The learned trial judge had to decide what were the terms of this agreement; and, if they involved a promise by the appellant to transfer an interest in the horse, whether that promise was carried into effect. The evidence conflicted in details as to the actual words that were used. Remarks made, or not made, thereafter by one or other of the parties to third persons, and other certain incidents were said to throw light in the probabilities one way or the other of the respective versions of what had been agreed. There is no question that in April 1967 the appellant was the owner of the horse. The horse was then broken in and quiet, but untrained for racing. The respondent, a relative of the appellant, was known to him as a trainer of trotting horses and as a driver in trotting races. (at p327). 4. The respondent’s case was that the agreement between them was in substance as follows. He, the respondent, was to have possession of the horse, feed him, train him for racing, bear all expenses of entering him in races and race him; any prize money won to be divided equally between them; the respondent to have a halfshare in the horse; whenever he was sold the purchase price would be divided equally between them; the delivery of the horse to the respondent then and there effected a transfer of the half-interest thus promised. (at p327) 5. The appellant’s case was that the agreement was, in substance, that the horse should be in the possession of the respondent to be cared for by him, trained by him at his expense and raced by him as driver; that he was to have half of any prize money won; and that “if the horse was sold while it was in his care he would get half the money that the horse was sold for”. (at p327) 6. The learned trial judge, having reviewed the evidence, said: In my opinion, the conversation on the relevant Sunday in April 1967 was a conversation in which the defendant agreed to give the horse to the plaintiff to be trained by the plaintiff on terms that the plaintiff pay the costs of training, cost of feeding and other costs in relation to its training and racing, and in return the plaintiff was to give the defendant one-half of any prize money, and in addition, if the horse were sold the plaintiff was to be entitled to one-half of the price obtained. I do not think that there was implicit in anything that was said any limitation as to time in relation to this agreement. This finding must be read with another statement by his Honour in mind: that is that he did not think that at the critical conversation between the parties the respondent was expressly told that he was to have a half-interest or share in the horse. It is of some significance that the appellant said that one L. J. McRae had in mid 1968 asked him “on what terms has Lionel (the respondent) got the horse” and he had said “the half-share basis”: and another witness, N. McRae, said that the appellant once told him that the respondent “owns half” the horse. His Honour believed that these statements were made. He said that they “confirm a view that it was the intention of the parties evidenced by what was said and done, that the plaintiff should have a half-share in the horse”. The appellant has consistently denied that he had given, or ever said that he had given, the respondent a half-share in the horse in the sense of making him a co-owner. The horse has been always registered with the New South Wales Trotting Club as owned by the appellant. He has not denied that he agreed that the horse was to be trained and raced by the respondent on the basis of a half-share in any winnings. The appellant’s speaking of the respondent having a share “in the horse”, although no doubt properly to be taken into account by his Honour, was in itself equivocal. Colloquially used, the words would not necessarily 852 [12.12]

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Dennis v Dennis cont. connote a common ownership: they could mean only that the respondent had a share in the enterprise of racing the horse. His Honour’s finding which I have quoted, of what was agreed between the parties was, as a finding of fact, accepted by the appellant in the argument before us. But it was contended that his Honour’s decision that this agreement had created a proprietary interest in the respondent in the horse could not be sustained in law. It was urged that it was a decision as to a legal consequence that was not supported by the facts as his Honour stated them. I have come to the conclusion that this submission must be accepted. It was for the respondent, as plaintiff in the suit, to prove his claim to be half owner of the horse. I think that on the facts as found by his Honour he failed to do so. The agreement found by his Honour to have emerged from the conversation did not include a promise to transfer an interest in the horse as a chattel. Of course if the parties were co-owners in equal shares it would follow that if the horse were sold, and whenever it was sold, each of the coowners would be entitled to half the net price realized by the sale. But that is a consequence of ownership in common. It is consistent with co-ownership: but it is not in itself proof of it. Nor does a promise by the owner of property that when it is sold he will share the proceeds of sale with another person make that person a co-owner. Let it be assumed that, in consideration of the respondent’s undertakings to care for and train the horse, he was to have half the proceeds if he were sold; and let it be assumed that this promise was neither expressly nor impliedly limited to a sale while the relationship of owner and trainer subsisted. Still it would not make the respondent an owner of the horse, entitled equally with the appellant to possession of him and to determine what, at any time and in any respect, should be done with him. If that were the position, the action of the appellant in taking the horse out of the respondent’s possession in December 1968 was a tort, remediable, it would seem, in an action of trover. (at p328) 7. However, the respondent submits that, even if he were not a co-owner of the horse, he is entitled to the account claimed, and to a declaration that if the horse be ever sold by the appellant as owner, he is entitled to half the price obtained. The claim to an account was put in the argument as consequential upon coownership since April 1967. As I do not think that the premise propounded is acceptable the claim to an account on that basis fails. But it is suggested that a declaration should nevertheless be made that there was a contract between the parties concerning the horse. If his Honour had been asked to make such a declaration it may be that he could properly have done so. But it would I think be necessary for the declaration to state the terms of the contract with complete precision. I do not think that, on the evidence that was given, which was directed to a different issue, this Court can now make such a declaration. His Honour did say that there was a binding contract that, in consideration of the respondent training the horse to be fit to race, the appellant promised that if ever thereafter he sold the horse he would pay half of the price he got for him to the respondent, notwithstanding that he had ceased to have the care of the horse. I do not say that that was not so: but it is not I think for us to declare that it was so. As to the suggestion that there is a continuing obligation on the part of the appellant to pay to the respondent a half of any prize money that has been won since December 1968, I am unable to accept the view that if there was no co-ownership such an obligation appears from the evidence. The improbability of it is shown by his Honour’s decision that it would have to be offset by the amount of expenses in respect of the horse incurred by the appellant since December 1968. This points to the promise of a share in prize money having been incidental to the respondent having the charges and expenses of keeping and training the horse and driving it in races. It may be that the assumptions made in the Queen’s Bench many years ago in Forth v. Simpson [1849] EngR 641; (1849) 13 QB 680 (116 ER 1423) and by Parke B. in Jackson v. Cummins [1839] EngR 136; (1839) 5 M & W 342, at p 350 [1839] EngR 136; (151 ER 145, at p 148) , that a horse owner has ordinarily an absolute right to take a horse from the possession of a trainer at any time, is not today a rule applicable to a trotting horse in New South Wales: but that I [12.12]

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Dennis v Dennis cont. doubt. The case for the respondent was put forward in the Supreme Court upon an alleged creation of a proprietary right enforceable by decree in equity. I do not think we can now treat it as if it were an action for breach of an alleged contract. (at p329) 8. I would allow the appeal. (at p329)

[12.14]

Notes

1. The above case indicates that interests as co-owners of goods are broadly equivalent to those in land. Although the law is however less well defined it seems that decisions as to the type of co-ownership and rights of enjoyment between the parties follow similar considerations. The position with respect to the termination of a co-ownership of goods is far less satisfactory (see [12.235]–[12.240]). 2. In its recent report on co-ownership, the Victorian Law Reform Commission made particular recommendations on the creation of co-ownership. In relation to property interests which can be co-owned other than registerable interests under the Torrens system, such as personal property (chattels, shares, bank accounts) and unregistrable interests in land (leases for less than three years, equitable interests), the Commission recommended that the common law presumption of the joint tenancy be retained: see Victorian Law Reform Commission, Disputes Between Co-owners Report (2002), pp 25-28. 3. Normally co-owners of a copyright hold as tenants in common: Prior v Lansdowne Press Pty Ltd [1977] VR 65; Seven Network (Operations) Ltd v TCN Channel 9 Pty Ltd (2005) 222 ALR 569.

CREATION OF CO-OWNERSHIP OF LAND Introduction [12.15] The common law favoured the joint tenancy. The historical reasons included the

simplification of title and of feudal obligations as a result of the right of survivorship with the reduction in the number of co-owners. These reasons have lost most of their significance, however many Australians die without a valid will and the joint tenancy presumption means that for domestic partners property will automatically pass to the survivor without administrative complications and costs. It remains the case at common law that, in the absence of words of severance in the grant, a joint tenancy results provided the four unities are present. In several jurisdictions, statutory provisions in the property law statutes have overturned the common law presumption in relation to interests in real and personal property, and replaced it with a presumption of a tenancy in common. In equity the common law position has been replaced in what are broadly commercial situations. Further, there are provisions in some Torrens statutes which make reference to the joint proprietorship: the import of these provisions and their interrelationship with the general property provisions are complex.

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Creation at law

Robertson v Fraser [12.20] Robertson v Fraser (1871) 6 Ch A 696 Court of Chancery Appeals [The testator by his will appointed Johnson and Fraser to be his executors. He provided for the payment of debts and certain legacies and left the residue of his estate to Johnson and Fraser for their own absolute use and benefit. In a codicil to his will, the testator appointed Warren to be an additional executor and provided that Warren was to be a further beneficiary of the residuary estate “so that the said Warren shall and may participate in such bequest” with Johnson and Fraser. Johnson died in the lifetime of the testator. A question arose as to whether the residuary estate was given to Johnson, Fraser and Warren as joint tenants or tenants in common. If the effect of the devise was to give a tenancy in common, an intestacy as to one third share would result and the next of kin of the testator would be entitled to the share.] LORD HATHERLEY LC: … It is the last clause in the codicil which alone creates the difficulty; and the question has been argued at considerable length, and many cases have been cited on both sides. I should have felt no difficulty in applying the authorities if this clause had occurred in the original will; the only difficulty arises from the fact of its occurring in the codicil. I cannot doubt, having regard to the authorities respecting the effect of such words as “amongst” and “respectively”, that anything which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy, and to create a tenancy in common. Perhaps it would have been well if the Courts had held that in bequests, as in partnerships, every community of interest was to be considered a tenancy in common. But that has not been done. However, putting aside such words as “alike” and “equally” – for they may be considered more decidedly inconsistent with joint tenancy, inasmuch as the interests of joint tenants are very rarely quite equal, considering the difference that may exist in the ages of the legatees-it does not appear to me that such words as “amongst” and “respectively” are at all stronger than “participate”. I have, therefore, no doubt that the word “participate” is sufficient to indicate an intention to divide, and to create a tenancy in common. My doubt has been as to the effect of the peculiar form of the codicil; … The testator effects his purpose by way of reference to the original gift in the will. In two places he directs that the will is to be read as if the name of Joseph Warren had been inserted in the original bequest; that alone would have given a joint tenancy to the three. But then he adds the clause: “So that the said J Warren shall and may participate in such bequest, free of legacy duty, with the said J H Johnson and W J Fraser …” But when we find the testator not contented with inserting the name of the new legatee, but expressing his reason for so doing, we must take the reason as he gives it, and that reason is, that the new legatee may participate with the two other legatees-in other words, that there may be a sharing of the bequest; and all the authorities go to this, that if there is to be a sharing, the shares must be equal; and division being once imported, the true interpretation must be a tenancy in common … The testator is not altering the will, he is only explaining it. He uses words which the Court allows to be explained by very slight indications of intention, and having used them, he goes on, not to alter them, but to explain them by words shewing an intention to create a tenancy in common.

[12.25]

Notes and Questions

1. In Re Leaver [1997] 1 Qd R 55 the use of the words “equally as a joint tenant” resulted in the creation of a tenancy in common. 2. In Victoria, South Australia, Western Australia and Tasmania, the early common law presumption of a joint tenancy remains, although any indication of an intention to grant [12.25]

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separate shares in the instrument creating the co-ownership, results in a tenancy in common. However, if expediency favours a joint tenancy, in some instances the courts have been prepared to hold that a joint tenancy was created despite the use of possible words of severance. See, for example, Re Barbour [1967] Qd R 10; Joyce v Barker Bros (Builders) Ltd (1980) 40 P & CR 512. 3. If contradictory expressions are used in a grant or a will, the rule is that the first words prevail in a deed but the last words prevail in a will (Forbes v Git [1922] 1 AC 256). Why have these seemingly contradictory positions been adopted? 4. In its report on co-ownership, the Victorian Law Reform Commission considered that there was no evidence that a presumption of tenancy in common more accurately reflected the intention of those creating co-owned interests, see Victorian Law Reform Commission, Disputes Between Co-owners Report (2002), pp 25-28. Creation in equity [12.30] The certainty and equality of the tenancy in common was preferred by equity (Re Woolley [1903] 2 Ch 206). Thus wherever co-owners were tenants in common at law, they were also tenants in common in equity. Further, in some specific fact situations, equity presumed co-owners who were joint tenants at law to be tenants in common in equity. Recently, it has become clear that equity will not confine itself to those specific fact situations. In Victoria, South Australia, Western Australia and Tasmania, the position in equity has not been altered by statutory intervention.

Malayan Credit Ltd v Jack Chia Mph Ltd [12.35] Malayan Credit Ltd v Jack Chia Mph Ltd [1986] AC 549 Privy Council [The following statement of facts is taken from the headnote of the case. The appellant and the respondent were granted a five-year lease of the seventh floor of an office block in Singapore. Prior to the grant of the lease they agreed between themselves that the appellant would occupy 62% and the respondent 38% of the floorspace for their separate commercial interests and that their liability for rent and service charges would be divided accordingly. They were invoiced separately, according to the agreed shares, for the deposit payable under the terms of the lease and paid the stamp duty, survey fees, and thereafter the rent and service changes on a pro rata basis. Following a dispute between the parties the respondent applied to the court for an order for the sale of the lease and an equal division of the net proceeds or, alternatively, an order for an equal partition of the premises. Since the lease contained no words of severance it took effect as a grant to the appellant and respondent as joint tenants at law. Accordingly, the question arose whether the parties held the beneficial interest as joint tenants in equity or as tenants in common in equal or unequal shares. The appellant contended that since the parties had provided the purchase money in unequal shares it followed that, in the absence of an express agreement, in equity they held the beneficial interest as tenants in common in unequal shares. The High Court of Singapore upheld that contention and refused to order a sale. The Court of Appeal of Singapore reversed that decision, holding that there was a joint tenancy which, on later severance, became a tenancy in common in equal shares. The Court therefore directed a sale of the lease. The appellant appealed to the Privy Council.] LORD BRIGHTMAN: … Their Lordships will deal first with the general principles involved in the case. As the lease itself contains no words of severance, it necessarily takes effect as a grant to the lessees as joint tenants at law. As regards the beneficial interest in the lease in equity, there are three possible situations. Situation 856 [12.30]

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Malayan Credit Ltd v Jack Chia Mph Ltd cont. A: the lessees at the inception of the lease hold the beneficial interest therein as joint tenants in equity. This will be the case if there are no circumstances which dictate to the contrary. On subsequent severance, the lessees would hold the beneficial interest in equal shares. Situation B: the lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in equal shares. Situation C: the lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in unequal shares. Situation A is that which is advocated by the Chia company. The argument is that, in the absence of an express agreement, persons who take as joint tenants at law hold as tenants in common in equity only in three classes of case: first, where they have provided the purchase money in unequal shares (in this case they hold the beneficial interest in similar shares); second, where the grant consists of a security for a loan and the grantees were equal or unequal contributors to the loan (again they would hold the beneficial interest in the same shares); and, third, where they are partners and the subject matter of the grant is partnership property (see, for example, Snell’s Principles of Equity (28th ed, 1982) pp 37-38). The Chia company contends that the instant case falls into none of these three categories. Therefore it is said that the lessees hold as joint tenants in equity as well as at law, with the result that either party was at liberty to sever the joint tenancy and thus ensure that the beneficial interest was thereafter held in equal shares. Subject to severance, which either party can secure at will, there is no difference between the end result of situation A and situation B. Situation C is that which is advocated by the credit company. If situation A applies to the present case, it is not in dispute that there has been a severance. The matter came before the High Court on affidavit evidence. The trial judge held that, as the premises were disproportionately divided between the parties, there was a tenancy in common in unequal shares in other words, situation C. He said that he was fortified in this view by the fact that the stamp duty was paid in unequal shares, as also the rent. The Court of Appeal reversed the trial judge, holding that there was a joint tenancy which, on later severance, became a tenancy in common in equal shares; in other words, situation A. The Court of Appeal directed a sale. It seems to their Lordships that, where premises are held by two persons as joint tenants at law for their several business purposes, it is improbable that they would intend to hold as joint tenants in equity. Suppose that an accountant and an architect take a lease of premises containing four rooms, that the accountant uses two rooms, and that the architect uses two rooms. It is scarcely to be supposed that they intend that if, for example, the accountant dies first without having gone through the formalities of a severance the beneficial interest in the entire premises is to survive to the architect. Their Lordships do not accept that the cases in which joint tenants at law will be presumed to hold as tenants in common in equity are as rigidly circumscribed as the Chia company asserts. Such cases are not necessarily limited to purchasers who contribute unequally, to co-mortgagees and to partners. There are other circumstances in which equity may infer that the beneficial interest is intended to be held by the grantees as tenants in common. In the opinion of their Lordships, one such case is where the grantees hold the premises for their several individual business purposes. Furthermore, there is no fundamental distinction to be drawn for present purposes between joint tenants who acquire a term of years on payment of a premium and at a token rent and joint tenants who acquire a term of years on the payment of no premium but at a rack rent. If in the first case the lessees contribute unequally towards the premium, it is plain that they hold the term of years (in the absence of contra-indications) as tenants in common in equity in unequal shares. The premium is the purchase money. In the second case the rent is equivalent to the purchase money. If that is paid in unequal shares, logically the joint tenants should hold the beneficial interest in equity (in the absence of contra-indications) as tenants in common in unequal shares. There are features in the instant case which appear to their Lordships to point unmistakably towards a tenancy in common in equity, and furthermore towards a tenancy in common in unequal [12.35]

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Malayan Credit Ltd v Jack Chia Mph Ltd cont. shares. (1) The lease was clearly taken to serve the separate commercial interests of the credit company and the Chia company. (2) Prior to the grant of the lease the parties had settled between themselves what space they would respectively occupy when the lease came to be granted. This was roughly 62% to the credit company and 38% to the Chia company. (3) Prior to the grant of the lease, the parties had made meticulous measurements of their respective allotted areas, and divided their liability for the rent and service charge in unequal shares in accordance with the respective areas that they would occupy. (4) Prior to the grant of the lease, the Chia company was invoiced for its due share of the deposit which was to be paid to the landlord as security under the terms of the lease, the apportionment being made in unequal shares in the like manner. This deposit was a sum which was not to be refundable by the landlord until the termination of the lease. The Chia company did not dispute the principle of this apportionment. (5) After the grant of the lease, the credit company and the Chia company paid the stamp duty and the survey fees in the same unequal shares. (6) As from the grant of the lease, the rent and service charges were paid in the same unequal shares. With great respect to the Court of Appeal, their Lordships feel unable to support their conclusion that the parties are beneficially entitled in equal shares. In the opinion of their Lordships, the payment of rent and service charge in unequal shares, the payment of the stamp duty and the survey fee in unequal shares, and the unequal contributions to the deposit payable under the terms of the lease, which was to be outstanding for the whole period of the lease, are comparable to the payment of purchase money in unequal shares. All the circumstances point decisively to the inference that the parties took the premises in equity as tenants in common in unequal shares, those shares being (as a result of the meticulous calculations made by the parties), 3,614 shares to the credit company and 2,306 shares to the Chia company. Their Lordships are however in agreement with the Court of Appeal that a partition of the premises is inappropriate and that they should be sold by order of the court under the Supreme Court of Judicature Act.

[12.40]

Notes and Questions

1. The three traditional situations where equity presumes a tenancy in common referred to by Lord Brightman are (1) the unequal contribution to purchase price (Bull v Bull [1955] 1 QB 234); (2) mortgagees (Morley v Bird (1798) 3 Ves 628; 30 ER 1192; Re Jackson (1887) 34 Ch D 732) and (3) partnerships (Lake v Craddock (1732) 3 P Wms 158; 24 ER 1011; Spence v Federal Commissioner of Taxation (1967) 121 CLR 273). 2. With respect to the position of mortgagees, there are see now the statutory provisions relating to joint account clauses; Conveyancing Act 1919 (NSW), ss 96A, 99; Property Law Act 1958 (Vic), ss 112 – 113; Property Law Act 1974 (Qld), s 93; Law of Property Act 1936 (SA), ss 54 – 55; Property Law Act 1969 (WA), ss 67 – 68; Conveyancing and Law of Property Act 1884 (Tas), s 30; Law of Property Act (NT) s 103. 3. In the commercial contexts, equity presumes a tenancy in common. If there is evidence that the co-owners who provided the purchase price in unequal shares intended nevertheless to take as joint tenants in equity, they will take as beneficial joint tenants. Where a husband and wife (legal or de facto) purchase a home and become joint tenants at law, it may be their intention to take as joint tenants in equity also, despite unequal contributions to the purchase price: see Vedejs v Public Trustee [1985] VR 569; Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280. If, however, 858 [12.40]

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the parties in a close personal relationship have clearly been engaged in a pattern of business conduct involving the purchase and sale of real property for profit, a tenancy in common in equity may be found to exist: Xenou v Katsaras (2002) 7 VR 335. 4. In Malayan Credit Ltd v Jack Chia Mph Ltd [1986] 1 AC 549, the Privy Council took the view that the three traditional categories referred to above did not constitute a complete set of the circumstances in which equity would declare co-owners to be tenants in common. Can you think of other circumstances in which equity may, or has already, preferred the tenancy in common? How do the cases concerning the unconscionable conduct constructive trust (for example, Baumgartner v Baumgartner (1987) 164 CLR 137) relate to this area of the law? Where the parties are joint tenants at law and have made equal contributions to the purchase price, equity follows the law and presumes the co-owners to be joint tenants. Why would this position have been taken by the courts of equity? 5. Property disputes between domestic partners, particularly on the breakdown of the relationship, are now subject to the Family Law Act 1975 (Cth); see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [8.350]-[8.415]. Creation under statute

Hircock v Windsor Homes (Development No 3) Pty Ltd [12.45] Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 New South Wales Court of Appeal [Windsor Homes leased a unit to Mr and Mrs Hircock for a 10-year term with an option to renew for a further 10-year term. It was provided that the lease, or any extension under the option, was to determine on the death of the survivor of the lessees. The lease was registered under the Real Property Act 1900 (NSW). Mrs Hirock died and subsequently, Mr Hircock sought to exercise the option to renew. The smallness of Mrs Hircock’s estate meant that no legal personal representative of her estate was appointed. The lessor argued that the exercise of the option was invalid as it was exercised by Mr Hircock alone. The lessor argued this would only have been possible if the Hircocks had held the lease as joint tenants and section 26 of the Conveyancing Act 1919 (NSW) deemed this is not to be the case.] HUTLEY JA: The option, which was included in a registered lease of premises being lot 3, Strata Plan 1844, was exercised by the plaintiff on or about 26th September, 1975, by a letter which, omitting the formal parts, reads as follows: “PURSUANT to Special Covenant 1 of the lease made between your Company and John Herbert Hircock and Jessie Hircock on the 4th January 1966 you are hereby given notice of my intention to exercise my Option in accordance with the terms of that Covenant.” Jessie Hircock had died during the currency of the lease and no representation of her estate had been taken out, because her estate was so small that only her husband was interested in what she left. The relevant parts of the lease are: “WINDSOR HOMES (DEVELOPMENT No 3) PTY LIMITED of 64 Castlereagh Street, Sydney (hereinafter called ‘Lessor’) … DOTH HEREBY LEASE unto JOHN HERBERT HIRCOCK and JESSIE HIRCOCK … ALL THAT Home Unit … FOR THE TERM of ten (10) years from the 4th day of January 1966 PROVIDED HOWEVER that this lease or any extension thereof shall absolutely determine on the death of the survivor of the said JOHN HERBERT HIRCOCK and JESSIE HIRCOCK …1. AND THE LESSOR FURTHER COVENANTS that on the written request of the Lessees made at least three (3) months before the expiration of the term hereby created and if there shall not at the time of the expiration of the term hereby created be any existing breach or non-observance of some one or more [12.45]

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Hircock v Windsor Homes (Development No 3) Pty Ltd cont. of the covenants on the part of the Lessee herein contained or implied will grant to the Lessees a Lease of the demised premises for a further term of ten (10) years from the expiration of the said term hereby created at the same rent and payable at the same time and in the same manner as in this Lease PROVIDED and containing the like covenants and provisions as herein contained including the provision for absolute determination of the Lease on the death of the survivor of JOHN HERBERT HIRCOCK AND JESSIE HIRCOCK AND PROVIDED and containing the like option as herein contained …” The only ground upon which it was contended the option was not validly exercised was that the notice of exercise of option was given by the plaintiff alone. The principal contention of the plaintiff was that the lease was to him and his wife jointly, so that, as the survivor of his wife, he was the only person entitled to exercise the option. The defendant contended that the lease was to the plaintiff and his late wife in common, and it relied upon s 26 of the Conveyancing Act 1919, which provides as follows: (1) In the construction of any instrument coming into operation after the commencement of this Act 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 tenants by entireties. The lease for ten years is a disposition of property, as it is a conveyance: see Conveyancing Act 1919, s 7(1), therefore s 26 will apply to its construction, unless it is inconsistent with the Real Property Act 1900: see Conveyancing Act 1919, s 6. It was held by the trial judge, and submitted before this Court, that s 100(1) of the Real Property Act was inconsistent with s 26, so that the lease on registration became a joint tenancy. [Section 100(1) provides “Two or more persons who may be registered as joint proprietors of an estate or interest in land under the provisions of this Act, shall be deemed to be entitled to the same as joint tenants.”] This would produce an extraordinary situation. When the lease was executed, but before registration, it would effect a disposition of property in equity which was to be construed as a tenancy in common, unless it expressly, or by necessary implication, provided that the tenancy was to be joint. However, on registration, the opposite construction is to prevail, unless the contrary was to be inferred. Any reasonable construction which will avoid this is to be preferred. There is such a construction. Section 100(1) can be read as applying the incidents of joint tenancy to the joint proprietorship. The words “who may be registered” do not relate to their state prior to registration, but as a description of their position on registration. The subsection 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.” … The explanation of the language given in Baalman, The Torrens System in New South Wales, 2nd ed., by Woodman and Grimes, p. 349, supports this approach. The learned authors say: “The original authors of the Torrens statutes appear to have been reluctant to use feudal terminology in describing the new statutory titles … As a large body of common law was already in existence relating to the expression ‘joint tenant’, it was convenient for the draftsman of the Act to apply that body of law to what he apparently intended to become a new statutory expression – ‘joint proprietor’. Section 100(1) was made the medium for applying it – a joint proprietor shall be deemed to be a joint tenant. Apart 860 [12.45]

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Hircock v Windsor Homes (Development No 3) Pty Ltd cont. from introducing the new expression, the Act has ‘left the incidents of joint tenancy to be determined by the common law and any other relevant statute’ per Latham CJ in Wright v Gibbons (1949) 78 CLR 313 dealing with the Tasmanian Torrens statute.” If there is no inconsistency between s 26(1) of the Conveyancing Act and s 100(1) of the Real Property Act, the question then arises as to whether the instrument shows that husband and wife were to take jointly. Reliance was placed on the proviso for determination of the lease or any extension on the death of the survivor of husband and wife. His Honour rejected this reasoning, saying: “These words, I think, do no more than prevent the unexpired term of any lease vesting in the legal personal representatives of the survivor of the plaintiff and his wife. The words do not disclose expressly any intention that they should take under the lease as joint tenants.” It is accepted that s 26 operates as a rule of construction; indeed, that is its only purpose. As Isaacs J said in Registrar-General (NSW) v Wood (1926) 39 CLR 46 at 55: “Sec. 26 of the Conveyancing Act is directed purely to ‘construction’.” The kind of property can itself be a factor in construction: Re Wool Trading Co Ltd (In Liq) (1927) 28 SR (NSW) 106 at 111; 45 WN 19, and it is not necessary that it should be expressly stated that the intention was to create a joint tenancy: Mole v Ross (Unreported, Sugerman J, 31st July 1950, noted (1951) 24 ALJ 356). The terms of the proviso to the grant of the term are, in my opinion, only consistent with the view that there could be an extension of the lease, that is, an exercise of the option, when only one survives, unless the terms of the option itself exclude this meaning. If the option has to be exercised by the legal personal representative of the first to die, it can only be done so as to make the legal personal representative a co-tenant with the survivor for the life of the survivor, personally liable to pay the rent and observe the covenants in the lease and with the right to occupy the premises with the survivor … An executor might be very unwilling to subject himself to liability under the covenants in the lease. If he exercised the option and took the lease, he would be personally liable with a worthless right to be indemnified out of the wife’s estate. I cannot imagine that this couple, or the lessor, contemplated there being anything but a joint lease. Though there can be leases in common, they are relatively unusual, a lease in its inception commonly having the four unities which are required for a joint tenancy. In fact, leases in common usually arise from the severance of a joint lease. An example of such is provided by the decision of Kindersley VC in Norval v Pascoe (1864) 34 LJ Ch 82. In my opinion, a court is entitled to have regard to the fact that leases in common are far from common in construing this lease. The option itself refers to the request for a new lease being made by the lessees. On the principle that the singular includes the plural and vice versa, I would read this as meaning that, only if both of these lessees are alive, must they join in the request, but if there is only one, he or she can make the request. If, however, these lessees hold in common it seems to me the result is no different. In Challis, Real Property, 3rd ed, pp 368, 369, the very learned author describes a tenancy in common as follows: “A tenancy in common, though it is an ownership only of an undivided share, is, for all practical purposes, a sole and several tenancy or ownership; and each tenant in common stands, towards his own undivided share, in the same relation that, if he were sole owner of the whole, he would bear towards the whole. And accordingly, one tenant in common must convey his share to another, by some assurance which is proper to convey an undivided hereditament; and he cannot so convey by release.” Therefore, when the surviving husband purported to exercise the option, if the tenancy is a tenancy in common, he exercised the option in respect of the whole, giving rise to a lease of the whole exactly similar to the lease he originally acquired. Only if the special covenant is read as precluding the exercise of the option by one, does it matter whether the tenancy is joint or in common. If the lease [12.45]

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Hircock v Windsor Homes (Development No 3) Pty Ltd cont. creates a tenancy in common, that itself provides a reason against a construction of the special covenant as requiring both to exercise it and, if this is correct, in my opinion it does not matter whether the tenancy for the term of ten years was a joint tenancy or a tenancy in common. [Hope and Samuels JJA delivered judgments to a similar effect.]

[12.50]

Notes and Questions

1. In New South Wales, Queensland, the Australian Capital Territory and the Northern Territory, similar provisions reversing the common law presumption of a joint tenancy exist: Conveyancing Act 1919 (NSW) ss 26, 27 Property Law Act 1974 (Qld), ss 35 – 36; Civil Law (Property) Act 2006 (ACT), ss 210 – 211; Law of Property Act (NT), ss 35 – 36. Although the wording of the New South Wales provision refers to “legal estate” rather than “legal interest”, thereby implying application to real property, it has been held that s 26 applies to both real and personal property: Buchan v Nash [1983] 2 NSWLR 575; Public Trustee v Gittoes (aka Caldar) [2005] NSWSC 373. In the Queensland and Northern Territory provisions the words “legal interest” are used in place of the words “legal estate”. The Queensland Law Reform Commission (QLRC) took the view that the provision was intended to apply to real and personal property, and that as the use of the words “legal estate” may not be appropriate to all forms of personalty, the words “legal interest” should be used. Further, the Commission stated that as the provision applies to personalty, the section should not be confined to “instruments”. In dispositions of personalty, an instrument may not be used and thus the section should apply to “a disposition” and not simply an instrument: see QLRC, Report No 16 (1973), p 25. 2. In Queensland and the Northern Territory the presumption of joint tenancy is inapplicable to dispositions for partnership purposes; see Property Law Act 1974 (Qld), s 35(3) and Law of Property Act (NT), s 35(3). 3. In order for Conveyancing Act 1919 (NSW), s 26(2) to operate, it is sufficient if the instrument clearly or plainly indicates the desire for a joint tenancy: see Rule v Mallon (2000) 10 BPR 18,005 Where applicable, s 26(2) removes automatic deeming and restores the position prior to statutory intervention: see Minter v Minter (2000) 10 BPR 18,133. 4. Section 27 of the Conveyancing Act 1919 (NSW) provides: “Where two or more persons entitled beneficially as tenants in common to an equitable estate in any property are or become entitled in their own right whether as joint tenants or tenants in common to the legal estate in such property equal to and co-extensive with such equitable estate both the legal and equitable estates shall be held by them as tenants in common unless such persons otherwise agree.” Section 27 was included to overcome the principle enunciated in Re Selous [1901] 1 Ch 921 where it was held that if two persons were beneficially entitled to a property as tenants in common and they subsequently acquired the legal estate as joint tenants, the equitable estate merged in the legal and they became joint tenants both at law and in equity. See also : Property Law Act 1974 (Qld), s 36; Civil Law (Property) Act 2006 (ACT), s 211; Law of Property Act (NT), s 36. 862 [12.50]

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5. In Churcher v Danis Hotels Pty Ltd (1980) 8 BPR 15,863 Holland J doubted the correctness of Hutley JA’s assertion that if a tenancy in common existed, the surviving tenant in common could have exercised the option to renew in respect of the whole. Which view do you think is correct? 6. Similar provisions to s 100(1) of the Real Property Act 1900 (NSW) exist in Victoria, South Australia, Western Australia and the Australian Capital Territory: Transfer of Land Act 1958 (Vic), s 30(2); Real Property Act 1886 (SA), s 74; Transfer of Land Act 1893 (WA), s 60; Land Titles Act 1925 (ACT), s 54(2). The interpretation of Hutley JA in Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 is equally applicable to these provisions. 7. Other provisions in some of the Torrens statutes concern the creation of co-ownership: some of these alter the common law presumption and some reiterate the presumption. In Victoria and Tasmania, there is a presumption in favour of the joint tenancy. Section 33(4) of the Transfer of Land Act 1958 (Vic) provides: “Any two or more persons named in any instrument as transferees mortgagees lessees or as taking any estate or interest in land shall unless the contrary is expressed be deemed to be entitled jointly and not in shares and every such instrument when registered shall take effect accordingly” (see similarly Land Titles Act 1980 (Tas), s 44). 8. The Torrens statutes in Queensland, the Australian Capital Territory, the Northern Territory and New South Wales (by regulation) contain provisions requiring an indication of the form of co-ownership adopted by the parties. For instance, s 56(1) of the Land Title Act 1994 (Qld) provides “In registering an instrument transferring an interest to co-owners, the registrar must also register the co-owners as holding their interests as tenants in common or as joint tenants.” The similar provisions are: Land Titles Act 1925 (ACT), s 54(1); Land Title Act (NT), s 57(1); Real Property Regulations 2003 (NSW), reg 6. In Queensland and the Northern Territory, if an instrument does not set out the type of co-ownership, effectively a presumption of tenancy in common operates. Section 56(2) of the Land Title Act 1994 (Qld) provides: “If the instrument does not show whether co-owners are to hold as tenants in common or as joint tenants, the registrar must register the co-owners as tenants in common.” Section 57(2) of the Land Title Act (NT) is in similar terms, but s 57(3) and (4) make special provision for instruments lodged before the commencement of the Act. 9. These equitable presumptions apply equally to Torrens land. The position of a person holding an equitable tenancy in common is, however, more precarious than if he or she held land under general law system. Why is this the case?

Delehunt v Carmody [12.55] Delehunt v Carmody (1986) 161 CLR 464 High Court [The facts are taken from the report of the case. Francis Patrick Carmody married Heather May Carmody in 1935. They separated in 1939 and did not thereafter live together. From 1949 until his death in 1980 Mr Carmody lived in a rented property at 49 Trafalgar Street, Enmore, in New South Wales with Ethel Grace Delehunt as man and wife. Mr Carmody purchased the property in 1956 and it was transferred into his name. The price was paid by Mr Carmody and Miss Delehunt in equal shares, on the basis of an oral agreement that they would own the property in equal shares and that it would in due course be put in the names of both. Mr Carmody died intestate, letters of administration of his [12.55]

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Delehunt v Carmody cont. estate were granted to Mrs Carmody, and the property was transmitted to her as registered proprietor. On Mrs Carmody’s demand that Miss Delehunt vacate the property, the latter entered a caveat claiming an estate or interest as beneficial owner of the land pursuant to a trust. Mrs Carmody commenced proceedings in the Supreme Court of New South Wales to have the caveat removed, and by a cross-claim Miss Delehunt claimed a declaration that Mrs Carmody held the land upon trust for her absolutely … The Court of Appeal …held that before his death Mr Carmody had held the land on trust for himself and Miss Delehunt as tenants in common in equal shares. The Court so held because s 26 of the Conveyancing Act 1919 (NSW) had removed the basis for the presumption formerly made in equity that if two people advance the purchase money in equal shares they intend to be joint tenants of the land purchased. Special leave to appeal to the High Court was granted to Miss Delehunt, limited to the ground “that the Court of Appeal erred in holding that s 26 of the Conveyancing Act displaced the equitable presumption that when two persons advance equally the purchase moneys for a property they hold as equitable joint tenants”.] GIBBS CJ: … I must say immediately, with the greatest respect to the learned members of the Court of Appeal, that I cannot agree that they were right in holding that there was no concluded contract and no express trust. Let it be assumed that it was correct to hold that no implication could be made, either in the contract or in the trust, of a term either that the co-ownership be by way of joint tenancy or that it be by way of tenancy in common. It would not, in those circumstances, follow that there was no valid contract and no binding trust. A contract to convey land to A and B, or a trust for A and B, may be perfectly valid, notwith-standing that nothing is said as to the form of co-ownership which A and B are to take; it then becomes necessary to consider the legal effect of a contract or a trust in that form. If the trust is created by an instrument, the effect of s 26 will be that in New South Wales the beneficial interest will be deemed to be held by the beneficiaries as tenants in common. In the present case there was, however, no instrument which disposed of the beneficial interest in the land to Miss Delehunt and Mr Carmody. It does not matter whether the trust in the present case be regarded as an express trust (not created by an instrument) or a resulting trust, for, as will be seen, the result will be the same in either case … At common law in England before the reform of the law of property in 1926, if land was conveyed to two or more persons a joint tenancy of the legal estate was created, unless either one of the four unities (of estate, time, possession and interest) was absent, or words of severance were employed: see Megarry and Wade, The Law of Real Property, 5th ed (1984), at pp 424-425, where it is explained that the presumption at law in favour of a joint tenancy had its origins in the fact that in earlier times a joint tenancy was preferable to a tenancy in common, both to feudal lords and feudal tenants and to conveyancers. In this respect equity did not follow the law-in general, equity preferred tenancies in common, probably to give effect to the maxim “equity is equality”. Where land was conveyed to two or more purchasers, all of whom had provided some of the purchase money, equity drew a distinction: if the purchase money had been provided in equal shares, the purchasers took beneficial interests as joint tenants, but if the money had been provided in unequal shares, they took as tenants in common. For completeness it should be added that even if the contributions are equal, equity will hold that there is a tenancy in common where two or more persons advance money and a mortgage is made to them jointly, or where the persons to whom the property is conveyed acquire it as partners or as participants in a joint undertaking; these are not rigid categories: Malayan Credit Ltd v Jack Chia Mph Ltd (1986) 2 WLR 590, 595-599. The decisions usually cited as authority for the proposition that purchasers who have contributed equally to the purchase price hold the equitable as well as the legal estate as joint tenants were all cases in which the legal estate was conveyed to the purchasers: see Lake v Gibson; affirmed sub nom; Lake v Craddock; Aveling v Knipe; Robinson v Preston; Palmer v Rich. Writers of high authority have 864 [12.55]

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Delehunt v Carmody cont. explained this result by saying that where the purchasers had contributed equally there was no reason why equity should not follow the law. Thus in Maitland on Equity, revised by Brunyate, (1936), p 79, it is said that: in general if two men pay the purchase money in equal shares there is no presumption that they intend to be other than what the conveyance will make them, namely joint tenants. Similarly, Story’s Equity Jurisprudence, 3rd English ed (1920), p 509 says: In the case of joint purchases made by two persons, who advance and pay the purchasemoney in equal proportions and take a conveyance to them and their heirs, it constitutes a joint tenancy, that is, a purchase by them jointly of the chance of survivorship; and of course the survivor will take the whole estate. This is the rule at law; and it prevails also in equity under the same circumstances; for unless there are controlling circumstances, equity follows the law. However, since s 26 of the Conveyancing Act, in New South Wales the effect at law of a disposition in favour of A and B is that they will take as tenants in common. In New South Wales a conveyance to two purchasers who have contributed equally to the purchase price of the property will now give the purchasers a beneficial interest as tenants in common. Of course in the present case the property was not conveyed to the two persons who had contributed to the purchase price, but to only one of them. When a purchase is made in the name of one of two or more persons who contributed to the purchase price, and the relationship between the parties does not give rise to a presumption of advancement, the property will be held on a resulting trust for the persons who paid the price. Quite clearly, where the contributions to the purchase price have been made in unequal shares the property will be held on a resulting trust for the contributors as tenants in common in proportion to the amounts which each contributed: Calverley v Green (1984) 155 CLR 242 at 246-247, 258. There seems to be no authority which decides the precise question whether, when a resulting trust was raised in favour of purchasers who had contributed to the price in equal shares, the beneficial interest of the purchasers would have been that of joint tenants or of tenants in common. However, it would seem to follow, by analogy with the case where a conveyance is made to all the contributors, that (apart from the effect of s 26 of the Conveyancing Act) they would be equitable joint tenants, … It would further seem to accord with principle that if there were an express trust in favour of A and B who had contributed equally to the purchase price of the property the subject of the trust, equity, again following the law, would have held (before the amendment effected by s 26) that A and B took beneficially as joint tenants. In either case slight circumstances would have been enough to indicate that it was intended that there should not be a joint tenancy. Equity had a dislike for joint tenancies, because their effect was to make the ultimate ownership of the property depend on the chance of survivor-ship, and, in the words of Snell’s Principles of Equity (28th ed, 1982), at p 37: “There is here no equality except, perhaps, an equality of chance.” It would be indeed surprising if the rules of equity required the courts to follow a rule of the common law that no longer existed and in doing so to reach a result which equity generally tried to avoid. However the doctrines of equity are not so inflexible. If equity follows the law, it will follow the rules of law in their current state. Where, as a result of following the law, a beneficial joint tenancy would formerly have been created, now a beneficial tenancy in common will (in New South Wales) come into existence. In other words, although s 26 of the Conveyancing Act has no direct application to the present case, its indirect effect is to require it to be held that there was a resulting trust for the purchasers in an interest of the same kind as that which would have resulted if the land had been conveyed to them at law, ie as tenants in common. Of course if these views are wrong, and if it was only when there was a conveyance to purchasers who had contributed in equal shares that equity presumed that there was a joint tenancy, the result would be the same, for equity would then favour a tenancy in common and the beneficiaries would hold as tenants in common accordingly. [12.55]

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Delehunt v Carmody cont. For these reasons, I agree with the conclusion reached by the Court of Appeal that the land was held for Miss Delehunt and Mr Carmody beneficially as tenants in common. I would dismiss the appeal. [Wilson, Brennan, Deane and Dawson JJ agreed with the judgment of the Chief Justice.]

[12.60]

Notes and Questions

1. In Mitchell v Arblaster [1964-1965] NSWR 119 it was held that where persons are executors and beneficiaries, Conveyancing Act 1919 (NSW), s 26(2) has “no application to interests which they take as beneficiaries and not as executors”. 2. Does s 26 produce a fair result in Delehunt v Carmody (1986) 161 CLR 464? In Vedejs v Public Trustee [1985] VR 569 Nicholson J stated: In Robinson v Preston (1858) 4 K & J 505; 70 ER 211, Wood V-C said, at 510: “The law is settled as to the investment of moneys in the name of two or more persons in the purchase of property. If invested in unequal shares the purchasers remain tenants in common of the purchased property. If in equal shares and the matter on the face of it purports to be a joint tenancy, then it is considered by this court to be a joint tenancy and no equity is supposed to intervene by which it can be reduced to a tenancy in common.” Although on the face of it this passage would appear to favour the contention of the defendant, the basis of the principle, as stated by the learned Vice-Chancellor, nevertheless appears to be predicated upon the fact that by contributing in unequal shares the parties have unequal equities in the property purchased. The application of these equitable principles to marriage cases such as this one is not without difficulty. In particular, in the present case I have found that, despite the unequal contribution of the deposit moneys, the parties had a common intention that the house be held by the deceased in trust for himself and the plaintiff equally. The situation is thus quite different from a situation where parties acting at arm’s length have made unequal contributions towards a joint purchase because in such a case the parties would hold in proportion to their contribution. The position of married persons making unequal contributions appears to have been regarded quite differently by the courts. In Jones v Maynard [1951] Ch 572, Vaisey J, in a decision later approved by the Court of Appeal in Rimmer v Rimmer [1953] 1 QB 63, held that in circumstances where husband and wife had contributed unequally to a joint fund for a particular joint purpose and the purpose for keeping the fund had come to an end, then the proper way for a Court of Equity to deal with the money was not to investigate the precise sources out of which the fund was built up, but to assume that the intention was an equal division of what was left. Subsequently, in Re Cohen; National Provincial Bank Ltd v Katz (No 1) [1953] Ch 88, 95, Vaisey J considered the position of the proper application of a sum of money found on premises after a married couple had died, the husband having predeceased the wife. His actual decision was based on principles referable to the rights of an owner of premises to chattels found thereon, the wife having owned the premises, but he also approached the matter upon the alternative basis that the sum found represented a common fund put aside by both parties for the benefit of the survivor of them. His Lordship said that in such a case the presumption would be not for a division but for an equality of ownership and that if the principle of equality applied, it only applied in the sense that their interest was that of a severable joint tenancy so that if they had wanted to divide up the fund in their joint lifetimes they could have done so but that if they did not desire to do so, then the fund would be held for the benefit of the survivor. If the principles applicable to married persons 866 [12.60]

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are similarly applicable to persons in the position of the plaintiff and the deceased, this approach appears to me to be applicable to the present case. I have already found that it was the common intention of the parties that the house be purchased on trust for both of them and that it would be inappropriate to divide their interests in accordance with some mathematical calculation as to their respective contributions. If this be correct, it would seem to me to be a curious exercise in logic to then take their unequal contributions into account for the purpose of applying the maxim that “equality is equity”. I think it far more likely that the parties would have intended the type of severable joint tenancy referred to by Vaisey J in Cohen’s Case. Further, it can, I think, be said that once the parties are presumed to hold equally despite any inequality in their contributions, then it does no violation to the equitable principles already discussed to presume a joint tenancy for in the case of equality, equity itself presumes a joint tenancy in the absence of some clear indication that a joint tenancy is not intended: see Snell, supra.

3. Similar results occur in Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280 and Neilson v Letch (No 2) [2006] NSWCA 254. By contrast in Xenou v Katsaras (2002) 7 VR 335 a pattern of business conduct relating to sale and purchase of real property resulted in a tenancy in common in equity, despite the parties being in a de facto relationship. 4. It appears that the rule that equity follows the law means that “equity follows the statute law for the time being”: see West v Weston (1998) 44 NSWLR 657.

RIGHTS OF ENJOYMENT AND MANAGEMENT AS BETWEEN CO-OWNERS Compensation for possession by other co-owners and for expenditure by the claimant

Ryan v Dries [12.65] Ryan v Dries (2002) 10 BPR 19,497 New South Wales Court of Appeal [Taking into account contributions to purchase price (including liability for mortgage payments), the Court of Appeal held that the parties were entitled to beneficial ownership in the proportion of 43% and 57%. The appellant, the holder of the larger share, argued that on an equitable accounting, he should receive more than 57%. The court did increase the share of the appellant and Hodgson and Sheller JJA in the course of their judgments commented generally on accounting between co-owners and the earlier Court of Appeal decision in Forgeard v Shanahan.] HODGSON JA On the basis that a resulting trust is not rebutted, the respondent has a 43% interest in the property based on a contribution of one-half of the mortgage advance, this carrying a correlative liability to contribute one-half of the mortgage repayments. In those circum-stances, the appellant contends that there should be an allowance in his favour, because he has paid the whole of the mortgage instalments, including the 50% thereof which, on this approach, the respondent should have contributed … There seems little question about the broad principle applicable in this situation: a co-owner of property who has exercised the right to occupy the property is not liable to be charged with an occupation rent unless he or she (1) has excluded the other co-owner from occupation or (2) is claiming an allowance for expenditure in respect of the property: see Luke v Luke (1936) 36 SR (NSW) [12.65]

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Ryan v Dries cont. 310. If an allowance for expenditure is claimed, then, by reason of the maxim requiring the seeker of equity to do equity, the claimant can be charged with an occupation rent up to a limit of the amount allowed for the claim for expenditure: see Teasdale v Sanderson (1864) 33 Beav 534; 55 ER 476; Brickwood v Young (1905) 2 CLR 387. However, there are some questions about the details. In particular, in relation to this case, there is the question whether a claim for contribution to payments of mortgage principal and/or interest should be treated as a claim for expenditure; and a question as to how the principle applies when the occupation by one co-owner is not exclusive because the other co-owner uses the property at weekends. There is a quite detailed discussion of the principles by Meagher JA in Forgeard v Shanahan (1994) 35 NSWLR 206 at 221-226. Mahoney JA (at 219) agreed in the principles stated by Meagher JA. However, some of the statements of principle in that case were obiter only, and in some respects I am not in complete agreement with them. Because some of these principles are relevant to this case, I should indicate the areas where I have some disagreement. At 222, Meagher JA said that, apart from statute, there did not seem to be any action by which one co-owner could recover a share of rent received by the other co-owner. He referred to the case of Strelly v Winson (1685) 1 Vern 297; 25 ER 480, which decided otherwise, but pointed out that this case had not subsequently been relied on or noticed. He noted that the same result was provided by a 1705 statute; but that this statute had been repealed in New South Wales by the Imperial Acts Application Act 1969, so that the remedy provided by the 1705 statute was not available in New South Wales. At 224, Meagher JA said that a co-owner who has effected repairs and maintenance to a co-owned property, as distinct from making improvements, cannot have any allowance, and he referred inter alia to Leigh v Dickerson (sic) (1884) 15 QBD 60. That case did decide, as noted in the headnote, that a co-owner of a house who expends money on ordinary repairs has no right of action against another co-owner. However, the judgment of Cotton LJ at 67 makes it clear that, if the value of a property is increased by repairs, a co-owner who paid for the repairs is entitled, in partition proceedings, for an allowance in respect of that increase in value (that is, treating repairs as no different from improvements). Brett LJ at 65 noted that no claim for partition was made in that case, and while Lindley J did not refer to partition, he said he was of the same opinion as the other judges. In my opinion, as a matter of principle and authority, there is no difference in the application of these principles as between an increase in value to property caused by improvements and such an increase caused by ordinary repairs. At 224, Meagher JA also said that the principles can only be applied in partition actions, administration actions, where there is a fund in court, and where the court orders sale under s 66G of the Conveyancing Act. I note that in Luke at 318, Long Innes CJ in Eq. expressed the view that the maxim requiring the seeker of equity to do equity is not limited to suits for partition; and in my opinion, the principles may be applicable in a case where one party claims an interest in property by reason of a resulting trust or constructive trust, and the court is asked to quantify that interest. The point most directly relevant to the present case was discussed by Meagher JA at 225, where he referred to the question whether one co-owner’s claim that the other be charged with an occupation fee should be permitted where the latter is claiming an allowance, not for an increase in value to the property from improvements, but for the making of mortgage payments. Meagher JA set out the following passage from the first instance judgment of Rolfe J in that case: Whilst in the present case the mortgage payment made by the defendant did not amount to improvements in the sense of physical improvements to the land enhancing its value, they are, in my opinion, to 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 868

[12.65]

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Ryan v Dries cont. distributable to them. In the present case the defendant has asserted her equity to the mortgage payments and, therefore, in my opinion, must account for rents and profits. Meagher JA then continued: I have some difficulty with the last sentence I have quoted. There were no “rents and profits”, and the plaintiff was seeking an allowance in respect of an occupation fee, which is rather a different thing. This difficulty apart, I am far from convinced by his Honour’s reasoning. In the case where one party is claiming an allowance for improvements and the other is seeking to charge an occupation fee, both claims can arise in partition actions (and related actions), and only in such actions. Each claim is a potential incident of a partition action. In this context, “no rent if no improvements” makes good sense. The discharging of joint debts stands in a different position. An adjustment occasioned by such a discharge is not necessarily made in a partition action: it could be made in an action for contribution, which could be brought quite independently of a partition action (or its equivalent). In the present case, for example, the defendant could have brought an action for contribution before or after the s 66G case. In these circum-stances to equate a claim for contribution with a claim for an allowance for improvements does not seem to me to carry much conviction. However, the defendant has not cross-appealed and his Honour’s decision on this point must therefore stand. One point made by Meagher JA is that the claim for contribution in respect of the discharge of a joint debt, such as a mortgage, can be made independently of a partition action or its equivalent. Indeed, it would appear that such a claim could even be made by an action at law, without the need to seek equity at all: see Meagher Gummow & Lehane, Equity (2nd ed), para 1001-para 1003. If a co-owner makes a claim for contribution to mortgage payments in reliance purely on a legal right, with no reliance on equitable principles, then it would seem that the co-owner is not seeking equity and is not required to do equity. However, if the co-owner does rely on equitable principles in making such a claim, in my opinion the co-owner is seeking equity and is required to do equity, no less than if allowance for improvements was being sought. Thus I agree with Rolfe J that, once an occupier is required to do equity because he or she is seeking equity, there is no reason to distinguish between improvements or repairs effected to the property on the one hand, and the reduction of a charge on the property through mortgage repayments on the other. I think this accords with what Long Innes CJ in Eq said in Luke at 317, in commenting on the case of McMahon v Burchell 5 HA 322: In passing I may state that, by reason of the claim which was apparently being made by the plaintiff William McMahon for an allowance in respect of repairs and outgoings, an occupation rent might possibly have been properly charged in that case on the ground that a plaintiff seeking equity must do equity: Teasdale v Sanderson 33 Beav 524. In the present case, no legal claim has been made. In essence, the appellant is relying on a defensive equity, unpleaded, to the respondent’s resulting trust case. I note that, even if the appellant had sought contribution at law in a cross-claim in these proceedings, he would have been limited to contribution towards payments made by him in the six years prior to commencement of these proceedings, that is, since 17th June 1993: see Limitation Act 1969, s 74. (This limit does not apply to his defensive equity, because the respondent’s resulting trust case depended on transactions in 1990 (and cf Limitation Act, s 47(1)(c)), thus enabling the appellant to rely defensively on intermediate transactions.) The appellant would still have had to account for his occupation of the premises since November 1997. I note also that if the appellant is not given an accounting in these proceedings, in fresh proceedings commenced now he would be restricted by the Limitation Act to an accounting from the end of 1995, and might in any event be defeated by an Anshun estoppel. Applying these principles to the present case, I think it would have been an appealable error for the Master not to give the appellant the benefit of an equitable accounting in respect of his payment of mortgage instalments. There are respects in which the evidence relating to the application of the [12.65]

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Ryan v Dries cont. principles is less full and precise than desirable, but both parties have requested the Court to do its best. I propose to take a fairly broad brush approach, in the hope of thereby doing substantial justice to the parties. In making the mortgage repayments, both principal and interest, the appellant was discharging a debt for which the respondent, on the assumption that she had the benefit of 50% of the mortgage advance, was liable to bear 50%. That prima facie gives rise to a claim for $97,500.00. In my opinion, the principles supported in Luke mean that the appellant, now claiming equity in relation to those payments, should do equity by making some appropriate adjustment in respect of his very much greater use of the property, and indeed exclusive use thereof since November 1997. This is not a case where the greater use of the property by the appellant was in any way foisted upon him, so as to make questionable the justice of requiring him to make some recompense for that greater use. I think it is clear that it was wholly in accordance with the appellant’s wishes and intentions that he have by far the greater use and benefit of the property. I think some allowance should be made for the use which the respondent got from the property, which I would assess to be 10% as against the appellant’s 90%, up to November 1997. From November 1997, plainly the respondent had 100% use of the property. The value of occupancy of the property from September 1990 up to the Master’s decision in the case has been calculated at about $150,000.00, of which about $100,000.00 relates to the period up to November 1997 and about $50,000.00 relates to the period since November 1997, and I will adopt those figures unless the parties seek a more precise calculation. The appellant is not to be charged with the whole of that $150,000.00, because of what I have held to be the 10% usage which the respondent had up to November 1997, so that the value of the appellant’s usage for this period can be put at $90,000.00 and the value of the respondent’s usage for this period can be put at $10,000.00. Accordingly, I put the figure for which the appellant should account to the owners of the property for this period at $80,000.00; and in addition he should account to the owners of the property for the whole $50,000.00 applicable to the period since November 1997, making a total of $130,000.00. The respondent’s 43% of this amount comes to $55,900.00. Accordingly, the adjustment to be made in favour of the appellant against the respondent is $97,500.00 less $55,900.00, giving $41,600.00. I think it is fair to regard the appellant as becoming entitled to the whole of that adjustment half way through payment of the mortgage instalments, that is in about 1994, and thus to allow six years’ interest on that amount at 5%, totalling $12,480.00. The calculation then is as follows. The respondent’s 43% of the value of the property of $435,000.00 comes to $187,150.00. There should be an adjustment in favour of the appellant of $41,600.00 plus interest of $12,480.00, that is $54,080.00, giving a net interest of the respondent in the property of $133,070.00 calculated at the date of the Master’s orders. Substantially the same result can also be reached by another route. Had the appellant explicitly claimed an account in his pleadings, the respondent could plausibly have contended that he was prevented from claiming interest payments by agreement or estoppel. It is reasonably possible that she could have led evidence of an agreement that he pay non-capital outgoings in return for his much greater use of the property, or at least of reliance by her to her detriment on a representation or assumption that he would do so. Then, the appellant’s claim would be limited to contribution to the capital repayments, namely $120,000.00, of which the respondent’s share would be $60,000.00. The respondent could still have claimed in respect of the appellant’s exclusive occupation since November 1997, an amount of about $50,000.00, of which her share would be $21,500.00, giving a net figure in favour of the appellant of $38,500.00. With an allowance of some interest on that figure, we again arrive at something approximating the $54,080.00 reached by the other route. It is common ground that the respondent’s interest is to be satisfied by a payment made by the appellant to the respondent. I understand that a payment on account has already been made. The 870 [12.65]

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Ryan v Dries cont. amount still to be paid would be calculated by taking the sum of $133,070.00, adding interest at Practice Note rates, then making the adjustments appropriate by reason of the subsequent payment on account. [Sheller JA agreed with Hodgson JA. Although Giles JA agreed with most of the findings of Hodgson JA, his Honour took the view (agreeing with Meagher JA in the Forgeard case) that the payment of mortgage instalments could not be “equated with expenditure on repairs or improvements” and a claim for allowance for them did not automatically lead to being subject to the payment of occupation rent. In the absence of ouster (and the sole possession of the appellant was with the concurrence of the respondent on the facts) no such payment should be imposed.]

[12.70]

Notes and Questions

1. The Statute of Anne of 1705 (Eng) remains in force in South Australia, Western Australia, Tasmania and the Australian Capital Territory. 2. The Statute of Anne 1705 was repealed in New South Wales but not replaced. In Ryan v Dries (2002) 10 BPR 19,497, the New South Wales Court of Appeal took the view that nonetheless a suit in equity for account lies whenever one co-owner receives more than her or his share or proportion. 3. The Statute of Anne 1705 was also repealed in Victoria (Imperial Acts Application Act 1980 (Vic)) but in 1998 was replaced by s 28A of the Property Law Act 1958 (Vic) which provides for accounting in the same manner as the Statute of Anne 1705. In Queensland and the Northern Territory, s 43 of the Property Law Act 1974 (Qld) and s 45 of the Law of Property Act (NT) provide for a similar accounting between co-owners. 4. Consider the issue of maintenance costs incurred by one co-owner. Was Hodgson JA in Ryan v Dries (2002) 10 BPR 19,497 suggesting that amounts expended on maintaining the property were to be treated in the same way as improvements when considering whether allowance can be claimed from the other co-owners? Is his view supported by authority? The Victorian Law Reform Commission in its report Disputes Between Co-Owners Report (2002) took the view that the common law did not permit allowance to be made for maintenance costs and recommended that the law should be changed to permit a co-owner to make a claim for such costs when the property is sold or divided: see p 86. The Commission commented “it seems unfair that the law does not permit a co-owner to recover costs incurred to prevent depreciation in the value of the property”. 5. The decision in Ryan v Dries (2002) 10 BPR 19,497 is discussed in Skapinker, “Careful Calculations Deciding the Rights and Obligations of Co-Owners” (2002) 40 LSJ 56. 6. The issue as to the treatment of mortgage repayments in this area remains unclear, with the New South Wales Court of Appeal in Ryan v Dries (2002) 10 BPR 19,497 suggesting that mortgage repayments by one co-owner (at least of a capital component and insofar as they lead to an increase in the value of the equity of redemption), can be treated as equivalent to expenditure on improvements. This reasoning has subsequently been adopted in Brennan v Duncan (No 2) [2006] NSWSC 851. Cf Forgeard v Shanahan (1994) 35 NSWLR 206. There is a strong argument that such payments should not be so classified. Mortgage payments represent “necessary expenditure”: all co-owners are liable [12.70]

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for a joint debt and if one makes all the payments, he or she can automatically seek equitable contribution from the others without being subject to the payment of occupation rent. See Cooke, “Equitable Accounting” [1995] Conv 391 at 396; Conway, “Co-owners and Equitable Accounting: A Comparative Commonwealth Analysis” in Cooke, Modern Studies in Property Law, 2005, Vol 3, Ch 6, pp 111-130 at pp 123-124.

Callow v Rupchev [12.75] Callow v Rupchev [2009] NSWCA 148 New South Wales Court of Appeal BEAZLEY JA, BASTEN JA, HANDLEY AJA Background 5. Ms Callow and Mr Rupchev lived in a de facto relationship from 1992 until July 1998. In April 1998 they purchased a property in their joint names, borrowing the whole of the purchase price from the Advance Bank. Mr Rupchev’s father (Mr Rupchev senior) guaranteed the obligations under the loan to the Bank. The guarantee was secured by a mortgage over a property owned by Mr Rupchev senior: [2007] NSWSC 1097 at [1]. In turn, Mr Rupchev and Ms Callow granted a second mortgage over the property to Mr Rupchev senior. 6. The parties separated about three months after they purchased the property. Thereafter, other than during a period between September 2004 and April 2006, Mr Rupchev continued to live in the property and either directly, or through his company, continued to pay the mortgage until the company got into financial difficulties: [2007] NSWSC 1097 at [18], [32]. Mr Rupchev senior took over the payments of the mortgage in January 2004 so as to protect his security: [2007] NSWSC 1097 at [2], [33]. 7. On 18 June 2004, Mr Rupchev senior commenced proceedings against Ms Callow and Mr Rupchev to enforce his security. Those proceedings were settled and on 29 May 2006, consent orders were made whereby Mr Rupchev senior obtained a money judgment and an order for possession of the property: [2007] NSWSC 1097 at [3]. The orders contemplated that Mr Rupchev senior would exercise his power of sale of the property and that the balance of any proceeds of sale would be invested by his solicitors to be held in trust for Mr Rupchev and Ms Callow until further order. 8. Ms Callow defended the proceedings brought by Mr Rupchev senior. Ms Callow also brought a cross-claim against both Mr Rupchev and Mr Rupchev senior, in which she claimed she had entered the mortgage under undue influence and that she was not a party to a mortgage with Mr Rupchev senior. She sought an order that the mortgage be set aside. She did not seek any relief against Mr Rupchev or in respect of the property. She pleaded that the property was purchased as joint tenants. 9. Mr Rupchev, by a second cross-claim filed on 8 December 2005, claimed contribution to his mortgage payments; an allowance for the increase in value to the premises as a result of carrying out renovations; and contribution to the acquisition costs he had paid. Mr Rupchev also pleaded that Ms Callow’s claim for one half share in the property, when she had made no contribution, was unconscionable: [2007] NSWSC 1097 at [4]. He pleaded that in the circumstances, Ms Callow’s interest in the property was held on constructive trust for him. 10. In her defence to Mr Rupchev’s cross-claim, Ms Callow asserted that the mortgage payments had been made on account of both parties and she denied the claim to a constructive trust. 11. On 29 May 2006, when Mr Rupchev senior’s proceedings were settled, Mr Rupchev abandoned his claim that Ms Callow’s interest was held for him on trust and only claimed contribution from Ms Callow in respect of the mortgage payments and the acquisition costs. That claim was advanced in accordance with Muschinski v Dodds [1985] HCA 78; 160 CLR 583: see Trial Tcpt, 11/09/07, at 8. 872 [12.75]

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Callow v Rupchev cont. 12. An amended second cross-claim claiming contribution was eventually filed on 1 August 2007. Mr Rupchev pleaded in that cross-claim that Ms Callow’s claim for a half interest in the property, without making contribution to the mortgage, was unconscionable. However, the claim relating to the constructive trust was withdrawn, as was the claim for an allowance in respect of the renovations. 13. The property was sold in November 2006 and the balance of the proceeds of sale, in an amount of $172,141.49, was invested in accordance with a court order of 29 May 2006. 14. Mr Rupchev rented the property for some eight months in 2005, being part of the period when he was not in residence. He acknowledged that Ms Callow was entitled to be credited with half of the rental he had received for the period when the property was rented. Ms Callow claimed that Mr Rupchev was liable to pay an occupation fee for the period in which he otherwise occupied the premises, such occupation fee to be set off against the mortgage contributions. 31. The traditional grounds for charging an occupying co-owner with an occupation rent, for the benefit of a co-owner who was not in possession, were an actual ouster by the occupying co-owner which prevented the other co-owner from exercising his or her right to possession, a constructive ouster by denial of title, and a claim by the occupying co-owner to be recouped for his expenditure on permanent improvements which had increased the value of the property. The relevant principles, and the decisions on which they are based, were reviewed in Luke v Luke (1936) 36 SR(NSW) 310. 32. These principles became established in cases between siblings and other relatives decided before the Married Womens Property Act 1882 (Eng). In the early cases the co-ownership was created by a common ancestor, not by the co-owners themselves. The parties in Luke v Luke were related, but were not married, and had not lived together in a de facto domestic relationship akin to marriage. 33. The increase in home ownership after the Second World War, financed by long term mortgages, the increased participation of married women in the paid workforce, and the popularity of domestic relationships without marriage, have brought before the courts a new class of disputes between co-owners, those who were or had been married, and those who had shared their lives without marriage, or such a person and the trustee in bankruptcy of the other. 34. The established principles, developed in earlier times for a different group of co-owners, were ill-suited for the resolution of disputes involving this new group of co-owners. Thus it was not long before the English courts commenced to fashion additional principles more suitable for this new group; those decisions have been followed in Australia. 35. The “new” principles, based on cases dating from the 1970s, have established that a forceful ouster is not necessary where the domestic relationship has broken down and one co-owner, for practical reasons, can no longer live in the property with the other, and leaves. 36. These “new” cases were correctly decided and should be applied where the co-ownership flowed from a marital or equivalent domestic relationship: they should be applied in the present case. On that basis it is neither necessary nor appropriate to express any views on the traditional ouster principle, or the doctrine of constructive ouster based on denial of the title of the co-owner, or their application in this case. 37. Indeed the application of the doctrine of constructive ouster to the facts of this case is doubtful, the respondent’s denial of Ms Callow’s title not being directed to her legal title, which was clear on the face of the register, but to her beneficial title. It was only maintained from December 2005 until May 2006, whereas the “new” principles could apply to the whole period from separation in June 1998 until the sale was completed in November 2006. There was no evidence that this denial had any real effect on the conduct of Ms Callow. It did not prevent her exercising her rights of co-ownership and returning to live in the property. Further, a doctrine which gives substantive effect to such a pleading is troubling: compare Warner v Sampson [1959] 1 QB 297 (EWCACiv). [12.75]

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Callow v Rupchev cont. 47. The relevance of the traditional grounds for charging a co-owner with an occupation rent when the parties had been in a de facto relationship arose in Forgeard v Shanahan (1994) 35 NSWLR 206 where the Court was divided. Meagher JA applied the established principles which he summarised in 16 paragraphs. He doubted the correctness of the conclusion of Rolfe J that a claim for contribution for mortgage payments could be equated with a claim for the cost of improvements for the purpose of attracting a liability to account for an occupation rent, although that decision stood because the respondent in possession had not cross-appealed: at 225. 48. The question which divided the Court was whether, as the majority held, the appellant’s claim to charge the respondent with an occupation rent could not exceed the amount of the respondent’s claim for contribution for mortgage payments. In his review of the established principles Meagher JA referred to the position of a co-owner out of occupation and said that “the law treats the latter simply as someone who has chosen not to exercise his legal right to occupy the land”: at 221. Although Dennis v McDonald had been cited, he held that the established principles applied with undiminished force to co-owners who had been in a domestic relationship. 49. Mahoney JA, who agreed with Meagher JA, said at 219: The principles which have been evolved in this area of the law derive in the first instance, from the incidents which the law long ago attached to common ownership of land. I see no reason to depart from them. To do so would be merely to substitute one set of judgments as to what is just for another, without there being a compelling reason for the one or the other. 50. Kirby P, in dissent, declined to apply the established principles which had been developed for co-owners who were not married or in a domestic relationship: at 211-212. 51. The decision of this Court in Biviano v Natoli (1998) 43 NSWLR 695, and in particular the reasons of Beazley JA (Stein JA agreeing), marked a significant departure from the views of the majority in Forgeard v Shanahan. 52. Beazley JA approved the reasoning of Purchas J in Dennis v McDonald: at [40]-[41] above. Powell JA’s conclusion that there had been an actual ouster in that case and that the reasoning of Purchas J should be understood on that basis cannot, with respect, be supported. 53. Part of the dispute in Biviano concerned the quantum of the occupation fee chargeable to the appellant. The trial judge had assessed this at 65% of the full market rent: at 703. This Court reduced it to 50%, and might have reduced it further if the appellant had also challenged the adoption of the full market rent because she had a right of concurrent occupation and arguably the value to her of the use of the respondent’s half-share should have reflected this: at 704. 54. In Biviano the absent co-owner had not “voluntarily” withdrawn from the property and there was no claim for contribution to mortgage payments. Both issues arose for consideration in Ryan v Dries [2002] NSWCA 3; 10 BPR 19,497 where once again the Court was divided. 59. In McKay v McKay [2008] NSWSC 177, Brereton J reviewed a number of the authorities discussed above and concluded at [51]: I, therefore, agree with Purchas J in Dennis v McDonald and Beazley JA in Biviano v Natoli, that the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where a matrimonial or similar relationship has broken down and one party is, for practical purposes, excluded from the family home. Upon breakdown of a domestic relationship, if it becomes no longer reasonable or practicably sensible to expect the partners to co-occupy the one property, the one who remains in possession may be taken to do so to the exclusion of the other, and to be liable to pay an occupation fee. At present, however, Biviano would seem to restrict that to a case in which the exclusion was not authorised by a court order – whether under matrimonial legislation or an [apprehended personal violence order]. 874 [12.75]

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Callow v Rupchev cont. 60. This statement of principle may be accepted, subject to the qualification that, viewed in the context of the broader authorities, Biviano should not be seen as restricting the allowance of a notional occupation fee to those cases where the exclusion was not required or authorised by a court order. That conclusion accords with the statement of the law set out by K Gray and SF Gray, Elements of Land Law (5th ed, OUP, 2009) at [7.4.44] in the following terms: To this basic common law principle of rent-immunity between co-tenants there emerged, over the years, a number of overlapping exceptions, most of which involved some trauma in the personal or family relationship of the co-owners. It came to be accepted, for instance, that an occupation rent is payable by a co-tenant whose sole occupation was achieved by the intentional ouster or violent exclusion of another co-tenant or where termination of a personal relationship made it “unreasonable” to expect continued joint occupation. Likewise a co-tenant who claimed credit for improvements, repairs or mortgage outgoings paid on the co-owned land was normally required to give credit for a notional rent to be assessed in respect of any sole occupation which he had enjoyed. 6.1 The operation of such a broad statement of equitable principle may have ramifications which have not been fully worked through. Underlying the concept of ouster was a lack of voluntary choice in the decision not to continue to occupy the property. Where a domestic relationship has broken down, the underlying purpose is to achieve a fair and reasonable settlement of property interests as between the parties to the relationship. That may now be more generally achievable pursuant to application under the Family Law Act 1975 (Cth) or the Property (Relationships) Act 1984 (NSW). That exercise involves an adjustment of interests with respect to property, taking into account financial and non-financial contributions and beneficial usage. General law principles do not replicate the statutory schemes. Application of principle 62. The next question is how the principle set out above is to be applied in the circumstances of the present case. As noted above, Ms Callow left the premises at some point in July 1998. Mr Rupchev remained in occupation until September 2004 when he went to live in Queensland. During part of the period from September 2004 until April 2006 the premises were let and the rent was paid to Mr Rupchev. He conceded that he must account to Ms Callow for 50% of the rental payments, being an amount of $4,800. 63. The next question is the period during which the notional occupation fee should run. During the course of the hearing of the appeal, Ms Callow handed up a calculation sheet which factored in an offset for a notional occupation fee, against each mortgage payment, for the period from August 1998 until August 2002, when the mortgage was discharged. However, the Court was also taken to a document entitled Occupation and Rent which was apparently before the trial judge and which included a calculation for the periods during which Mr Rupchev was in occupation after repayment of the mortgage, and for the period during which he was not in occupation and during which the premises were not tenanted. The notional occupation fee was calculated until the end of October 2006, the premises being sold shortly thereafter. 64. As it was unclear for which period Ms Callow was in fact claiming a setoff by way of notional occupation fee, both she and Mr Rupchev were given an opportunity following the hearing of the application in this Court, to clarify that issue and identify arguments in support of their respective positions. 65. Ms Callow submitted that the fee was to be allowed in respect of a period which “extended past the time the Respondent lived in the property until the date the property was sold (or the premises vacated). The Respondent had the use of the property to do with as he pleased including renting out the premises, ‘renovating’ and occupying it later to the exclusion of the Appellant”. Reference was made to the judgment in McKay. [12.75]

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Callow v Rupchev cont. 66 The supplementary submissions from the respondent took a different view: Should the Court impose an allowance in this instance, an equitable allowance would be limited to the period that mortgage payments were being made by the respondent under the mortgage rather than the period of occupation by Mr Rupchev or the date the property was sold. This is so because the date the appellant vacated the premises and the dates of occupation and sale are of less relevance in the calculation of an equitable fee because the vacation was not caused by exclusion on the part of the respondent but rather the respondent’s occupation of the premises was with the appellant’s concurrence. 67. Mr Rupchev also raised an issue as to the basis of calculation. He noted that the amount of actual rent paid during 2005, namely $320 per week, was achieved after some renovations had been undertaken. He also stated that there was no agreement at trial with respect to the figure proposed by Ms Callow as appropriate to be applied throughout the period, namely $210 per week. 68. In respect of this last issue, Ms Callow did not demonstrate a basis on which any other figure than $210 per week should be applied by this Court: nor was issue taken with that figure when proposed at trial: Tcpt, 14/09/07, pp 84 and 98 (25). Accordingly, it is the figure which should be adopted in calculating a notional occupation fee. 69. With respect to the period during which the fee should be applied, there is no reason to restrict it to the period during which mortgage payments were made. It should accrue during the period of Mr Rupchev’s sole occupancy. However, both at trial and on appeal, Ms Callow claimed an occupation fee in respect of the period in 2005-2006 during which the premises were neither tenanted nor occupied by Mr Rupchev physically. The basis for that claim appears to have been that Mr Rupchev was, during that period, denying that Ms Callow had any interest in the property. That might, if made out, have justified a finding of ouster by denial of title. While Mr Rupchev conceded that he treated the property as his own and controlled access to it, it was not expressly put to him that if Ms Callow had sought to occupy the premises while he, Mr Rupchev, was in Queensland and not obtaining rent from it, he would have refused her permission: see Tcpt, 11/09/07, pp 23 and 28. 70. Because the case was not run explicitly on the basis that, absent ouster, control of premises was sufficient to give rise to a right to an occupation fee, Ms Callow’s evidence did not extend to the question of why she did not seek to reoccupy the premises when Mr Rupchev was in Queensland. She was asked, in a context which directed her attention to an earlier point in time, why she did not move back into the house, and said that she had enrolled her daughter in a local school and had “moved too many times”: Trial Tcpt, 11/09/07, p 54(10). 71. An occupation fee is chargeable, inter alia, where it is unreasonable to expect co-owners to continue to live under the same roof after a domestic relationship has collapsed, and one party moves out. However when the premises later become vacant for an extended period the party who initially remained may not be obtaining any financial benefit, or the same level of financial benefit from the property. If neither co-owner is using the property for residence or storage it may not be appropriate or equitable for either to be charged with an “occupation rent” unless a proper basis for this is established. Ms Callow’s assertion that Mr Rupchev was exercising control was just assertion based on evidence relating to an earlier period. As the relevant issues were simply not explored and she bore the onus of proof, she must fail on this issue. We express no concluded view on the legal position where it is sought to charge a co-owner with an occupation rent in respect of a vacant property. 74. Because, absent ouster, the basis for setting off a notional occupation fee is the unreasonableness of requiring the joint owners to reside together, it would be necessary, in a case where the party claiming contribution has vacated the premises for a period, for the other party to demonstrate affirmatively that it was unreasonable to expect him or her to return to the premises during that 876 [12.75]

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Callow v Rupchev cont. period. That task was not assayed by Ms Callow in the present case and accordingly the notional occupation fee should be limited to the period during which Mr Rupchev was actually in physical occupation of the premises. Interest 75. With respect to contributions to the mortgage payments, a liability to contribute arose at the time the payment was made solely by one party. Accordingly, it is appropriate that interest be calculated on each payment from the date on which it was made. The net proceeds of sale of $172,141.49 received on 8 November 2006 were invested in an interest bearing account pursuant to an order of the Court. The rights of the parties to pre-judgment interest after that date should be limited to that earned from the investment. 76. With respect to the notional occupation fees, in each case the financial benefit was obtained by Mr Rupchev, and alternative expenses were incurred by Ms Callow, from week to week as the arrangements proceeded. It is appropriate that interest be calculated on each fee (being 50% of the notional rent of $210 per week), payable on a monthly basis, from the date at which each payment accrued. Calculations 82. The trial judge held that the amount of the contribution payable to Mr Rupchev on account of the loan repayments was $55,603.05. Her Honour also found that interest on that amount calculated up to 1 October 2007 was $35,360.64. As noted above, the calculation of interest should have ceased at the end of October 2006, when the proceeds of sale were placed in a controlled account. An allowance should therefore be made by reducing the interest component by eleven months or $5,097, leaving an amount of $30,264 and a total amount (repayments and interest) of $85,867.

Note

[12.80]

The above decision turns on its head previous understanding that an occupation rent was only payable in cases of exclusion or as a set-off. The case favours a general discretion to award compensation to a co-owner who has not enjoyed possession. Compensation for improvements

Brickwood v Young [12.85] Brickwood v Young (1905) 2 CLR 387 High Court [The facts are set out in the judgment of Griffith CJ.] GRIFFITH CJ: This appeal relates to the distribution of a sum of money paid into Court by the Minister for Public Works, representing the value of land resumed by the Crown for public purposes. On 18th May, 1869, the appellant’s predecessor in title, one Gannon, purchased the land in question, and took a conveyance of it from six persons, Elizabeth Young and her five children, who were all of full age. Elizabeth Young was tenant for life of the land under her deceased husband’s will, and it appears to have been assumed that the other five vendors were tenants in common in remainder. In fact, however, they had only executory interests, the actual trusts of the will having been for the use of the wife for life, and after her death for such of the testator’s children as should be living at her decease, but the testator directed that, in case any of them should die in the lifetime of his wife leaving issue, [12.85]

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Brickwood v Young cont. the share that would have belonged to any deceased child should go to his children. The fee was vested in the trustees of the will, so that the interests were equitable interests. One of the children died unmarried. Three of the others died in the lifetime of the tenant for life, leaving issue, who consequently took the shares of the deceased parents. One of the children survived the tenant for life, who died in 1890. The result was that the deed of 18th May 1869, only operated as a conveyance of the life estate and of the undivided fourth share in remainder of the son who survived her. Upon her death the appellant, who had by the effect of several mesne conveyances acquired Gannon’s title, became an equitable tenant in common with the respondents other than the Minister, who are the children of those children of the testator who predeceased the tenant for life, his share being one fourth. One of his predecessors in title, one Porter, had in 1872 erected houses upon the land, by which it was alleged that its value was considerably increased. The appellant continued in possession of the land and in receipt of the rents and profits until the resumption … The appellant first claimed the whole fund on the ground above stated, but failed to establish his claim. He then claimed to be entitled to be recouped out of the fund to an amount equal to three-fourths of that by which the purchase money was increased by reason of the improvements by his predecessor in title … [His Honour then continued.] In Leigh v Dickeson 15 QBD 60, however, it is asserted by Cotton LJ as follows 15 QBD 60, 67: No remedy exists for money expended in repairs by one tenant in common, so long as the property is enjoyed in common; but in a suit for partition it is usual to have an inquiry as to those expenses of which nothing could be recovered so long as the parties enjoyed their property in common; when it is desired to put an end to that state of things, it is then necessary to consider what has been expended in improvements or repairs: the property held in common has been increased in value by the improvements and repairs; and whether the property is divided or sold by the decree of the Court, one party cannot take the increase in value, without making an allowance for what has been expended in order to obtain that increased value. There is, therefore, a mode by which money expended by one tenant in common for repairs can be recovered, but the procedure is confined to suits for partition. The application of the doctrine was extended in In re Jones; Farrington v Forrester [1893] 2 Ch 461 to a case of an expenditure by a tenant for life in entirety, who was also owner in remainder of a moiety in fee; and in In re Cook’s Mortgage; Lawledge v Tyndall [1896] 1 Ch 923, to a case of division of funds in an administration suit. In Boulter v Boulter 19 NSWLR (E) 135, the same learned Judge from whose decision this appeal is brought held that the rule applies in suits for administration as well as in suits for partition, and when the improvements are made while the estate of the tenant in common is only an estate in remainder, as well as when his estate is an estate in possession. In the present case the person who made the improvements was tenant pur autre vie of the whole, and also tenant in remainder of an undivided fourth. It appears from the case of Leigh v Dickeson 15 QBD 60 that the equity in question is not one which can be asserted actively, except in a suit for partition or administration, in which all the parties are equally regarded as actors, but is what was called in argument a defensive equity. And this point was relied on by Mr Knox for the respondents, who contended that the appellant, having accepted his own fourth of the purchase money payable on the resumption, must be considered as an actor in respect of the other three fourths paid into Court. He also contended that this payment to the appellant operated as a partition of the land and an allotment to the appellant of his one fourth share, so that the fund in Court represents only the other three fourths to which he has no title. With regard to the second ground of the learned Judge’s decision, I cannot regard the equitable right of a tenant in common to compensation as against his co-tenants as merely personal to the 878 [12.85]

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Brickwood v Young cont. individual tenant who effects the improvements. The principle appears to be that the making of permanent improvements by one tenant in common in sole occupation gives rise to an equity attaching to the land, analogous to an equitable charge created by the owners for the time being, but enforceable only in the event of partition or a distribution of the value of the land amongst the tenants in common. There can be no reason why such a charge should not run with the land in favour of purchasers from the person originally entitled to it. It is clearly a right incidental to the possession of the land, and cannot be asserted until that possession is disturbed. It appears to me, therefore, that the equity passes with the land, and may be asserted by the possessor for the time being, who, I think, may claim the benefit of the improvements effected by his predecessor in title. It is true that Porter, who made the improvements, has been paid for them, but not by the respondents. The purchase money which the appellant paid for the land prima facie included the enhanced value, and I can see no reason why he should not stand in the place of Porter, whose rights he acquired for valuable consideration … When the land was resumed, the appellant was in possession as tenant in common, and the respondents could only have asserted their title against him by a suit for partition, in which he could have set up his equity to compensation for the improvements. Upon the resumption the land was represented by the purchase money. By sec. 56 of the Public Works Act the appellant, as the person in possession of the land, is to be deemed to have been lawfully entitled to the land until the contrary is shown. It is the respondents, therefore, who are in the position of actors, asserting a claim to that which prima facie is the property of the appellant. The equity set up by him is, therefore, a “defensive” equity, namely, to claim compensation before effect is given to the better title of the respondents. Having regard to the principle of the doctrine invoked by the appellant, it seems quite immaterial that he has already received without objection part of the property to the whole of which he is prima facie entitled. The parties asserting the adverse claim are in either case equally bound to do equity. Nor, in my judgment, can the payment of one fourth of the purchase money to the appellant affect his right to set up this equity … For these reasons it appears to me, both on principle and authority, that the appellant, who is defending his prima facie claim to the fund representing the three fourths, is entitled to assert his lien upon it for the value of the improvements. It was, however, contended that he is debarred from doing so, because it may turn out that he is indebted to the respondents, in respect of three fourths of the rents and profits received by him since the death of the tenant for life, in an amount greater than that which he is entitled to claim under his lien, and that in that event the respondents ought to be in a position to take the difference out of his fourth share which he has already received. The indebtedness is not disputed. The claim to recover from him three fourths of the rents and profits existed before the resumption, and is not affected by it. The respondents had no lien for it upon the land, and the payment into Court of the three fourths did not give them any lien upon the sum paid in, and, a fortiori, gave them none upon the other fourth. No doubt the Court may, and I think ought to, impose as a condition of allowing the appellant to assert his equity in respect of the improvements that he shall account for the rents and profits so far as they may exhaust the amount of his charge: see Teasdale v Sanderson 33 Beav 534. [Barton J concurred with the judgment of Griffith CJ, and O’Connor J delivered a judgment to similar effect.]

[12.90]

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[12.90]

Notes and Questions

1. What is meant by the term “a defensive equity”? 2. Generally the amount payable for an occupying co-owner’s claim for improvements is calculated as that expended to the extent that it is reflected in the current value of the property. In Squire v Rogers (1979) 39 FLR 106 expenditure on a Darwin caravan park came to nought when the park was destroyed by Cyclone Tracey. Did the managing co-owner have any claim for expenditure on the park?

Stone v Owen [12.95] Stone v Owen [2001] 1 Qd R 419 Queensland Court of Appeal McMURDO P, PINCUS and THOMAS JJA: [footnotes omitted] These proceedings are between former de facto partners who resided together for about 12 years and separated in November 1993. There were no children of the relationship. The only substantial asset acquired during the relationship was a property at Mermaid Waters upon which they built a house, the total value of which was estimated at time of trial to be $185,000. It was acquired in the name of the appellant Ms Owen and she remained its sole legal owner at the time of trial. The District Court at Southport determined that Ms Owen holds the property subject to a constructive trust in favour of the respondent (Mr Stone) as to 40%. Trustees for sale were appointed and certain directions were made, including distribution of net proceeds of 40% to Mr Stone with an additional direction for payment of a further $22,112 to Mr Stone. The appellant, Ms Owen, challenges the 60/40 apportionment and also Mr Stone’s additional money entitlement. The essential basis of this additional order was loosely referred to by counsel in argument as “occupation rent”, but it might more accurately be described as a claim arising from the fact that Ms Owen had the benefit of sole occupation and renting of the property between March 1994 and trial (almost five years). The evidence reveals that Ms Owen supplied a considerably greater amount of money both for the purchase of the land and for the construction of the house than Mr Stone, and that throughout the term of their relationship she exercised her income- earning capacity more successfully than he did. In the result, so far as the proven contributions are concerned, Ms Owen provided all the funds for the acquisition of the land ($6,600 deposit in 1982 and the balance payout of $24,571 in 1985). She also personally provided $40,000 towards the building of the house and improvements thereon, through payments of $25,000 (originating as a gift from her father), $10,000 for the acquisition of a pool, and $5,000 (again originating from her father) for pool fences. Mortgage repayments were made out of a bank account run by Ms Owen, into which substantial contributions were made by Mr Stone including his wages. This is not a case where either party has made out a case based on non-pecuniary contribution (for example, of excessive domestic work thereby releasing the other party for income earning activity). But the parties did pool their resources and Mr Stone put all his earnings into joint purposes while Ms Owen, who had control of the accounts, was able to earn interest on her own behalf. Also, as found by the learned trial judge, the original intention was that the property could be owned in equal shares and that Mr Stone would in due course make good the deficit. Whilst none of these factors is conclusive, the present case would seem to be one where the appropriate interests should be calculated in accordance with the approach taken in Muschinski v Dodds. Mr Hamwood submitted that, shortly stated, such an approach would notionally pay back to the parties their specific pecuniary contributions and that otherwise the equity of the property would be divided equally between them. The circumstances of the present case would seem to call for application of a trust such as that articulated in Muschinski v Dodds rather than one fashioned entirely according to the direct financial contributions that can be proved to have been made to the property. It is impossible to discern clearly 880

[12.95]

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Stone v Owen cont. any rational basis upon which a 60 per cent/40 per cent trust was declared. As indicated above, on an approach based on proven contribution level to the asset in question the result would be 79 per cent/21 per cent; and on an approach such as that taken in Muschinski v Dodds the result would be approximately 70 per cent/30 per cent entitlement favouring Ms Owen. The appeal should therefore be allowed in relation to the percentage upon which Ms Owen should be declared to be a constructive trustee of the property in favour of Mr Stone. The precise formulation of the order will best be considered after determination of the other ground raised in this appeal.

Note and Question

[12.100]

The judgment in Stone v Owen [2001] 1 Qd R 419 considered the interrelationship and overlap between, on the one hand, principles set out in Forgeard v Shanahan (1994) 35 NSWLR 206 relating to accounting between co-owners and on the other hand, the principles relating to implied trusts and the quantification of interests under such trusts. Is it clear when the court will base its reasoning on one set of principles rather than the other? See also Jones v Jones [1977] 1 WLR 438 and Anson v Anson (2004) 12 BPR 22,303. Occupation rent, repairs, maintenance, improvements, accounting – The Victorian position [12.105] In 2002, the Victorian Law Reform Commission released its report, Disputes Between Co-owners Report (2002) and made many recommendations for reform. Not all the recommendations in the Report have been the subject of legislation, but the Property (Co-ownership) Act 2005 (Vic) does implement many of the recommendations concerning the resolution of disputes between co-owners and sale and division. The Property (Co-ownership) Act 2005 replaces Part IV of the Property Law Act 1958 (Vic) with a new Part IV. The new Part IV gives the Victorian Civil and Administrative Tribunal (VCAT), a less expensive and more accessible forum than the courts, broad powers in relation to co-ownership disputes concerning land and goods and sets out the principles governing the circumstances and manner in which remedies can be sought. Sections 233 and 234 concern compensation and accounting matters arising between co-owners.

Property Law Act 1958 (Vic), ss 233 and 234 [12.110] Property Law Act 1958 (Vic), ss 233 and 234 233. Orders as to compensation and accounting (1) In any proceeding under this Division, VCAT may order– (a)

that compensation or reimbursement be paid or made by a co-owner to another co-owner or other co-owners;

(b)

that one or more co-owners account to the other co-owners in accordance with section 28A;

(c)

that an adjustment be made to a co-owner’s interest in the land or goods to take account of amounts payable by co-owners to each other during the period of the co-ownership.

(2) In determining whether to make an order under sub-section (1), VCAT must take into account the following– (a)

any amount that a co-owner has reasonably spent in improving the land or goods; [12.110]

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Property Law Act 1958 (Vic), ss 233 and 234 cont. (b)

any costs reasonably incurred by a co-owner in the maintenance or insurance of the land or goods;

(c)

the payment by a co-owner of more than that co-owner’s proportionate share of rates (in the case of land), mortgage repayments, purchase money, instalments or other outgoings in respect of that land or goods for which all the co-owners are liable;

(d)

damage caused by the unreasonable use of the land or goods by a co-owner;

(e)

in the case of land, whether or not a co-owner who has occupied the land should pay an amount equivalent to rent to a co-owner who did not occupy the land;

(f)

in the case of goods, whether or not a co-owner who has used the goods should pay an amount equivalent to rent to a co-owner who did not use the goods.

(3) VCAT must not make an order requiring a co-owner who has occupied the land to pay an amount equivalent to rent to a co-owner who did not occupy the land unless– (a)

the co-owner who has occupied the land is seeking compensation, reimbursement or an accounting for money expended by the co-owner who has occupied the land in relation to the land; or

(b)

the co-owner claiming an amount equivalent to rent has been excluded from occupation of the land; or

(c)

the co-owner claiming an amount equivalent to rent has suffered a detriment because it was not practicable for that co-owner to occupy the land with the other co-owner.

(4) VCAT must not make an order requiring a co-owner who has used goods to pay an amount equivalent to rent to a co-owner who did not use the goods unless– (a)

the co-owner who has used the goods is seeking compensation, reimbursement or an accounting for money expended by the co-owner who has used the goods in relation to the goods; or

(b)

the co-owner claiming an amount equivalent to rent has been excluded from using the goods; or

(c)

the co-owner claiming an amount equivalent to rent has suffered a detriment because it was not practicable for that co-owner to use the goods with the other co-owner.

(5) This section applies despite any law or rule to the contrary.

Division 3–Accounting 234. Application for order for accounting (1) A co-owner of land or goods may apply to VCAT for an order under this Division to be made for an accounting in accordance with section 28A. (2) An application under this section may be made whether or not an application is made under Division 2.

[12.115]

Notes and Questions

1. As the cases extracted above show, there remains some uncertainty as to the types of payments by one co-owner which give rise to a claim for compensation from the other co-owner(s). After reading s 233(2), consider whether the Victorian legislation resolves the uncertainties. 882 [12.115]

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2. The legislation appears to maintain the traditional common law and equitable position of occupation rent not being payable to a non-occupying co-owner, except in certain circumstances. The circumstances in which occupation rent is payable, however, are generally broader than those under the common law and equitable position. After reading s 233(3) and (4), consider the possible differences between the Victorian statutory position and the situation in the other jurisdictions. 3. The rules set out in Part IV cover all land and goods that are held in co-ownership and are intended as a substitute for the principles set out in the cases extracted above. Nevertheless, in interpreting the new provisions, VCAT may choose to take into account the old common law and equitable principles where appropriate. For example, the common law and equitable principles limit the compensation to the cost of the improvements or the increase in the value of the land, whichever is the lesser; an occupying co-owner is prevented from gaining compensation for expenditure which has not benefited the other co-owners. Under the Victorian statutory regime, by s 233(2)(a), VCAT must take into account “any amount a co-owner has reasonably spent in improving the land”. In this case, VCAT may choose to be guided by the pre-statutory regime in determining what is “reasonable”. Consider whether the interpretation of any of the other provisions might be informed by the old rules. 4. It has been argued the jurisdictional demarcation between VCAT and the courts is not wholly clear: see Mulvany, “The Road to VCAT- Recent Changes to Co-ownership Law” (2006) 80 LIJ 37 at 39 and Tooher, Lecture to Property Law Conference, September 2006 (Melbourne). It seems joint venture disputes concerning co-owned land and disputes arising from resulting and constructive trusts (where specific legislation is not relied upon) may be heard at VCAT: see O’Byrne v Gillett (Real Property) [2006] VCAT 1053 (6 June 2006). 5. Part IV makes no provision for the situation where the co-owners have made an agreement as to contributions, payments and adjustments. If the co-owners make such an agreement, is it possible, and if possible, likely, that VCAT will give effect to such an agreement? Neither do the new provisions specifically set out the consequences of a co-owner’s predecessor in title having, for example, expended money on improvements. Consider again the decision in Brickwood v Young (1905) 2 CLR 387; will VCAT have the power to take into account such amounts in making determinations under Part IV?

EXPLOITATION OF THE LAND Ferguson v Miller [12.120] Ferguson v Miller [1978] 1 NZLR 819 Supreme Court of New Zealand McMULLIN J: This is an action in which the plaintiff seeks an injunction restraining the second defendant from the construction of a driveway within the area of an access way which is owned by the plaintiff, first defendant and second defendant as tenants in common in unequal shares. The action is an unusual one. Where adjoining owners obtain access to building sites by a common access strip it is customary at least in present day subdivisions, for each to own a strip of freehold with reciprocal rights of way over the land of the others. In such cases, remedies will lie for an interference with an owner’s enjoyment of the easement, the terms of which are fixed by the instrument creating the easement. In the present case, the access strip is not a right of way in that sense. It is not subject to [12.120]

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Ferguson v Miller cont. any easement. The rights and obligations of those who have an interest in it are those which spring from co-ownership. Such rights as the plaintiff has in the access strip arise from her position as a tenant in common with other co-owners. The plaintiff’s second cause of action is in waste. It is said that the act of resealing the drive would amount to voluntary waste. Technically, waste consists of any act which alters the nature of the land, whether for the better or for the worse: Megarry and Wade, p 103. Voluntary waste implies the doing of some act which tends to the destruction of the premises: 23 Halsbury’s Laws of England (3rd ed), p 566, para 1240. Most reported cases of voluntary waste have arisen between lessor and lessee but one co-owner can commit voluntary waste for which the other co-owner may sue. In the case of voluntary waste if one co-owner (whether joint tenant or tenant in common) commits waste, his co-owners can obtain an injunction restraining him. The statute expressly applies to tenants in common, and was extended to joint tenants … (Garrow’s Law of Real Property (5th ed), p 83). The reference to the “statute” is a reference to the Statute of Westminster II which is still in force in New Zealand. … It could not be said that the resealing of the 10 feet of carriageway with attendant disturbance of the subsoil in the provision of foundations would constitute voluntary waste. That would be an act of repair rather than an act of waste. So too the replacement of the existing ten feet of damaged seal by 15 feet of new seal would be an act for the betterment of the property rather than one of waste. It is likely to result in the provision of a more adequate access way which will serve alike the properties of the plaintiff, first defendant and second defendant. I have referred to the extension of the existing carriageway be widening it on each side of the existing carriageway and have held that the work involved in that would not constitute waste. The second defendant’s alternative proposal is to provide an access way on the eastern side close to the boundary. This seems likely to involve the removal of some trees and removal of the whole of the grass verge to a width of eight to ten feet. I have not viewed the property but the trees described as bordering the existing seal are of an ornamental kind which enhance the appearance of the drive. Their retention seems to me to be in the mutual interest of all parties and to place an access way alongside that eastern boundary, an object which can only be achieved by the removal of trees and turf, in my view, may amount to waste in all the circumstances of this case where it is entirely unnecessary and undesirable. Indeed it is manifest that the only advantage which the second defendant would obtain from the adoption of such a course is financial, that is by forcing the plaintiff to accept the placing of the driveway in the middle of the access way in which case the second defendant hopes to obtain a contribution toward the cost of the work … [McMullin J went on to consider a further cause of action raised, that of nuisance. Whilst holding that the fact of co-ownership was not a bar to a claim in nuisance by one co-owner against another, his Honour held on the facts that the plaintiff could not demonstrate that the alleged interference was unreasonable.]

[12.125]

Notes and Questions

1. The application of the doctrine of waste as between co-owners has been questioned on the basis that the right to commit waste is a normal incident of ownership: see Butt, Land Law (6th ed, Thomson Reuters, Sydney, 2010), p 236; Griffies v Griffies (1863) 8 LT 758. 884 [12.125]

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2. A co-owner who wishes to leave land undeveloped cannot restrain another co-owner from developing the land provided that other co-owner uses her or his own money. However, a co-owner cannot destroy or injure the property. In Marriott v Franklin (1993) 60 SASR 457 a co-owner altered a house and thereby diminished its value. In the distribution on sale, that co-owner’s share was reduced by the extent of the diminution in the value of the property. Should environmental detriment be similarly regarded as harm? What remedy would be available if the detriment is not reflected in the value of the property? 3. A lessee from a tenant in common has all the rights associated with that tenant in common including the right to possession attached to the tenant in common. Thus interference by such a lessee with the rights of the other co-owners cannot constitute a trespass unless the interference constitutes an ouster or a nuisance. See The Proprietors of the Centre Building Units Plan No 343 v Bourne [1984] 1 Qd R 613. 4. Generally it has not been regarded as possible for a co-owner to claim that the other co-owner has committed waste where the other co-owner has cut down trees or simply allowed the property to fall into disrepair: Jacobs v Seward (1872) LR 5 HL 464. Should this approach continue to be followed?

Paroz v Paroz [12.130] Paroz v Paroz [2010] QSC 203 Queensland Supreme Court PETER LYONS J [footnotes omitted] [28] However, the right of any co-owner is subject to the rights of the other co-owners. Thus the wrongful exclusion of fellow co-owners from exercising their own right of occupation (referred to as “ouster”) forms the basis for an action against the excluding party. [29] More recently, there has been a recognition that ouster and exclusion may be constructive. In Biviano v Natoli Beazley JA (with whom Stein JA agreed) said: The true nature of ouster is that it constitutes a trespass by one co-tenant of another co-tenant’s rights in respect of the property. “An express denial of the title and right to possession of fellow tenants, brought home to the latter openly and unequivocally” would clearly amount to an ouster. (authorities omitted) [30] More recently, in the context of matrimonial and similar de facto relationships, it has been held that, if it becomes no longer reasonable or practicably sensible to expect the partners to co-occupy the one property, the one who remains in possession may be taken to do so to the exclusion of the other, resulting in a liability to pay an occupation fee. [31] The conduct which seems to underline the doctrine of constructive ouster is conduct by the party in occupation which manifests a denial of the rights of the other co-owners. [32] Moreover, a co-owner who does an act which changes the character of the land, such as the planting of a grove, without the consent of the other co-owners, acts in breach of the rights of the other co-owners. [33] In the present case, the evidence establishes that the plaintiff has depastured cattle on the property at, or in excess of, its carrying capacity. There has been no suggestion that the evidence reflects conduct which is uncharacteristic and temporary in nature. When the receivers sold the cattle depastured on the farms in 2007, the plaintiff purchased virtually all of them, and returned them to the farms, without the consent of the other co-owners; and appears to have conducted full-scale grazing activities on the properties since that time. Indeed, the evidence indicates that some of the grazing activities extend onto other properties. It seems to me that grazing activities to this extent deny the other co-owners the opportunity to exercise their right to graze cattle on the farms. While [12.130]

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Paroz v Paroz cont. they have generally not been denied the right physically to enter upon any part of the farmlands, at least so far as the substantial grazing areas on the farms are concerned, they have in a practical sense been denied possession of those lands for the purposes for which one would ordinarily possess grazing lands. [34] In my view, additional support for the conclusion that there has been constructive exclusion of the first and third defendants from these areas of the farms is derived from the character of the plaintiff’s possession of these areas. The character of his possession of these lands is shown by his response to the interlocutory injunction. It demonstrates a refusal to recognise the rights of others in respect of the lands. Although the plaintiff’s violent conduct at the home of the first and second defendant, and his blocking of the entry to the farm where Mrs Olive Paroz lives, are isolated instances, they seem to me to demonstrate a belligerent and aggressive attitude, which extends to an implicit assertion that his rights in respect of the farms prevail over those of the other co-owners. [35] On the plaintiff’s behalf, it was pointed out that, as a result of legal advice obtained, apparently in late 2006, the defendants have not sought to carry out farming activities on the lands; and that because they have not sought to assert their rights, there has been no act preventing them from doing so, and accordingly no exclusion of them from the farms. The corollary of that proposition is that, at a time when litigation had been commenced between family members, the defendants could not be said to be asserting their rights unless they engaged in conduct which may well have been regarded by the plaintiff as inflammatory. It seems to me that this is an unduly narrow view of what is required to demonstrate exclusion by one co-owner of the others. It should be noted that the defendants have in their pleadings in the principal action asserted that the plaintiff has acted in breach of their rights in respect of the land. Thus in their defence of 13 June 2008 they allege that the plaintiff used the farms for his own benefit to the exclusion of the defendants. In their defence of 22 October 2008 they make similar allegations, and an allegation that the plaintiff has used partnership assets to conduct his own activities, as a matter in respect of which they are entitled to an account. Their defence of 12 March 2009 is to similar effect, as is their defence of 11 June 2009. Their defence of 2 November 2009 put the allegations a little more clearly, including allegations that from 2007 onwards the plaintiff depastured his cattle on the farms, and used the farms to grow crops for his benefit alone, to the exclusion of the defendants from 2007 onwards. It seems to me that their conduct could not be characterised as showing no wish to exercise their rights in respect of the land. Rather, his use of partnership assets, including the farms “for his own benefit to the exclusion of the partnership”, amounts to an assertion, in my view, that the plaintiff’s conduct was in breach of the rights of the defendants in respect of the land. The actions of the defendants in seeking interlocutory injunctive relief is consistent with this view. [36] The recent actions of the plaintiff in slashing land which was at that time grassland, for the purpose of ploughing it; and subsequently ploughing a substantial area of it, without the consent of the defendants, and in contravention of the interlocutory injunction granted on their application, in my view is also conduct inconsistent with their rights. It occurred at a time when the defendants wished the dealings between them brought to an end. They sought the interlocutory injunction in part to enable this to occur. [37] It follows that I consider the conduct of the plaintiff in relation to the farms to be conduct which is inconsistent with the rights of the first and third defendants as co-owners. If it were necessary to give relief on this basis, consideration would have to be given to the fact that the plaintiff remains a co-owner of the farms.

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Paroz v Paroz cont. Conclusion [38] In my view the plaintiff has acted, and notwithstanding the existence of an interlocutory injunction intended to prevent him (at least in part) from doing so, has continued to act, in a manner inconsistent with the rights of the defendants in relation to the farms. Further orders should be made to restrain him from doing so. I shall hear submissions about the form which those orders should take.

Note

[12.135]

Whilst this case supports liability for damage to the land caused by one co-owner, it does little to give insight into the conceptual basis for such liability.

DISPOSITION OF A CO-OWNER’S SHARE DURING CO-OWNERSHIP [12.140] It is clear that every co-owner has an interest with which he or she may deal by way of sale, lease or encumbrance. In some instances, co-owners may attempt, by contract, to restrain each other from alienating without the consent of the other co-owners. Such a restraint may be an invalid restriction on alienation and thus void: see, for example, Elton v Cavill (No 2) (1994) 34 NSWLR 289. Issues often arise as to the relationship between the grantee and the non-granting co-owners and also as to the rights of third parties who are affected by a disposition by a co-owner.

Catanzariti v Whitehouse [12.145] Catanzariti v Whitehouse (1981) 55 FLR 426 Full Court of Federal Court of Australia FISHER, LOCKHART and KELLY JJ: … The appellant and her husband were the registered proprietors as joint tenants of the residue of the term of a Crown lease of premises known as 113 Eggleston Crescent, Chifley. In August 1978 the appellant left the premises and, after living with her mother for some months, she rented other premises in Yarralumla where, separately from her husband, she lived with the child of the marriage. In January 1979 the husband purported to let the premises to the respondent for a term of twelve months at a rental of eighty dollars per week. There is no doubt on the evidence that, when the agreement was made between the husband and the respondent, the respondent thought that the husband was leasing to him the house with the right to exclusive possession. The respondent did not enquire as to the state of the title which would have revealed to him the existence of the joint tenancy. He dealt solely with the husband who did not tell him that he and his wife were joint tenants. In fact, the appellant knew nothing of the arrangement between her husband and the respondent at the time it was made. Thus the premises were let without the consent or knowledge of the appellant. During the period 9th-11th June 1979, the appellant moved into the house herself, initially against the respondent’s will. He, being uncertain of his legal position, agreed to allow her to return to the house and occupy one of its rooms. She made certain re-arrangements to the disposition of the furniture and other chattels in the premises to enable her to do this. It is not disputed that the appellant occupied the premises for the purpose of ensuring that she would receive her share of the rent being paid by the respondent to her husband. Various unfortunate events occurred when the appellant sought to occupy the premises, with consequent loss to the respondent in the sum assessed by the Supreme Court. [12.145]

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Catanzariti v Whitehouse cont. It is common ground that this appeal relates only to the entry of judgment against the appellant in favour of the respondent in the sum of $111.25 being damages assessed for interference with or trespass to the chattels of the respondent and costs … Each joint tenant of an estate at law is entitled equally to use and occupy the whole estate. If one joint tenant purports to lease (or sub-lease, there is no difference in principle) his share or interest to a third person, all he binds by his lease is his own share. The share of his co-tenant is not bound. It follows that the lessee of one joint tenant cannot exclude the lessor’s co-owner, or the co-owner’s separate lessee, from such use and enjoyment of the land as co-ownership authorises: see Co Litt 186a; Litt, s 289; Cartwright’s Case cited in Putt v Nosworthy 1 Vent 135; 86 ER 93; Wright v Gibbons (1949) 78 CLR 313 per Dixon J at p 330; Oates v Oates [1949] SASR 37 at 40; Frieze v Unger [1960] VR 230; Baxter v Harrigan [1963] NSWR 432; Hedley v Roberts [1977] VR 282, 286 et seq. It is however open to us to determine the fate of this appeal on grounds other than the rights inter se of co-owners and their privies to quiet possession and enjoyment of their separate interests in the land. At the time the husband of the appellant agreed to lease the premises to the respondent, in truth all he could agree to lease was his interest as joint tenant with the appellant in the premises. The respondent thereupon became entitled, together with the appellant, to use and occupy the whole of the premises, neither being entitled to the use and occupation of any part of the premises to the exclusion of the other. It was conceded by the respondent, and rightly so, that, at the time of the agreement, the appellant did not join in the agreement or otherwise dispose of her interest in the premises in favour of the respondent … [I]t was nevertheless part of the respondent’s case that the conduct of the appellant was an unlawful interference with the respondent’s right to use and occupy the premises equally with the appellant and an unlawful interference with his personal chattels. The agreement between the appellant’s husband and the respondent entitled the respondent to use and occupy the whole of the premises together with the appellant. She retained her right as joint tenant equally to use and enjoy the whole estate. But she was not entitled to attempt to prevent the respondent from exercising his right of use and occupation. In particular she was not entitled to damage his goods and chattels. Her conduct in this latter regard constituted an actionable infringement of the respondent’s rights. The damage sustained by the respondent as found by the trial Judge was caused by the appellant’s unlawful conduct and she is guilty of committing the tort of trespass to chattels. It follows that the appeal must be dismissed.

Hedley v Roberts [12.150] Hedley v Roberts [1977] VR 282 [One co-owner granted an easement to use a toilet on the co-owned land. Harris J discussed the principles applicable to the situation where an encumbrance is granted by one co-owner.] HARRIS J: … Long ago, in about 1481, in the earliest treatise on English law ever printed, (which, incidentally, was also one of the first ten books ever printed in England), Littleton wrote: “Also, if two joint-tenants are seised of lands in fee-simple, and one grants a rent-charge by his deed to another out of that which to him belongeth: in this case during the life of the grantor, the rent-charge is effectual; but after his decease, the grant of the rent-charge is void, so as to charge the land, for he that hath the land by the survivor, shall hold all the land discharged.” (See Littleton on Tenures, edited by TE Tomlins, published 888 [12.150]

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Hedley v Roberts cont. in French and English, 1841.) I read from the English translation. It may be noted that the author only spoke of a rent-charge, which one would think was something which could be satisfied without affecting the interest of the other joint tenant. In 1607, in Lord Abergavenny’s Case 6 Co Rep, 786; 77 ER 373 Sir Edward Coke reports that it was held that where the interest of a joint tenant was subject to execution for a judgment debt, and that joint tenant died before execution, the survivor took the land free from it being liable to be taken in execution and also that if one joint tenant who had granted a rent-charge took the appropriate conveyancing step to transfer his interest to his co-owner and died, the surviving co-owner took the land subject to the rent-charge. This, by implication, indicates that, otherwise, on the death of the joint tenant who had granted the rent-charge, the survivor took free of the charge. Later, in 1628 when Coke published the Institutes, in volume 1, known as Coke upon Littleton, he spoke in more detail about the effect of the grant by a joint tenant of rights over land jointly owned. He quoted what Littleton had said and then added further examples of his own. All except one of the rights he referred to have long since ceased to exist, but their enumeration not only evokes a glimpse of English rural society of the past, but also illustrates the kind of easements which one joint tenant could create. What the great author said was: “And where Littleton putteth the case of a rent-charge, it is so likewise implyed that if one joint-tenant granteth a common of pasture, or of turbary, or of estovers, or a corody or such like, out of his part, or a way over the land, this shall not bind the survivor: for it is a maxime in law that jus accrescendi praefertur oneribus and there is another maxime, that alienatio rei praefertur, juri accrescendi”. (See Coke’s Institute (1832), 19th ed, vol 2, para 185(a)) … It seems to me that all the rights mentioned are ones which, of their nature, suggest that the enjoyment of them would be, in effect, out of the grantor’s interest in the land and would not subject the co-owner to anything more than the grantor could require that co-owner to submit to if it were the grantor himself exercising his rights as a joint owner of the land. (See also Menzies v MacDonald (1856) 2 Macq 463 at p. 473, though there the Lord Chancellor was speaking of land in Scotland.) What concerned the lawyers of long ago was the reconciliation between some rights of alienation by a joint tenant and the principle of survivorship. Hence the two Latin maxims. The first means that the law favours the alienation of property against the right of survivor-ship and the second that the right of survivorship is favoured, or is put before, the burdens (or encumbrances). Here I should say that during the course of argument Mr Batt of counsel kindly provided an instant translation of these maxims, which subsequent research has, not surprisingly, verified as correct. Hence, one has on the one hand the power of a joint tenant to alienate his interest – and so sever the joint tenancy – and on the other hand the cessation of the encumbering easements upon the death of the grantor, when the right of the survivor to the entire interest prevailed over the interest of the grantee of the easement. Neither Littleton nor Coke (as far as I can ascertain) dealt with the corresponding position of tenants in common in the passages in their respective works dealing with tenants in common. Perhaps this was because it was the joint operation of the principle of survivorship in the case of joint tenants that mainly concerned them. There is, however, the statement about tenants in common in the decision of the House of Lords in Jacobs v Seward (1872), LR 5 HL 464. That was the case which dealt with the circumstances in which one tenant in common can bring trespass against another. In the course of his speech, Lord Hatherly, Lord Chancellor, referred to examples from other cases where the use of the property by one tenant in common, though without the consent of the other, was legitimate and did not enable the other co-tenant to sue in trespass and also to the circumstances in which the action for an account under the Statute of Anne enabled one tenant in common to get his just rights with respect to the property that [12.150]

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Hedley v Roberts cont. he had in common, but with respect to which he had not received his share. (See especially at pp 474-475; and see also Bull v Bull [1955] 1 All ER 253; [1955] 1 QB 234, at p 237.) More recently, there have been judgments in this Court in which problems relating to jointly owned land have been carefully considered. In Frieze v Unger [1960] VR 230 Sholl J, considered the capacity of one joint tenant to grant a lease of the jointly owned property. At pp 244-245 his Honour cites, inter alios, Littleton and Coke to show that a joint tenant can effectively lease his moiety and that the lease of that moiety will continue to take effect notwithstanding the death of the lessor. In this instance, it would appear that the maxim “jus accrescendi praefertur oneribus” may not prevail, though the point was not finally resolved and is subject to some doubt. In the other case, Lyons v Lyons [1967] VR 169, McInerney AJ (as he was when the decision was given), considered whether a mortgage by one joint tenant of his joint interest had the effect of severing the joint tenancy. He held it did not. As I understand it, this was in substance on the ground that though the mortgage by one joint tenant created an interest in the land in the mortgagee, the right of survivorship was put before that burden, in accordance with the statements of principle that go back as far as Littleton. The present case is not concerned with joint tenants but with tenants in common. In my opinion, the examination of the authorities shows that there is one principle that applies to both kinds of co-ownership. This is that a joint tenant, or a tenant in common, can encumber his interest in the land so as to compel his co-owner to submit to the encumbrance if the encumbrance does not interfere with the right of that co-owner to his right to possession of the land and his other rights with respect to the land. Because the right of survivorship is an incident of land held in joint tenancy, the effect of an encumbrance by one joint tenant differs from the effect of an encumbrance by one tenant in common. In the case of land held in joint tenancy, the encumbrance ceases to be effective on the death of the joint tenant who created the encumbrance before the death of the other joint tenant. In the case of land held on a tenancy in common, in my opinion, the death of the tenant in common who created the encumbrance has no effect on the encumbrance, as the interest of the deceased tenant in common passes to his personal representative, who takes the interest subject to the encumbrance. However, because the only essential unity in the case of tenancy in common is that of possession, it may be that the extent of the interest of the tenant in common has a material bearing on the extent to which he can effectively encumber his interest. He cannot do so in a way which unduly interferes with the right his co-owner has, or his co-owners have, to possession. Where the interest of the tenant in common is that of one of two tenants in common in equal shares, each deriving their title from the same source, it would seem to follow that such a tenant in common could encumber the land at least as effectively as one of two joint tenants. When one turns to apply the principle to cases where the co-owner who creates the encumbrance alienates the whole of his interest to another, then, in my opinion, the same result follows whether that person held as a tenant in common or as a joint tenant. In both cases, the alienee takes the interest of the alienor as a tenant in common with the other co-owner and, as in the case of alienation by a person who holds the entire fee simple, the alienee takes the alienor’s interest subject to encumbrances. Where the situation is that one of two tenants in common who has encumbered his interest joins with the other tenant in common to alienate the entire fee simple to an alienee, there would not seem to be any reason why the encumbrance of the one alienor’s moiety should not still bind the land in the hands of the alienee, though it may be that a question would arise with respect to whether there could be any effective limitation to the rights of enjoyment of the charge once the interests of the two alienors had coalesced by reason of the alienation, the situation would not appear to be affected by whether the alienation of the fee simple was to one or more alienees … 890 [12.150]

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Hedley v Roberts cont. It may be observed that the subjection of lot 1 by one co-owner to an easement with respect to the closet may be thought not to subject the other co-owner of lot 1 to any undue interference with her right to possession, especially as the closet was erected on the part of the land that is subject to easements of carriageway, drainage and sewerage, so that the use of that part of the land by the owners of lot 1 is restricted in any event …

[12.155]

Notes and Questions

1. In Lyons v Lyons [1967] VR 169, McInerney AJ held that a Torrens system mortgage by a joint tenant did not sever the joint tenancy. This conclusion was based on the character of a Torrens system mortgage as a charge on the land rather than a transfer of an interest to the mortgagee. His Honour rejected arguments that this result produced commercial impracticality: With respect, this does not seem to me to be the process involved. What is done is first to analyse the juristic nature of the interest conferred on the mortgagee under the statutory form of mortgage: that is seen to be an interest in the land, in the nature of a charge. One must then apply to the situation resulting from the creation of an interest of that nature a very old established doctrine of the common law, namely, that a joint tenancy is severed, inter alia, upon the loss of any of the four unities, but it not severed if the four unities remain unaffected. As I understand it, severance by reason of the loss of one or more of the four unities does not depend on the intention of the parties to the transaction – it is a matter to be tested by the result, rather than the intention, of the transaction. Dr. Mendes Da Costa then asks: “Is it not a more just result, is it not both consistent with the amendment to Section 74(2) and more in accordance with the disinclination of the Full Court in Re Forrest; Trustees Executors Co. v Anson, supra, to draw differences of substance between a mortgage of land under the Act and a mortgage of land under the general law, to hold that a severance does occur” (3 MULR, at p. 452). As to what is the just result in the present case, that must depend on what the legal answer to the problem now before me. Where, as here, the mortgage is to secure the sum of 25 pounds, I am left with the suspicion that the mortgagee viewed the transaction as one which from the legal point of view was uncertain in its outcome. And what are the merits of the claims of the husband’s relatives on the one hand and the widow’s on the other, I do not know. But, in any event, I am disposed to agree with the comments of Nourse, J, in People of California v Nogarr, (1958) 67 Am LR (2nd) 992, at p. 999: “There is nothing inequitable in holding that the lien of the respondent’s mortgage did not survive the death of the mortgagor. Their note was payable upon demand and they could have enforced the lien and mortgage by foreclosure and sale prior to the death of the mortgagor and thus have severed the joint tenancy. If they chose no to do so but to await the contingency of which joint tenant died first they did so at their own risk. Under that event the lien that they had expired. If the event had been otherwise and the mortgagor had been the survivor the security of their lien would have been doubled.” In the present case the mortgage debt was repayable on 31 December 1961.

2. What is the position of a lessee from one joint tenant when that joint tenant dies? See Frieze v Unger [1960] VR 230. Why is a lease by one joint tenant treated differently from the Torrens system mortgage. How does the issue of severance apply in the context of the grant of an easement? See Hedley v Roberts [1977] VR 282 and consider Crown, “Severance of Joint Tenancy of Land by Partial Alienation” (2001) 117 LQR 477; Nield, [12.155]

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“To Sever or Not to Sever: The Effect of a Mortgage by One Joint Tenant” (2001) Conveyancer 462; Fox, “Unilateral Demise by a Joint Tenant: Does it Effect a Severance” [2000] Conveyancer 208. 3. A grant of occupation which does not give rise to any proprietary interest in the occupier does not give rise to any rights against the other co-owners. It seems that the non-granting co-owners may terminate the licence without the authority of the grantor; see RobsonPaul v Farrugia (1969) 20 P & CR 820; Annen v Rattee (1985) 273 EG 503; New South Wales v Koumdjiev (2005) 63 NSWLR 353; cf Hong v Choo [2004] HKCFI 24 and Pitt v Baxter (2006) 159 A Crim R 293; [2006] WASC 4. 4. In Pitt v Baxter, Hasluck J emphasised that the New South Wales Court of Appeal in Koumdjiev had commented that there had to a reasonable reconciliation of the rights of various tenants in common and that only “a licence in excess of what is reasonable and incidental to one tenant in common’s interest and which prejudices the other tenant in common’s interest is a licence terminable by the other tenant in common” (at [40]). In Pitt v Baxter an attempted unilateral termination by one tenant in common of an implied licence from all tenants in common over the co-owned communal driveway, was held to be ineffective. 5. In Gray and Gray, Elements of Land Law (5th ed, OUP, London, 2009), p 272 it is argued that whilst the effectiveness of a unilateral revocation may be correct in principle, its application may place victims of domestic violence at risk. 6. Where the parties are joint tenants of a lease, notice to quit given by one of the joint tenants without the consent of the other is effective to terminate the lease: see Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478 (CA); Crawley Borough Council v Ure [1995] 3 WLR 95 (CA). At least, this is the case where the tenancy is a periodic one. In relation to residential tenancy agreements the effectiveness of a notice to quit by one joint tenant is uncertain and the position may differ from a common law tenancy because a statutory tenancy continues unless properly terminated, see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [15.95].

SEVERANCE: THE CONVERSION OF A JOINT TENANCY INTO A TENANCY IN COMMON Williams v Hensman [12.160] Williams v Hensman (1861) 1 J & H 546; 70 ER 862 Vice-Chancellor’s Court SIR PAGE-WOOD, V-C: A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund – losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. 892 [12.160]

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Williams v Hensman cont. You must find in this class of cases a course of dealing by which the shares of all the parties to the contest have been effected.

Wright v Gibbons [12.165] Wright v Gibbons (1949) 78 CLR 313 High Court of Australia [The facts as stated: Olinda Gibbons, Ethel Rose Gibbons and Bessie Melba Gibbons were registered, under the provisions of the Real Property Act 1862-1935 (Tas), as joint tenants for an estate in fee simple of certain land at Hobart, subject to a registered mortgage. By a document executed on 6th December 1945, duly registered by the Recorder of Titles as a memorandum of transfer, Ethel Rose Gibbons, in consideration of the transfer to her of the one-third share in the joint tenancy by Olinda Gibbons, transferred to Olinda Gibbons all her one-third share estate and interest in the said piece of land; and Olinda Gibbons, in consideration of the transfer above described, transferred to Ethel Rose Gibbons all her one-third share estate and interest in the said piece of land. On registration … the former joint tenants were registered as tenants in common in equal shares. Bessie Melba Gibbons who survived the two other tenants, sought a declaration in the Supreme Court of Tasmania that the memorandum of transfer did not effect a severance of the joint tenancy, and consequently that she, as survivor of the three, became solely entitled to an estate in fee simple, the defendants being Reginald Charles Wright (the executor of the wills of Ethel Rose Gibbons, who died on 26th January 1946 and Olinda Gibbons, who died on 30th November 1946) and the Recorder of Titles.] LATHAM CJ: I do not think that the defendant’s case can be supported upon the basis that the sisters simply exchanged their interests. When an exchange of interests in land takes place the result is that what was previously the interest of B becomes the interest of A and vice versa. But in the present case the essence of the defendant’s contention is that the transferees each got an interest, namely as tenant in common, which was different from the interest which the transferors had – namely an interest as joint tenant. It has always been the law that a joint tenancy may be severed and converted into a tenancy in common by an agreement. This doctrine, however, does not help the defendants in the present case because the third joint tenant, Bessie Melba Gibbons, was not a party to the transaction between her co-tenants. There is no authority that some only of a number of joint tenants can bring about a severance of a joint tenancy inter se, though it is clear that all the joint tenants can bring about that result by an agreement to which they are all parties. But, further, the document upon which the defendants rely is a transfer and not an agreement. It is effective as a transfer or as nothing. All the authorities concur in stating that alienation of his interest by a joint tenant to a stranger severs the joint tenancy so as to produce the result stated … But in the present case two of the three joint tenants have attempted to alienate their interests to one another. The learned trial judge held that there was no true alienation, but that the cross-transfers left the two parties to that transaction just as they were. His Honour said: “It seems to me that such a transfer could operate nothing. Each party would be at once giving and receiving the same thing. It would be a futility.” But this statement, with all respect to the learned judge, assumes rather than proves the proposition which is in question. If the transfer leaves A and B as they were, that is as joint tenants, with the same interests, then there is obviously no creation of a tenancy in common. But the question whether the transfer does so leave them, or whether it operates so as to make the joint tenants tenants in common is just the question to be decided. It is true that if one joint tenant A successfully transferred to another joint tenant B his interest as a joint tenant and B successfully transferred to A his interest as a joint tenant, the parties [12.165]

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Wright v Gibbons cont. would be left just where they were, because the interest of each joint tenant is absolutely identical. But no transfer of an interest as a joint tenant so as to make the transferee a joint tenant with other joint tenants is possible when the transferee is a stranger to the joint tenancy. The transfer, if it could be effective, would destroy unity of time and unity of title so far as the interest of the transferee was concerned. Therefore he could not be a joint tenant with the other original joint tenants. No joint tenant can alienate to a stranger so as to make that person joint tenant with his co-tenants, but he can alienate so as to make that person a tenant in common with his co-tenants. In the present case the question is whether such an alienation to another joint tenant is possible. The interests of each joint tenant in the land held are always the same in respect of possession, interest, title and time. No distinction can be drawn between the interest of any one tenant and that of any other tenant. If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged. Where a joint tenant 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 joint tenant, then the alienee and the continuing joint tenant hold as tenants in common. If, however, there were three joint tenants A, B and C, and A transferred his interest to a stranger, D, then D would own a one-third interest as tenant in common with B and C, and B and C would hold a two-thirds interest as between themselves as joint tenants. The survivor of B and C would take the whole of the two-thirds interest, but D would not either gain or lose by the survivorship of any person. When one joint tenant transfers his interest to another joint tenant the transfer (which at common law was effected by release because each joint tenant is conceived as holding every part and the whole of the land – “per my et per tout”) does not operate by way of extinguishment of the estate. A mere extinguishment would enure in favour of B and C, and not only in favour of B in accordance with the intention of the parties. Accordingly such a transfer is said to pass (mitter) the estate. See Coke’s note upon Littleton (18th ed, 1823) Vol 2, p 193, s 304. Section 304 is as follows: “And if three joyntenants be, and the one release by his deed to one of his companions all the right which he hath in the land, then hath he to whom the release is made, the third part of the lands by force of the said release, and he and his companion shall hold the other two parts in joynture (et il et son companion teigneront les auters deux parts en joynture). And as to the third part, which he hath by force of the release, he holdeth that third part with himselfe and his companion in common.” Coke’s note is: “Upon this case these two things are to be observed. First, that in this case this release doth enure by way of mitter l’estate, and not by way of extinguishment, for then the release should enure to his companion also, and he is in the per by him that maketh the release.” But although such a transaction should be carried out by release, a grant is interpreted as being a release: Eustace v Scawen. (1624) Cro. Jac 69; 79 ER 604.The Real Property Act does not alter the law with respect to joint tenancy. It leaves the incidents of joint tenancy standing as they are determined by the common law and any other relevant statute. But it requires that documents transferring interests in land under the Act should be in a particular form and should be registered: ss 42, 39. If there are three joint tenants, A, B and C, and one joint tenant A transfers his interest to another joint tenant B, the result is that A then has no interest in the land, B becomes a tenant in common as to one-third interest in the land, and remains a joint tenant with C as to a two-thirds interest. If subsequently B transfers to A the interest which he still has as joint tenant (A then having become a stranger to the title, his interest having passed to B), there is a further and complete severance. A becomes a tenant in common as to one-third interest with B and C, the transfer working a severance of the joint tenancy between B and C in the two-thirds interest in the land. The final result is that A, B and C become tenants in common, each having a one-third interest. If the transfer by B to A were made on a day subsequent to the transfer by A to B, as I have assumed in what has just been said, there would be no doubt as to the result. The difficulty in the present case 894 [12.165]

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Wright v Gibbons cont. arises from the fact that there was only one document which came into operation at a particular moment of time, namely upon registration: see Real Property Act 1862, ss 35 (2), 39 (1). But if the document is construed in accordance with the principle ut res magis valeat quam pereat, the transaction can be upheld by regarding the words of transfer by A to B as equivalent to a release and by regarding the words of transfer by B to A as constituting a grant. The transfer by A to B made B a tenant in common with C as to a one-third interest, leaving B and C as joint tenants in respect of a two-thirds interest. That joint tenancy of B and C was severed when B transferred his interest as joint tenant to A. If the document is so interpreted effect is given to the plain intention of the parties so that A, B and C became tenants in common of the land, each owning a one-third interest. In my opinion the appeals should be allowed and the point of law determined by declaring that the joint tenancy in the land under the Real Property Act was severed by the registration of the transfer dated 6th December 1945. DIXON J … The case can, on this footing, be stated in an abstract way. A, B and C are joint tenants for an estate in fee simple in land under the Real Property Acts. By one instrument of transfer A purports to transfer to B his undivided interest in the land and B purports to transfer to A his undivided interest in the land to the intent that they shall all three be tenants in common in equal shares. Upon registration of the transfer is there a severance so that they become tenants in common in equal shares? Clark J answered this question in the negative. The full force of his Honour’s reasons for this conclusion can only be understood from a study of the judgment and the learning it contains. The foundation of the decision may, I believe, nevertheless be stated almost in a sentence. It is that in contemplation of law joint tenants are jointly seised for the whole estate they take in land and no one of them has a distinct or separate title, interest or possession. It follows that an attempt on the part of two of three joint tenants mutually to assure each to the other his or her undivided share in the hope that each of their two shares will be taken by a new title and so enure as a several undivided interest, must fail because it can accomplish nothing. Logical as may seem the deduction that joint tenants have not interests which in contemplation of law are sufficiently distinct to assure mutually one to another, there are many considerations which show that, to say the least, the consequence cannot be called an unqualified truth. The fact is that the principle upon which the deduction is based must itself be very much qualified. It represents only one of two not altogether compatible aspects of joint tenancy, a form of ownership bearing many traces of the scholasticism of the times in which its principles were developed. “Albeit they are so seised” says Coke, (186a) (“scil totum conjunctim, et nihil per se separatim”) “yet to divers purposes each of them hath but a right to a moitie.” For purposes of alienation each is conceived as entitled to dispose of an aliquot share. The alienation may be partial. One joint tenant for an estate in fee simple may grant a lease of his equal share and during the lease the jointure is suspended and there is a temporary severance and apparently it would not matter that the lease did not commence until after the death of the joint tenant granting it. A joint tenant may grant an estate for life in his share, though in that case it seems that it works a severance of the entire fee simple. If one joint tenant suffered a forfeiture it was not the whole estate but only his aliquot share that was forfeited. If one joint tenant proved to be an alien the Crown, on office found, took only his share. Execution on a judgment for debt against one joint tenant bound his aliquot share and continued to do so in the hands of the survivor if the execution debtor afterwards died. See Comyns, Digest, Vol 4, SV Estates, K 6 & 7. Each joint tenant could declare uses and they could declare different uses of their respective shares: Sanders Uses, Ch II, s 7, p 218 (1589) 2 Co Rep 58a (76 ER 549). In two places Richard Preston summed up the result: “Joint tenants are said to be seised per my et per tout. They are in under the same feudal contract or investiture. Hence livery of seisin from one to another is not sufficient. For all purposes of alienation, each is seised of, and has a power of alienation over that share only which is his aliquot part”: Essay on Abstracts of Title, (1824), Vol 2, p 62. “The real distinction is, joint tenants have the whole for the [12.165]

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Wright v Gibbons cont. purpose of tenure and survivorship, while, for the purpose of immediate alienation, each has only a particular part”; On Estates, 2nd ed (1820), Vol 1, p 136. An alienation by one joint tenant to a stranger might be made by the appropriate means of assurance and in respect of the aliquot share of the alienor the stranger would come in with the remaining co-tenant or co-tenants as a tenant in common. But with respect to the alienation of the share of a joint tenant to a companion, special rules applied. Because the alienee was regarded as already in by the infeudation creating the joint tenancy the proper means of assuring the share of the alienor to him was release. The release operated as a discharge of the benefit of the infeudation or feudal contract from one joint tenant to another: Watkins, Conveyancing, 9th ed (1845), Coote’s note, p 167. The foregoing shows that under the general law the question depended upon the conveyance or assurance used to effect the mutual transfers of the aliquot shares of the two joint tenants who desired to bring about a severance of the jointure with their companion as well as between themselves. This conclusion, to my mind, reduces the matter to a question of the operation of the Real Property Acts. It does so for two reasons. In the first place the conclusion must mean that not only for the purpose of alienations to strangers but also for the purpose of alienation of a share by one joint tenant to another, the aliquot share of each existed in contemplation of law as a distinct and ascertained proprietary interest. The second reason is that it shows that the obstacle to concurrent cross-transfers of interests was that, except by employing the Statute of Uses, no assurance existed capable of effecting the transfers simultaneously but only by successive steps.In approaching the Real Property Acts, it must be borne in mind that the interests of each joint tenant fell within the general statutory principle that all lands and all interests therein lie in grant. Section 39 of the Real Property Act 1862 provides that upon registration of an instrument the estate or interest specified in the instrument shall pass in the manner set forth and specified in the instrument. Section 42 says that when land is to be transferred (and that must mean an interest therein) the registered proprietor shall execute a memorandum of transfer in the prescribed form containing an accurate statement of the estate or interest intended to be transferred. Section 87 provides that two or more persons who may be registered as joint proprietors of an estate or interest in the land shall be deemed to be entitled to the same as joint tenants. These provisions result in each joint proprietor being entitled as a registered proprietor to transfer his interest by a memorandum of transfer presented for registration (see Tucker v Coleman (1885) 4 NZLR 128). When this system for the conveyance of distinct legal proprietary interests is applied to the common-law conceptions of the interests of joint tenants it appears to me to follow that an exclusive method of assuring the aliquot share of a joint tenant is provided and that all the consequences ensue which at common law followed the transfer or legal assignment of such a share. Moreover it supplies a method of assurance of general application, that is to say one that will be apt and effective to impart any transfer-able interest. It is of course subject to the law of capacity or law of persons. But if it is a legal interest, as opposed to equitable, in property and is alienable the system enables the transfer thereof to be made. It is of course true that this train of reasoning still falls short by one step of establishing that the transfer by one joint tenant of his interest may be made to his companion and e converso of the companion’s share to him. But in my opinion the considerations that have preceded the discussion of the Real Property Acts are enough to make good that step. For those considerations appear to show first that there is no incapacity in one of three joint tenants to take as a tenant in common a transfer of a companion’s share; secondly that the companion’s share is in contemplation of law a distinct and ascertained proprietary interest; thirdly that by a means of conveyancing that is superseded the result might have been brought about. 896 [12.165]

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Wright v Gibbons cont. The consequence is that if A, B and C are joint tenants, in my opinion cross-transfers may be made at the same time of the respective aliquot interests of A and B to one another and the result is to produce a tenancy in common among A, B and C. It follows that I think that the appeal should be allowed. [Rich J also delivered a judgment stating that severance had occurred.]

Corin v Patton [12.170] Corin v Patton (1990) 169 CLR 540 High Court [The case is extracted at [9.110] and should be considered again here.]

Hedley v Roberts [12.175] Hedley v Roberts [1977] VR 282 Supreme Court of Victoria [The case is extracted at [12.150] and should be considered again here.]

Guthrie v Australian and New Zealand Banking Group [12.180] Guthrie v Australian and New Zealand Banking Group Ltd (1991) 23 NSWLR 672 New South Wales Court of Appeal [The husband and the wife were joint tenants. The husband charged his moiety to the bank. Subsequently, the marriage was dissolved and the Family Court ordered that the husband transfer to the wife all his interest in the property and that she indemnify the husband in respect of the indebtedness. The husband executed a transfer but the bank refused to agree to registration until the moneys were repaid to it. A number of issues arose: inter alia, the wife claimed the effect of the Family Court order was to vest the whole of the land in her free of the mortgage. The bank claimed the husband’s interest had passed to the wife and as a result the whole of the land was subject to the mortgage. At first instance Cohen J. held that the wife was entitled to be the registered proprietor but that the mortgage could only be enforced against the husband’s former moiety. The wife and the bank appealed. The Court of Appeal thus had to consider the consequences where a joint tenant transferred an encumbered interest to the other joint tenant pursuant to a court order.] MEAGHER JA: … In order to resolve this problem, certain principles of law regarding joint tenancies must be appreciated. These are: 1

In general each joint tenant is seised of jointly owned property per my et per tout, and as between the joint tenant and his co-tenants there is unity of time, title, interest and possession. For this reason Blackstone said “joint tenants should not be spoken of as holding undivided shares”. Williams in his Lectures on the Seisin of the Freehold (1878) at 117 said that joint tenants in fact were considered by the law as one person for most purposes.

2

If this were correct for all purposes, it is difficult to see how one joint tenant on his own could ever validly exercise any power over jointly held property. But the view was not applied rigidly to all situations. Coke on Littleton, at 186a recognises that “yet to divers purposes each of them hath but a right to a moietie”. And Dixon J, as he then was, pointed out in Wright v Gibbons [12.180]

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Guthrie v Australian and New Zealand Banking Group cont. (1949) 78 CLR 313 at 330: “… For purposes of alienation each is conceived as entitled to dispose of an aliquot share. The alienation may be partial.” 3

Thus the law has recognised as valid a mortgage by one joint tenant of his interest in the property. There are many examples in the books: see York v Stone (1709) 1 Salk 158; 91 ER 146; Re Pollard’s Estate (1863) 3 De GJ Sm. 541; 46 ER 746; Re Sharer (1912) 57 Sol J 60; Re Wilks [1891] 3 Ch 59; Lyons v Lyons [1967] VR 169 and Re Real Property Act 1862, s 111 (Shannon’s Transfer) [1967] Tas SR 245. Equally, there are examples of the law recognising a lease granted by one only of a number of joint tenants: for example, Cowper v Fletcher (1865) 6 B & S 464; 122 ER 1267.

4

A mortgage purporting to be of the entirety by one joint tenant will be treated as a mortgage of his share only: First National Securities Ltd v Hegerty [1985] QB 850; and similarly a lease purporting to be of the entirety by one only joint tenant will be treated as a lease of his share only: Whitlock v Horton (1605) Cro Jac 91; 70 ER 78 and Bellingham v Aslop (1604) Cro Jac 52; 79 ER 44.

5

Where the mortgage granted by one joint tenant only is a common law mortgage, the granting of the mortgage necessarily involves the severance of the jointure: York v Stone; Re Pollard’s Estate and Re Wilks.

6

However, if the mortgage be a charge or equitable mortgage, no severance is affected merely by the granting of the mortgage: Challis on Real Property, 3rd ed (1911) at 367; Wilken v Young 41 N.E. 68 (1895) and People v Nogarr 330 P 2d 858; 67 ALR 2d 992 (1958). There is English authority to the contrary: First National Securities Ltd v Hegerty, but as it is both unreasoned and contrary to authority it may be disregarded on this point.

7

A judgment creditor, or a secured creditor, of one joint tenant may execute against that joint tenant’s aliquot share (Wright v Gibbons (at 331) per Dixon J), and when that happens a severance of the jointure must be effected.

8

When land is under Torrens title, in view of the Real Property Act 1900, s 57, which provides that a mortgage under that Act has the effect of a security but does not operate as a transfer of the legal estate in the mortgaged property, a statutory mortgage has the same effect as a charge would have had if the land were held under common law title. This has been decided, despite some authority to the contrary, in the very learned judgments of McInerney AJ in Lyons v Lyons [1967] VR 169 and of Neasey J in Re Real Property Act 1862, s 111 (Shannon’s Transfer). The Queensland authority, Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790 – in which neither of the two previous authorities are referred to – reached the contrary conclusion, but carries no conviction.

9

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) 14 FLR 167; Re Johnstone [1973] Qd R 347; sub nom Re Johnstone’s Estate (1973) 22 FLR 291; Pollard v Pollard (1975) 25 FLR 125; 6 ALR 256 and Penny Nominees Pty Ltd v Fountain (No 3) (Unreported, Young J, 25 October 1990). Such orders are often made under the Family Law Act 1975 (Cth), s 79. 10.The effect of the transfer inter vivos by one joint tenant of his mortgaged share to a co-tenant was decided as long ago as 1607 in Lord Abergavenny’s Case (1607) 6 Co Rep 78b; 77 ER 373. That case has been constantly followed and never (so far as I know) been doubted. The legal proposition for which it is authority is that where judgment is given against one of two joint tenants and afterwards that one releases to the other before execution such release shall not bar the creditor’s execution, whereas if the releasing joint tenant had died before execution the survivor holds the land discharged of any execution. The reason for the distinction is that in the former case the releasee derives title from the release not from the ius accrescendi.

898 [12.180]

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Guthrie v Australian and New Zealand Banking Group cont. Mr Willmott, counsel for Mrs Guthrie, argued that an application of correct principle resulted in the transfer to his client having the effect that she took the entirety of the land free of any mortgage. That was because, he said, prior to the Family Court order on 3 June 1986 at least, she did not have a “one half interest in the land” and to hold otherwise would destroy the whole rationale of the nature of a joint tenancy. He did not shrink from pursuing this distinction to its logical conclusion, viz that we should disregard what Dixon J said in Wright v Gibbons, that Lord Abergavenny’s Case should be overruled, that Lord Coke should be treated as an unreliable authority on a technical point of English property law, and that the Family Court order did not mean what it said. He invited us to restructure joint tenancies in their “pure” form, a form which has not characterised them for at least three centuries and probably long before that. Whatever else they lacked these submissions did not lack courage. Mr Blake’s submissions, on the other hand, in so far as they countered the appellant’s submissions, compel acceptance. He submitted that the Family Court order at least had the effect of severing the tenancy, in which event there was no reason to deny that the entirety of the land was subject to the Bank’s mortgage after the transfer; and, alternatively, if there were no severance, the combined effect of the Family Court order and the doctrine of Lord Abergavenny’s Case had the same effect. However, an acceptance of these submissions does not lead to the conclusion that the entirety of the land is subject to the mortgage. Lord Abergavenny’s Case is authority for the proposition that the transferred moiety remains subject to the mortgage after transfer. It is not authority for the proposition that the entirety of the land becomes subject to the mortgage after transfer: that point did not arise. Where, as here, the transferee’s equity to hold the moiety unaffected by the mortgage arises out of the combined conduct of the mortgagee and the transferor, it would seem inequitable to hold that her liability became enlarged by the transfer, and no existing authority compels that conclusion. [Meagher JA dismissed the appeal and cross appeal. In separate judgments, Kirby P and Priestley JA agreed.]

[12.185]

Notes and Questions

1. It is clear that a severance may occur in equity, if not at law, where there has been an alienation of an equitable interest. The ways in which equitable interests may be disposed of, are considered at [9.15]–[9.25]. 2. In Mischel v Mischel Holdings Pty Ltd (in liq) [2012] VSC 292, Croft J indicated a more lenient approach to the requirements for severance. He held that an agreement to sever would be enforceable despite an absence of writing and that conduct without any agreement would also sever a joint tenancy. He stated: The weight of authority now indicates, in my view, that an oral agreement to sever a joint tenancy will suffice. The Victorian decision of McInerney AJ in Lyons v Lyons is, however, authority for the proposition that writing is required. Nevertheless, in Pfeiffle v Pfeiffle, the Full Court overruled Lyons v Lyons on the issue of the time at which severance occurs when future events are contemplated by the agreement because, according to Kaye J, that decision was inconsistent with the decision of the English Court of Appeal in Burgess v Rawnsley. The decision in Lyons v Lyons is also inconsistent with the decision in the English Court of Appeal in Burgess v Rawnsley and, in my view, ought not to be followed or, alternatively, should be constrained to its facts, which, critically, concern the incomplete mortgage of a co-owner’s interest. The above authorities, and my views on these authorities, are helpfully summarised by Butt in the following terms: Some authorities hold that severance by course of conduct is a sub-branch of severance by [12.185]

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agreement, the only difference being the basis on which the agreement is proven – the agreement is inferred from the conduct and dealings of all the parties. On this view, conduct falling short of agreement does not sever the joint tenancy. But another – and, it is thought, better – view is that severance by course of conduct is a ground of severance independent of severance by agreement.

3. The courts have consistently favoured rules that lead to a tenancy in common rather than a joint tenancy and often refer to the certainty of an absence of survivorship. Has this approach been taken too far in overriding an expectation of one of the parties to gain a greater interest in the land on the death of the other party? What role remains for joint tenancies? 4. In Gardiner v Chief Commissioner of State Revenue (2004) 59 NSWLR 549 it was held that, even if a transfer had been executed and a certificate of title handed to the proposed transferee, no equitable interest would pass if there was no intention to effect a gift. On the other hand, where the transferor dies after executing the transfer and delivering it, together with the certificate of title, to the transferee, but before registration, the better view appears to be that severance has occurred in equity and the transferee has a right to present the transfer for registration and to be registered: Watt v Lord (2005) 62 NSWLR 495. See Land Title Act (NT), s 187 which provides that where a person dies after signing an instrument but before it is registered, the instrument may be registered and is valid despite the person’s death. 5. A joint tenant who wishes to effect a severance of the joint tenancy (and retain his or her legal and beneficial ownership) and who cannot get the agreement of the other joint tenants to do so, may assure his or her interest to him or herself. There are statutory provisions in some jurisdictions permitting such assurances: Conveyancing Act 1919 (NSW), s 24; Property Law Act 1958 (Vic), s 72(3); Law of Property Act 1936 (SA), s 40(3); Property Law Act 1969 (WA), s 44; Conveyancing and Law of Property Act 1884 (Tas), s 62(1), (2); Civil Law (Property) Act 2006 (ACT), s 208. By contrast Property Law Act 1974 (Qld), s 14(3) and Law of Property Act (NT), s 13(3) provide that a person may convey to herself or himself only lesser interests than a fee simple absolute. 6. Consider the difficulties that may arise if the property is subject to a mortgage and the mortgagee refuses to produce the certificate of title for the purpose of such a transfer: see Public Trustee v Hall [2003] ACTCA 27. 7. In New South Wales, Queensland, Tasmania and the Northern Territory, there are specific and simpler provisions in the Torrens statutes allowing for unilateral severance of a joint tenancy of Torrens land: Real Property Act 1900 (NSW), s 97; Land Title Act 1994 (Qld), s 59; Land Titles Act 1980 (Tas), s 63; Land Title Act (NT), s 59. The High Court has held that a unilateral severance under the Queensland provision is not a transfer under s 121(1) of the Bankruptcy Act 1966 (Cth) such as would make it void as against the trustees in bankruptcy: Peldan v Anderson (2006) 229 ALR 432. See further Tooher, “Windfall by Wager or Will? Unilateral Severance of a Joint Tenancy” (1998) 24 Mon LR 399; Tooher, “Testate or Intestate: Is There anything in the Estate? Unilateral Severance of a Joint Tenancy” (1998) 24 Mon LR 422. See also VLRC, Disputes Between Co-owners Report (2002), Ch 3, where recommendations were made in relation to methods of severance. The Commission 900 [12.185]

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recommended that severance by registration of an instrument of severance be permitted. It was recommended that such severance be effective on lodgment and that a joint tenant severing in this manner should not be required to produce the certificate of title. It was further recommended that parties who divorce after the creation of a joint tenancy should be deemed to have severed the joint tenancy. Neither of these recommendations were included in the Property (Co-ownership) Act 2005 (Vic) which enacted a number of the other recommendations of the VLRC Report. 8. A mutual agreement to sever (the second means of severance set out in Williams v Hensman (1861) 1 J & H 546; 70 ER 862) does not have to be in the form of a specifically enforceable agreement: see Magill v Magill (1993) NSW ConvR 59,793 (aff (1997) NSW ConvR 56,241); Burgess v Rawnsley [1975] Ch 429; cf Lyons v Lyons [1967] VR 169; Penny Nominees Pty Ltd v Fountain (No 3) (1991) NSW ConvR 55-561. For a more recent example of severance by mutual agreement, see Facchetti v Facchetti [2004] NSWSC 898. 9. The question of severance by agreement often arises in the context of family property disputes. There are a number of decisions where the courts have been satisfied that there has been a concluded agreement between the parties that they intend to hold separate and distinct shares. See, for example, Re Pozzi [1982] Qd R 499; Public Trustee v Pfeiffle [1991] 1 VR 19; Abela v Public Trustee [1983] 1 NSWLR 308; Sprott v Harper (2000) Q ConvR 54-545 discussed in Note, “Severance of Joint Tenancies After Separation – Case Note; Sprott v Harper” (2002) 76(8) ALJ 482. The problems of spouses who own property in joint tenancy are discussed in MacCallum, “Severance of a Matrimonial Joint Tenancy by a Separated Spouse” (1980) 7 MULR 17. The making of a joint application for property orders under s 79 of the Family Law Act 1975 (Cth) is insufficient in itself to effect a severance of jointly held property: see Pertsoulis v Pertsoulis (1980) FLC 90,823. Why should the Court have reached this result? In contrast, a court order which does not specifically sever the joint tenancy but settles the parties’ interests in the jointly held property in a manner which is inconsistent with the continuation of the joint tenancy, does sever the joint tenancy: see Berdal v Burns [1990] WAR 140; Re Johnstone [1973] Qd R 347; Public Trustee v Grivas [1974] 2 NSWLR 316; In the Marriage of Bourke (1993) 16 Fam LR 779; Official Trustee in Bankruptcy v Mateo (2003) 212 ALR 571 at 606 per Merkel J, at 586-587 per Wilcox J and at 599 per Branson J (semble); Jones v Daniel (2005) 212 ALR 588. Cf McKee v McKee (1986) 10 Fam LR 754; Corry v Corry (1983) FLC 91-343 where it was held there was no severance because the order was subject to conditions precedent; McVey v Dennis (1984) FLC 91-521 where it was held that there was no severance by order of the court because the wife died before the decree was made absolute; Penny Nominees Pty Ltd v Fountain (No 3) (1991) NSW ConvR 55-561 where it was held that if there is an order subject to a condition (for example, the decree for dissolution of marriage becoming absolute) the severance which would be affected by the order does not occur until the condition has been fulfilled. 10. The joint tenants may agree not to sever the joint and there is now authority for the proposition that an agreement between the joint tenants not to sever the joint tenancy, is effective to prevent severance in equity, even if severance has been effected at law. See Goyal v Chandra [2006] NSWSC 239 (specific finding that an agreement not to sever [12.185]

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leaves the joint tenant with the power to deal with his or her interest at law but “imposes an obligation in equity not to do so” at [28] per Brereton J) discussed in Butt, “Injunction to Restrain Threatened Severance of Joint Tenancy” (2006) 80 ALJ 557. See also Parry v Sullivan (1979) 9 RFL (2d) 349; Anderson v O’Donnell (2000) 10 BPR 18,501.

THE KILLING OF A CO-OWNER Rasmanis v Jurewitsch [12.190] Rasmanis v Jurewitsch [1968] 2 NSWR 166; aff (1969) 70 SR (NSW) 407 STREET J: … On 12 August 1964, one Helene Jurewitsch died in circumstances amounting to the crime of manslaughter, for which crime the first defendant, Andrej Jurewitsch, was subsequently convicted. At the date of her death Helene Jurewitsch and the first defendant were registered proprietors for estates in fee simple as joint tenants in a parcel of land at Yagoona … Helene Jurewitsch was also at the date of her death the registered proprietor, together with the first defendant and the second defendant, for estates in fee simple as joint tenants in a second parcel of land at Punchbowl … It is a well-settled principle of public policy that equity will not permit one joint tenant who feloniously slays his fellow joint tenant to gain from his own felonious act … So far as concerns the legal title to the land jointly owned by the felon and his victim, the principle of survivorship will result in the felon being entitled to be registered as the sole proprietor; but equity will then intervene to deprive him of the benefit which he would otherwise have derived by becoming registered as the sole proprietor … By what means and to what extent should the surviving felonious joint tenant be deprived in equity of the enjoyment of the legal estate as it exists subsequent to the death of the victim joint tenant? … I am in respectful agreement with the reasoning of Jacobs J, and the conclusion that he reached … Jacobs J, after discussing Re Barrowcliff, said: “On the other hand, many of the courts of the United States have taken a different view which is summed up in Scott on Trusts, 1st ed, para 493.2: ‘Where, however, the property is owned by two persons as joint tenants and the incidence of survivorship has not been abolished, on the death of one the survivor takes the whole of the property. His interest is enlarged by the death of his co-owner even though there is not technically a transfer to him of the interest of the deceased co-owner … Accordingly it would seem that if one joint tenant murders the other he should be chargeable as constructive trustee for the estate of the other, at least to the extent to which his interest is enlarged by the murder’…” There was inherent in that estate the contingency that the victim might die first, with a corresponding enhancement of the felon’s interest; and there was inherent in that estate the contingency that the felon might die first, with a corresponding total extinguishment of any interest to pass to his legal personal representatives. Either the prospective felon or prospective victim could have lawfully, by a unilateral act, severed the joint estate and, by converting it into a tenancy at common, relinquished the contingency of enhancement and been freed from the contingency of extinguishment. In such circumstances it might well be said that the benefit of the contingency of enhancement is precisely counter-balanced by the risk of the contingency of extinguishment; and this counterbalancing would seem to be the more real when one takes into account the readily severable nature of a joint tenancy. Upon killing his victim the felon gained, in that his contingency of enhancement was fulfilled. This was his real and substantial gain, and it is this which public policy demands should be taken from him … The question of basic principle can be best considered by dealing first with the three-sided joint tenancy of the Punchbowl land. A felony has been committed, and the felon must not be permitted to 902 [12.190]

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Rasmanis v Jurewitsch cont. gain from it. The enhancement consequent upon the death of the victim will not be permitted by equity to be enjoyed by the felon. Public policy requires deprivation of the felon; it does not require compensation to the victim, nor does it require punishment of the felon. I reject entirely from consideration any question of the present problems being resolved by suggestions that the estate of the victim should be compensated in some way … The object, then, is to find a suitable recipient for the enhancement of which the felon is to be deprived. There is no reason in principle or in logic why the third joint tenant should be deprived of the enjoyment of such enhancement as would flow to him from the death of the victim. And as the object which equity seeks to achieve is the denial of enhancement to the felon, both principle and logic point, in my view, towards the third joint tenant receiving the enhancement which is required by public policy to be taken from the felon. Equity will give effect to the principle of public policy in the case of the three-sided joint tenancy; by requiring that the felon and the third party joint tenant hold the land as joint tenants at law, but on trust for themselves as equitable tenants in common in the share of one-third to the felon and two-thirds to the third party. Returning to the Yagoona land, that is to say the land in which there was but a two-sided tenancy, the effect of Re Thorp will be to require the first defendant to be recognised as having, by survivorship, the sole legal estate. Equity must then take from the first defendant the enhancement of his interest consequent upon the death of Helene Jurewitsch. The carrying into effect of the principle of public policy requires that the first defendant should not have it. There is no third joint tenant, as with the Punchbowl land, to whom the enhancement goes in entire consistency with the basic nature of a joint tenancy. And simply for the want of any other suitable recipient, the enhancement will result back to the legal personal representatives of Helene Jurewitsch as part of her estate. I reject any notion of this result being produced by way of compensation to the victim’s estate, as is suggested in some of the American cases. The result is due to equity acting in personam so as to preclude the felon’s unconscientious action gaining him this benefit. A home for the benefit must be found and the estate of his victim is the only available destination. The first defendant will accordingly hold his sole legal estate in the Yagoona land upon trust for himself and the legal representatives of his victim as equitable tenants in common in equal shares.

[12.195]

Notes and Questions

1. The Court of Appeal (Jacobs JA with whom Wallace P and Mason JA agreed) affirmed the decision of Street J: see Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407. There was no appeal as to the beneficial proportions. However, it appears clear the Court of Appeal took the view that the public policy aim of preventing A from acquiring a benefit from B’s death would have been adequately and properly served simply by B’s beneficial interest being severed and settled upon C, and by leaving intact the equitable joint tenancy as to the remaining two thirds. That is, if the issue of the equitable proportions had been before it, the Court of Appeal would have found that A and C held the legal estate on a constructive trust for C as to one third and for A and C as joint tenants as to two thirds. 2. What was the principle of public policy which resulted in the estate of the deceased joint tenant obtaining an interest in one piece of land but not the other? Could Rasmanis be considered a case of severance by alienation? [12.195]

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3. There have been a number of cases on the issue raised in Rasmanis, with some conflicting results. In Neubacher v Good (2003) 11 BPR 20,877, the New South Wales Supreme Court adopted the constructive trust analysis espoused in Rasmanis. Where the killing is an unlawful one but does not constitute murder, the question has arisen as to whether public policy considerations similarly preclude the wrongdoer benefiting from his or her crime. Some decisions suggest a different rule should apply where the homicide is excusable (see Public Trustee v Fraser (1987) 9 NSWLR 433 where on the facts, forfeiture rule applied); Public Trustee v Evans (1985) 2 NSWLR 188; Re Keitley [1992] 1 VR 583). Other decisions suggest that the forfeiture rule should be applied strictly to prevent a person from gaining any benefit from the killing of another (Re Barrowcliff [1927] SASR 147; Troja v Troja (1994) 33 NSWLR 269; Estate of Soukup (1997) 97 A Cr R 103. 4. Forfeiture Act 1995 (NSW) provides that, except in the case of murder, the forfeiture rule may be modified if the justice of the situation so requires. Similar legislation exists in the Australian Capital Territory and has been recommended for introduction in Tasmania (see Tasmanian Law Reform Institute, The Forfeiture Rule (Report No 6) December 2004). See generally Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [12.430]ff.

TERMINATION OF A CO-OWNERSHIP: SALE, PARTITION AND APPOINTMENT OF TRUSTEES Application to the Court

Francis v Francis [12.200] Francis v Francis [2009] SASC 363 Supreme Court of South Australia JUSTICE BLEBY [footnotes omitted] Introduction 1. The land presently comprised and described in Certificate of Title Register Book Volume 5346 Folio 305 is an irregularly shaped piece of land on the northern side of the junction of Marrabel Road and Patterson Road in the Hundred of Julia Creek in the area known as Hampden in the Regional Council of Goyder. It is approximately 10 kilometres west of the town of Eudunda. It comprises approximately 64.7 hectares. 2. In November 1989 the land was purchased by the defendants, Mr and Mrs Francis, who then lived at Two Wells. They moved into the house which had been erected on the land. It has been their matrimonial home since then. They have worked the land under a share farming arrangement for the growing of crops and, more recently, they have bred horses. They bought the land at a time when Mr Francis was unable to continue to work full time as a fitter and turner, due to a work-related injury. The property has never provided an income sufficient to support Mr and Mrs Francis. They are now pensioners. 3. On or about 31 May 1996, in circumstances described below, Mr and Mrs Francis transferred to themselves “as Joint Tenants in one undivided moiety and to Susanne Jane Francis [their daughter and the plaintiff] … as to the remaining one undivided moiety” of an estate of fee simple in the land. As registered on the Certificate of Title the interest of Mr and Mrs Francis is described as “Joint Tenants of 1 Undivided 2nd Part”, and the plaintiff’s interest is described as “1 Undivided 2nd Part” of the estate of fee simple in the land. 904 [12.200]

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Francis v Francis cont. The proceedings 4. By her summons issued on 4 July 2008 the plaintiff seeks an order pursuant to Part 8 of the Law of Property Act 1936 (SA) that the whole of the land, including all improvements thereon, be sold and that the net proceeds, after payment of the expenses, any outstanding rates and taxes and the discharge of an existing mortgage, be divided as to 50% to the plaintiff and 50% to the defendants jointly. However, at the trial counsel for the plaintiff announced that in lieu of seeking a 50/50 division of the net proceeds of sale of the property, the plaintiff was now seeking a division as to one third for herself and two thirds for the defendants. As appeared from her counsel’s opening and from the oral evidence led from the plaintiff, this was based on the alleged intention of the parties at the time when the transfer of the one undivided second part of the land was made to the plaintiff. 5. For their part, the defendants seek an order of partition of the land into an area of one hectare, which I shall for convenience refer to as “Lot 1” and the transfer of Lot 1, together with the improvements thereon, to the plaintiff. They seek an order that the plaintiff should transfer her interest in the balance of the land, which I will refer to as “Lot 2”, to the defendants. They claim that this represents the intention of the parties at the time as to the respective equities intended to be created. 69. This application is brought pursuant to Part 8 of the Law of Property Act 1936 (SA). The plaintiff seeks an order that the whole of the land be sold and that the proceeds be appropriately divided between the parties. Section 83 of the Law of Property Act provides: 83–Application for partition to include application for sale and distribution of the proceeds. In an application for partition it shall be sufficient to claim a sale and distribution of the proceeds, and it shall not be necessary to claim a partition. 70. The power to order partition is contained in s 69(1) of the Act. Section 69(2) provides: 69–Power to order partition or sale instead of partition (2) On any such application if it appears to the court that, by reason of the nature of the property, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested, and notwithstanding the absence, dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions. 71. Section 70 of the Act provides: 70–Sale on application of certain proportion of parties interested On any application for partition, if the party or parties interested individually or collectively, to the extent of one moiety or upwards in the property, request the court to direct a sale of the property and a distribution of the proceeds, instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and shall give all necessary or proper consequential directions. 72. I have found that the defendants are beneficially entitled to an extent greater than one moiety in the property. They do not seek a sale of the land. Accordingly, s 70 has no application. If it can be achieved, partition of the respective interests of the parties is by far the most satisfactory option. 73. Evidence of the value of the land in various forms was given by a valuer, Mr Rothe. His evidence was undisputed. In his valuation dated 26 August 2008, he valued proposed allotment 1 of one hectare, together with its present improvements including the transportable home, at $110,000. He valued Lot 2, being the balance of the land and improvements, including the defendants’ home, at $502,000, making a total of $612,000. In his valuation of 30 January 2009 he valued the whole of the [12.200]

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Francis v Francis cont. land with its present improvements, unsubdivided, at $574,000. There is therefore a significant increase in value to the parties if the land can be subdivided and partitioned, rather than sold as a whole. 74. A further reason why sale as a whole is undesirable is that Condition 5(4) of the Development Approval of 27 August 1996 under which the transportable home was allowed to be installed provides that if the land is sold, the transportable home must be removed. Without a variation of that condition, even if there is an approved subdivision and partition, a sale of the land as a whole or of proposed Lot 1, if subdivided, would still require separate sale and removal of the transportable house. Nevertheless, it should be the Court’s aim to achieve partition with as few adverse side effects as possible. 75. The final compelling reason why the land as a whole should not be sold if it can be avoided is that it would probably mean the ejection of the defendants from their home for the past 20 years. If possible, they should be allowed to remain in their home and on the property which they have developed and nurtured until they are ready to leave. 76. On the other hand, the plaintiff is entitled to the benefit and enjoyment to the greatest extent possible of her equitable interest in the land. Her ability to do that without restriction can only be achieved if the land can lawfully be subdivided and without any sacrifice by Bank SA of the security which it holds in respect of the loan to the parties. 77. However, there is a complication in achieving that. The development approval sought by Mr Francis in 2007 has now expired. There is no guarantee that the Council will again agree to an application for development approval in a similar form, although Mr Rothe expressed some confidence that a further application would be approved. 78. I therefore propose to adjourn further consider without making any orders at this stage to enable the defendants to pursue two applications, the result of which will determine the nature of the final orders to be made. 79. The first application to be pursued by the defendants is an application to subdivide the land into two allotments in a manner and subject to such conditions, including the granting of any easements, as the parties may agree, or failing agreement, in accordance with the plan of subdivision approved by the Regional Council of Goyder on 24 May 2007 by Development No. 422/D002/07. I am prepared to allow some flexibility in the making of the application to include, for example, the provision of a right of way in favour of the owner of proposed Lot 1 over the narrow strip of land immediately north of proposed Lot 1, should that be agreed. 80. It would then be my intention, if such development application is granted, to make a declaration that the land is held by the parties as to proposed Lot 1 for the sole benefit of the plaintiff and as to proposed Lot 2 for the sole benefit of the defendants. The nature of any further orders would also depend on what follows. 81. Subdivision would not affect the mortgage in favour of Bank SA over the whole of the land. The original loan and its later extension were largely for the benefit of the plaintiff. As far as possible the defendants should be relieved of providing any further security for the plaintiff’s loan. It follows that if Development Approval is granted, it will also be necessary for the defendants to apply to Bank of SA Ltd for a partial discharge of Registered Mortgage No. 8122515 insofar as it affects proposed Lot 2 of the proposed subdivision. The Bank may or may not agree to such partial discharge and it may seek to impose some conditions upon the partial discharge. That may necessitate the sale of the transportable home or of the land on which it stands, or both. The plaintiff may also choose to apply to the Council for a variation of the condition that requires removal of the home upon sale of the allotment. Any further orders would need to be considered when the Bank’s attitude to the partial discharge is known. It is my intention, however, that, as the plaintiff would then become beneficially entitled to proposed Lot 1 and to have the legal estate vested in her, and as the loan was essentially for her benefit, if any 906 [12.200]

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Francis v Francis cont. sale is necessary in order for her to repay the loan and partially discharge the mortgage, it should be the improvements to and, if necessary, Lot 1 itself, that are sold in order to repay the loan. The plaintiff has so far shown no interest in retaining Lot 1 if subdivided. If any balance of the loan then remains outstanding, the Bank will be entitled to retain its security for that balance over proposed Lot 2. However, if the valuation of Mr Rothe is fulfilled, and if proposed Lot 1 and its improvements are sold, the whole of the loan should be able to be repaid without difficulty. 82. If either of the steps contemplated cannot be fulfilled, it will be necessary to hear further submissions as to what should then occur. That could include sale and removal of the transportable home and the application of the proceeds to the repayment of the Bank SA loan and/or the entering into some other arrangement to secure the plaintiff’s proper equitable interest in the land without unduly inconveniencing the defendants and interrupting their enjoyment of the land. There may be other courses which could also be considered at that time. 83. It would be my intention, and I would propose to order in due course, that the costs of any application for Development Approval and of implementing that approval be borne as to one half by the plaintiff and one half by the defendants. 84. I propose to adjourn the hearing into chambers at a date to be determined to review progress in respect of the applications which the defendants must now make. I will hear the parties further as to costs, although it may be appropriate to delay any order for costs until the making of final orders.

[12.205]

Notes

1. The common law position was that any dealing with the whole of the land, either by physical division amongst the co-owners or by disposition to a third party, required the agreement of all of the co-owners. The first Partition Acts in the 16th century in England resulted in co-owners being compellable to make partition (physical division) of the land. It was not until the Partition Acts of 1868 and 1876 that the court was able to order a sale and division of proceeds, instead of partition. As illustrated in the above case, South Australia, Western Australia, Tasmania and the Australian Capital Territory have partition provisions based on the 19th century English provisions (see Law of Property Act 1936 (SA), Pt 8; Property Law Act 1969 (WA), Pt XIV; Partition Act 1869 (Tas); Civil Law (Property) Act 2006 (ACT), ss 242 – 247). 2. Although partition itself is rare in Australia, it has been held that where an application for partition is made and no co-owner requests a sale, the court must order partition, see De Campo Holdings Pty Ltd v Cianciullo [1977] WAR 56 3. In Perman v Maloney [1939] VLR 376, O’Bryan AJ held that the then Victorian provisions equivalent to the South Australian provision, extracted above, contain three distinct powers: one in the case of special circumstances; the second in the case of application by the holder or holders of a half share or more; and the third in any other circumstances on the application of an interested party. As the powers are distinct, the right to buy out seems only applicable under Law of Property Act 1936 (SA), s 71. In Schnytzer v Wielunski [1978] VR 418; Martin-Smith v Woodhead [1990] WAR 62 and Sheahan v Cooper [1999] FCA 190 the courts interpreted the partition provisions in the same manner as did the Court in Perman v Maloney. [12.205]

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4. Where s 69(2) (or its equivalent) operates, the court must order a sale unless there is good reason to the contrary. See Bray v Bray (1926) 38 CLR 542; Peck v Peck [1965] SASR 293; Galati v Deep Point Holdings (1999) ANZ ConvR 573. See Sheahan v Cooper [1999] FCA 190 (SA case) as to the factors which may influence a court to refuse an application under Law of Property Act 1936 (SA), s 71 by a co-owner to buy out the other co-owners (economic disadvantage to other co-owners). Statutory trusts for sale

Jolevski v Jolevska [12.210] Jolevski v Jolevska [2010] NSWSC 416 Supreme Court of New South Wales ASSOCIATE JUSTICE McLAUGHLIN 1. HIS HONOUR: By summons filed on 12 May 2009 Blagojce Jolevski claims relief pursuant to Division 6 of Part 4 of the Conveyancing Act 1919 (in particular, section 66G of that statute), in respect to real property situate at and known as 8 Anama Street, Fairy Meadow (“the subject property”), of which property the Plaintiff and the Defendant, Marija Jolevska, are tenants in common in equal shares. The consent of the Public Trustee to be appointed, pursuant to section 66G of the Conveyancing Act, trustee for sale of the subject property, has been filed on behalf of the Plaintiff. 2. The Plaintiff is the elder child of the Defendant. The subject property was purchased in 1978 for $59,000. That purchase price was funded by a deposit of $30,000, the balance being met by a housing loan from the Commonwealth Bank of Australia, secured by a mortgage over the subject property. There was dispute between the parties as to the extent of their respective contributions to the deposit. 3. At the time of the purchase the Plaintiff (who had been born in 1957) was aged about 20. At that time he, the Defendant and his father (the husband of the Defendant) were all employed at the Port Kembla Steel Works. They (together with the Defendant’s younger son, Nick Jolevski, the Plaintiff’s brother, who was born in 1963) were residing in a house property in Aitcheson Street, Wollongong. 4. Upon its purchase the subject property was registered in the names of the Plaintiff and the Defendant as tenants in common in equal shares. 5. As a co-owner of the subject property, the Plaintiff has a prima facie entitlement to relief of the nature claimed in the summons. 6. In Ngatoa v Ford (1990) 19 NSWLR 72, Needham J held that the word “may” in section 66G(4) of the Conveyancing Act, does not have a mandatory effect; it confers a limited discretion on the Court to refuse to make an order appointing trustees for sale in an appropriate case. His Honour reviewed the various relevant authorities, and, at 77, expressed agreement with what was said by Kelly SPJ in the Full Court of the Supreme Court of Queensland in, … in my opinion the existence of some contractual obligation with which an order for the appointment of trustees on the statutory trust for sale would be inconsistent is one such matter which may have that result. 7. Needham J continued, in Ngatoa, at 77, It is not, I think, desirable that one should attempt to define exhaustively the circumstances in which an order may be refused; judicial experience is that such matters should be resolved on a case by case basis. My opinion is, however, that a contractual limitation upon the exercise of the right… is a proper consideration to be taken into a account in such applications. 8. However, the Defendant opposes the granting of the relief sought by the Plaintiff. Although the Defendant has not filed a cross-claim, her opposition to the claim of the Plaintiff appears to be based upon two grounds. Those grounds are, first, the existence of a contract alleged to have been made 908 [12.210]

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Jolevski v Jolevska cont. between the parties in 1977, the effect of which, it is submitted, would preclude the Plaintiff from being granted the relief which he presently seeks; and, further, or in the alternative, a defence grounded upon the principle of proprietary estoppel. 9. The Defendant does not assert that there was any form of written agreement between herself and the Plaintiff, to the effect of the contractual arrangement which the Defendant now appears to be alleging. However, the Defendant asserts the existence of some form of oral agreement between the parties. The evidence of the Defendant in this regard, was far from clear, consistent or satisfactory. 28. In summary, therefore, I am not satisfied that the Defendant has established the existence of an agreement or arrangement which she now asserts – or, indeed, of any agreement or arrangement which would preclude the Plaintiff from availing himself of his rights under section 66G of the Conveyancing Act to have the Court appoint a statutory trustee for the sale of the subject property. 29. It was further submitted on behalf of the Defendant that, even if the Court is not satisfied that there was an express agreement between the parties, there was, in any event, an implied agreement that the Plaintiff could not dispose of his interest in the subject property or force a sale thereof without the consent of at least his mother. In this regard the Defendant relied upon the following circumstances. (a)

The mother and son were to become tenants in common of a property.

(b)

The mother and son intended to live in the property with the rest of their family.

(c)

The mother (and her husband) provided, by way of deposit, at least half of the sale [sic] price of $59,000.

30. For the reasons which I have already set forth in relation to the existence of an alleged express agreement, I am not satisfied that any form of agreement can be implied from the foregoing circumstances now relied by the Defendant (even if I were to be satisfied, which I am not, of the disputed facts asserted by the Defendant in that regard). 31. If there is any right which can be implied from the foregoing circumstances, it is surely the right that the Defendant would not, as she has now done, prevent the Plaintiff from residing in the subject property. 32. I am not persuaded that any form of binding agreement can be teased out of the foregoing circumstances. Again, in the case of an implied agreement, just as in the case of an express agreement, the terms of that agreement must emerge with clarity and precision. No such terms can emerge from the foregoing allegations of the Defendant (and the evidence discloses that they can be regarded as no more than allegations). Again, there is no evidence of any consideration for such an implied agreement. 33. The Defendant has not established the existence of an agreement, be it an express agreement or an implied agreement, in terms which would deprive the Plaintiff of his entitlement to the relief which he presently claims. 34. The Defendant also relies upon the principles relating to estoppel, as a defence to the Plaintiff’s entitlement to the relief presently claimed by him. 47. But, further, what appears to me to be fatal in the submissions of the Defendant in asserting the existence of an estoppel which would have the effect of precluding the Plaintiff from enforcing his legal entitlement to obtain the relief which he presently claims, is that the alleged detriment suffered by the Defendant is not “detrimental reliance” of the nature referred to in the various decided cases relevant to this area of the law. (See, for example, Vukic v Grbin [2006] NSWSC 41, where Brereton J summarises the matters which a Plaintiff must establish to found an equitable estoppel; Simpson-Cook v Delaforce [2009] NSWSC 357; Tory v Tory [2007] NSWSC 1078; see, also, Gillett v Holt [2001] Ch 210.) [12.210]

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Jolevski v Jolevska cont. 50. In the instant case, even upon the Defendant’s own version of the evidence, it was the Defendant, as the adult mother, making the greater financial contribution towards the purchase, who was in a dominant position, whilst the Plaintiff, aged only about 20 and receiving (according to the Defendant) only “a child’s wage”, and making smaller financial contributions, who was in a position of vulnerability to his mother. 51. Even upon the Defendant’s evidence, there is no suggestion that the Plaintiff actively encouraged the asserted “belief” upon which the Defendant now apparently relies. The most that the Defendant now says is that the Plaintiff remained silent. It is quite apparent that silence cannot be regarded as encouraging a belief on the part of the Defendant of the nature which she now alleges. 52. I am not satisfied that the Defendant has established the existence of any form of equitable estoppel which would deprive the Plaintiff of an entitlement to the relief which he presently claims. 53. Finally, in opposition to the Plaintiff’s claim, the Defendant placed reliance upon a general ground of asserted unconscionability. 54. In this regard the Defendant relies sought to derive some benefit from what was said by Young CJ in Eq (as he then was) in Callahan v O’Neill [2002] NSWSC 877, at paragraph [57], There is some room for general unconscionability to be relied on as a defence, see Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 at 14,701, where Santow J said that whilst general hardship or unfairness was insufficient to defend a claim, where there was a conventional estoppel or one party had taken unconscientious advantage of another, that would constitute a defence. 55. The Defendant submits that if (contrary to the Defendant’s foregoing submissions) the Court finds that there was no agreement and that there is no operative estoppel, then the Plaintiff took unconscionable advantage of his mother when the subject property was purchased, because there was no contractual term in any agreement or arrangement between them which would allow her to stay in the property for her lifetime. 56. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51, at 63 (paragraph [7]) Gleeson CJ expressed the following salutary admonition regarding unconscionable conduct, In everyday speech, “unconscionable” may be merely an emphatic method of expressing disapproval of someone’s behaviour, but its legal meaning is considerably more precise. 57. In the present proceedings the Defendant disapproves of the Plaintiff pursuing his present claim for relief, and as a last resort the Defendant has pleaded unconscionable conduct on the part of the Plaintiff. Yet it is clear that the Defendant has not been able to establish the basis of such a claim. The Defendant has not sufficiently established any special disadvantage from which she was suffering at the time when the subject property was purchased. Moreover, it is inconsistent with her earlier evidence that the Defendant now asserts that she was fully capable of entering into an agreement with the Plaintiff not to sell the property, whilst she was at the same time suffering from a special disability of a nature which precluded her from making a judgment as to what was in her own best interest. 58. There is nothing in the circumstances of this case, even if the Defendant’s unsatisfactory evidence be accepted in its entirety, that would support the assertion that the Plaintiff has taken unconscionable advantage of the Defendant. Indeed, to the extent that there may have been an understanding between the parties, to the intent that they would each remain in residence in the subject property, that understanding was first breached by the Defendant in taking out the apprehended violence orders against the Plaintiff, with the consequence that the Plaintiff has been deprived of remaining in what had been his home for many years, the Defendant’s conduct thus precipitating the institution of the present proceedings. 910 [12.210]

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Jolevski v Jolevska cont. 59. I am not satisfied that any of the grounds upon which the Defendant attempts to resist the claim of the Plaintiff has been established. 60. In proceedings under section 66G of the Conveyancing Act the usual costs order is that the costs of the parties be paid out of the proceeds of sale of the subject property. I propose to make such an order in the instant case. However, as I have not heard any submissions as to costs, I will reserve to the parties liberty to apply, within 14 days of the date hereof, for a variation of that order.

Notes and Questions

[12.215]

1. In New South Wales, Queensland and the Northern Territory a different and simpler procedure applies (see Conveyancing Act 1919 (NSW), Pt 4 Div 6; Property Law Act 1974 (Qld), Pt 5 Div 2; Property Law Act (NT), Pt 5 Div 2). A co-owner may apply to the court for the appointment of trustees: the trustees may be appointed under a statutory trust for sale or partition. 2. Partition is not the primary right, see Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685. Partition may be ordered if the court is satisfied partition would be more beneficial than sale, see Panizutti v Trask (1987) 10 NSWLR 531; Hayward v Skinner [1981] NSWLR 590; Re Cordingley (1948) 48 SR (NSW) 248; Golby v Golby (1997) NSW ConvR 55-802. In Segal v Barel [2013] NSWCA 92, the court held that only monetary factors could be taken into account in deciding whether any benefit existed and excluded the benefit to one co-owner of continuing to reside in the family home. The court further held that partition involved a complete separation of ownership and did not cover a situation where two parcels of land were created but by way of strata title where access was to be provided over common land. Could an easement have been used to enable this access? Are the courts taking an unduly technical approach to legislation attempting to provide solution to disputes? Victorian procedures [12.220] Victoria has the most recently amended provisions concerning sale or division of co-owned property. The provisions deal with both land and goods. See now Property Law Act 1958 (Vic), Pt IV. The Victorian Civil and Administrative Tribunal (VCAT) has the power to order a sale or division of co-owned land or goods on the application of a co-owner and also has the power to order the appointment of trustees to conduct the sale or division if VCAT considers it necessary or desirable to do so. The powers given to VCAT relating to sale and division are broader and more flexible than the partition provisions under the previous Part IV. By s 228(1), VCAT may make any order it thinks fit to ensure a just and fair sale of land and goods occurs.

Property Law Act 1958 (Vic), ss 225, 228-231 [12.225] Property Law Act 1958 (Vic), ss 225, 228 – 231 225. Application for order for sale or division of co-owned land or goods (1) A co-owner of land or goods may apply to VCAT for an order or orders under this Division to be made in respect of that land or those goods. [12.225]

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Property Law Act 1958 (Vic), ss 225, 228-231 cont. (2) An application under this section may request (a)

the sale of the land or goods and the division of the proceeds among the co-owners; or

(b)

the physical division of the land or goods among the co-owners; or

(c)

a combination of the matters specified in paragraphs (a) and (b).

(3) A person who makes an application under sub-section (1) must give notice of the application to the holder of a security interest over the land or goods to which the application relates. … 228. What can VCAT order? (1) In any proceeding under this Division, VCAT may make any order it thinks fit to ensure that a just and fair sale or division of land or goods occurs. (2) Without limiting VCAT’s powers, it may order (a)

the sale of the land or goods and the division of the proceeds of sale among the co-owners; or

(b)

the physical division of the land or goods among the co-owners; or

(c)

that a combination of the matters specified in paragraphs (a) and (b) occurs.

229. Sale and division of proceeds to be preferred (1) If VCAT determines that an order should be made for the sale and division of land which is, or goods which are, the subject of an application under this Division, VCAT must make an order under section 228(2)(a) unless VCAT considers that it would be more just and fair to make an order under section 228(2)(b) or (c). (2) Without limiting any matter which VCAT may consider, in determining whether an order under section 228(2)(b) or (c) would be more just and fair, VCAT must take into account the following (a)

the use being made of the land or goods, including any use of the land or goods for residential or business purposes;

(b)

whether the land is, or goods are, able to be divided and the practicality of dividing the land or goods;

(d)

any particular links with or attachment to the land or goods, including whether the land or the goods are unique or have a special value to one or more of the co-owners.

230. Order varying entitlements to land or goods When making an order under section 228, VCAT, if it considers it just and fair, may order (a)

that the land or goods be physically divided into parcels or shares that differ from the entitlements of each of the co-owners; and

(b)

that compensation be paid by specified co-owners to compensate for any differences in the value of the parcels or shares when the land or the goods are divided in accordance with an order under paragraph (a).

231. VCAT may order appointment of trustees (1) In any proceeding under this Division, if VCAT thinks that the appointment or removal of trustees is necessary or desirable, it may order (a)

the appointment of trustees; or

(b)

the removal of trustees.

(2) In an order appointing trustees for the purposes of the sale of land or goods, VCAT may (a)

direct the trustees as to the terms and conditions on which any sale is to be carried out;

(b)

direct the distribution of any proceeds of the sale in any manner specified by VCAT.

(3) In an order appointing trustees for the purposes of a physical division of land or goods, VCAT may direct the trustees as to the manner in which the division is to be carried out. 912 [12.225]

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Property Law Act 1958 (Vic), ss 225, 228-231 cont. (4) An order under this section may provide for the remuneration of the trustees appointed under the order and (a)

if trustees are appointed for the purposes referred to in sub-section (2), the order may provide that the remuneration of the trustees be paid from the proceeds of sale; and

(b)

if the trustees are appointed for the purposes referred to in sub-section (3), the order may provide that the remuneration of the trustees be paid by such parties to the proceeding as VCAT considers just and fair in the circumstances.

[12.230]

Notes and Questions

1. The Victorian Law Reform Commission in its Disputes Between Co-owners Report (2002) found the partition provisions in the then ss 221 – 224 of the Property Law Act 1958 (Vic) to be “expensive, time consuming and rigid” and recommended wide-ranging reforms. The Commission considered the system in operation in New South Wales and Queensland (appointment of trustees for sale or partition). Under this approach, the court or some other body would have the power to order a sale or division of the land. The Commission favoured flexibility and suggested that VCAT should be given the power to hear these disputes (p 77). The Commission did, however, recommend that VCAT be given the power to appoint trustees for sale in certain situations such as where a risk of violence exists and avoidance of direct contact between the co-owners may be appropriate. Section 231 provides that VCAT may appoint trustees if it considers this necessary or desirable. 2. The powers given to VCAT relating to sale and division are broader and more flexible than the partition provisions under the previous Part IV. By s 228(1), VCAT may make any order it thinks fit to ensure a just and fair sale of land and goods occurs. It has power to order sale or division or a combination of both in whatever proportions it considers appropriate (s 230). By s 229 (see above) VCAT must consider a number of matters in the exercise of its discretionary powers. Consider whether this section provides VCAT with a wider discretion to order sale, division or a combination of the two than was previously available to the court under the partition provisions. Various specific powers are given in relation to the types of orders (for example, auction or private sale) and other ancillary matters (s 232).

SALE OF CHATTELS Disputes Between Co-owners Report [12.235] Victorian Law Reform Commission, Disputes Between Co-owners Report (2002), pp 61-63 and 89-91 [footnotes have been omitted.] Personal Property 4.12 The Commission recommends that VCAT’s jurisdiction should extend to co-owned goods as well as land. There seems to be little justification for maintaining a distinction between these types of [12.235]

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Disputes Between Co-owners Report cont. property. This is particularly the case in relation to applications that relate to both co-owned land and goods. Currently, disputes may arise as to whether certain items are fixtures (and so form part of the land, to be dealt with by Part IV), or goods (to be dealt with under section 187 of the Property Law Act 1958). If VCAT had jurisdiction in relation to both land and goods, it would not be necessary to determine which type of property it was – the Tribunal would have the capacity to deal with it. In addition, the process for determining how the property should be divided would not differ depending on whether the property was land or goods. 4.13 The Commission does not, however, recommend extending VCAT’s jurisdiction to other forms of personal property such as businesses, bank accounts or intellectual property. These forms of property raise different issues from those raised by land or goods, which may be quite technical. The Commission does not believe it is appropriate for VCAT to determine matters relating to such property. VCAT’s jurisdiction should be limited to co-owned land and goods. 4.14 As we only recommend extending VCAT’s jurisdiction to goods, it is important to ensure that current mechanisms for division and sale of personal property other than goods are retained. The power of the Supreme or County Court to order sale or division of chattels in section 187 of the Property Law Act 1958 may apply to such property, although this is unclear. While the term “chattel” is ordinarily associated with tangible personal property such as goods, in certain contexts it can have a broader meaning that includes forms of property such as bank accounts and intellectual property. A determination has never been made as to the precise meaning of “chattel” in the context of section 187 of the Property Law Act 1958. It is possible that a court may interpret “chattel” broadly in this context, in which case it would be possible to make an application to the Supreme or County Court under section 187 for the division of co-owned personal property other than goods. This possibility should be kept open. For this reason, the Commission does not recommend repealing section 187 of the Property Law Act 1958. 4.15 However, by retaining section 187 of the Property Law Act 1958, a problem arises. It would be possible for people to choose whether to institute proceedings for division or sale of co-owned goods in the Supreme or County Courts, or in VCAT. This may disadvantage less wealthy co-owners, who could be forced into expensive court proceedings, rather than having the matter determined by the cheaper, less formal avenue of VCAT. We believe that all matters relating to co-owned goods should be heard by VCAT. To solve this problem, the Commission recommends amending section 187 of the Property Law Act 1958, to provide that matters cannot be heard under section 187 if they can be heard by VCAT (under the provisions relating to co-owned goods). No Monetary Limit 4.16 It may be argued that there should be a jurisdictional limit on VCAT’s ability to hear such matters – that disputes concerning property above a certain value should automatically be heard by the Supreme Court, due to their “importance”. The Commission does not agree with this argument. The mere monetary value of a property will not effect the complexity of the dispute. Requiring all people to attend the Supreme Court in such circumstances may disadvantage those in a weaker financial position. Any potential complexities that may arise in such circumstances could adequately be dealt with by VCAT’s power to refer matters to the Supreme Court under section 77 of the VCAT Act. … Sale and Division of Co-Owned Goods 4.75 In addition to having jurisdiction to hear co-ownership disputes that relate to land, the Commission has recommended that VCAT should also have power to hear disputes relating to co-owned goods. The Commission notes that such disputes will be rare outside the context of marriage or domestic relationships. (As noted above, disputes over co-owned goods within marriage 914 [12.235]

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Disputes Between Co-owners Report cont. or domestic relationships will usually be dealt with under the Family Law Act 1975 (Cth) or Part IX of the Property Law Act 1958.) In most cases co-owners will have little to gain by refusing to agree to end co-ownership. However, in a few situations the parties may be unable to resolve the dispute, because the property cannot easily be divided or because one of the co-owners is unwilling to sell it. Problems are most likely to concern co-owned goods such as co-owned family heirlooms, racehorses or boats. It is necessary to determine when applications relating to such co-owned goods can be made to VCAT for sale or division of the property, and what powers VCAT will have in hearing such matters. Existing Law 4.76 Where the dispute involves co-owned chattels, a co-owner may apply to the County or Supreme Court for a division of the chattels under section 187 of the Property Law Act 1958. Section 187 only applies to co-owners who have an interest of half or more in chattels. Although the section does not explicitly give a court power to order sale, in NSW it has been determined that the equivalent provision (Conveyancing Act 1919, s 36A) permits an order of sale to be made (Ferrari v Beccaris [1979] 2 NSWLR 181). Proposed Reforms 4.77 The Discussion Paper tentatively recommended that it should not be necessary for applications to be made by co-owners with an interest in the property of a half or more. This is the current situation in relation to land, where co-owners who are entitled to an interest of less than half may apply for division of the property. This proposal was unanimously supported by those who made submissions on this point … 4.78 The Commission recommends that VCAT should have power to order sale of co-owned goods on the application of the co-owner regardless of the size of the interest. VCAT’s powers in relation to an application should be similar to those recommended for co-ownership disputes concerning land. That is, VCAT should ordinarily order sale of the goods, although the parties can argue that division of the goods would be more appropriate in the circumstances. The procedural matters outlined above in relation to land, such as the power of VCAT to appoint trustees where appropriate, to order independent valuation of the property, or to create necessary rules, should be equally applicable to goods. 4.79 VCAT should also have powers to order compensation in the case of an unequal division, to account between co-owners who have received unequal amounts of rent or profits in relation to the goods, or to order reimbursement or financial compensation of co-owners where justice requires it. The principles to be applied in this case should, where appropriate, be the same as for co-ownership disputes concerning land.

[12.240]

Notes and Questions

1. The recommendations of the Victorian Law Reform Commission for reform were incorporated into the Property (Co-ownership) Act 2005 (Vic) and now form part of Part IV of the Property Law Act 1958 (Vic). 2. There appears to be no power at common law for court ordered sales of chattels: Ryan v King [1932] QWN 1. In New South Wales and Western Australia there are provisions setting out that a person who has a half share or more in co-owned chattels may apply to the court for an order for division of the chattels and the court may make such order and make any consequential order as it thinks fit: Conveyancing Act 1919 (NSW), s 36A; [12.240]

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Property Law Act 1969 (WA), s 129. Section 187(1) of the Property Law Act 1958 (Vic) is a provision to similar effect but now only applies in relation to chattels which cannot be the subject of an application to VCAT under the new Part IV provisions (s 187(2)). The New South Wales, Victorian and Western Australian provisions do not specifically provide that the court may order a sale. It seems, however, that an order for sale can probably be made under these provisions: Ferrari v Beccaris [1979] 2 NSWLR 181. 3. Tillack v Tillack [1941] VLR 151 is an example of the way in which the court has been prepared to exercise its power under a s 187 type provision. A motor car had been purchased in the joint names of the applicant and the respondent and was registered in their joint names, and the applicant swore that she had paid more than half the purchase money for the motor car. The respondent had possession of the owners’ certificate for the motor car and had threatened that if he obtained possession of the car, the applicant would not see it again. The summons sought directions as to the sale of the motor car and the disposition of the proceeds of sale. Lowe J ordered pursuant to s 187 that the respondent … deliver to the applicant the owners’ certificate of the motor car for the purpose of enabling her to sell such motor car and that the applicant may sell the said motor car either by auction or private contract after valuation thereof by a competent valuer and at a price not less than the said valuation. The applicant will be at liberty to retain one-half of the net proceeds of the sale of the motor car and shall pay the remaining half into Court to abide the further order of the Court.

4. In Queensland, Tasmania and the Northern Territory a co-owner of a chattel may apply to the court for sale or division: the co-owner does not have to own a one-half share or more in order to make the application: Property Law Act 1974 (Qld), s 41(1); Conveyancing and Law of Property Act 1884 (Tas), s 84L(1); Law of Property Act (NT), s 43. In South Australia, the general partition provisions (Law of Property Act 1936 (SA), ss 69 – 74) appear to apply to property other than land. 5. The meaning of the term “chattel” in the context of the statutory provisions referred to above has been questioned. Although chattels would normally be connected with tangible personal property such as goods, the VLRC considered it possible that the provision could be interpreted broadly so as to include personal property other than goods, for example, bank accounts and intellectual property. Cf Naziridis v Rimis (1985) 9 BPR 16,201. Why did the VLRC recommend that disputes concerning co-owned chattels other than goods should continue to be dealt with by the courts under Property Law Act 1958 (Vic), s 187? What practical problems might VCAT encounter if it has the power to make orders in relation to land and goods, but not, for example, bank accounts? 6. Provisions relating to co-ownership of some other forms of personal property may be covered by specific Acts. See, for example, Patents Act 1990 (Cth), ss 16 and 17 and Copyright Act 1968 (Cth), s 100AE. There is also the power in some jurisdictions for a court ordered division of chattels where they are vested in a trustee for beneficiaries in undivided shares: Trustee Act 1925 (NSW), s 87.

916 [12.240]

CHAPTER 13 Management Where Ownership is Divided [13.05]

INTRODUCTION .................................................................................................... 917

[13.10]

PROTECTION FOR LATER INTEREST HOLDERS ................................................... 918 [13.10]

[13.20]

SETTLED LAND AND TRUSTS ............................................................................... 921 [13.20]

[13.30]

Crocombe v Pine Forests of Australia Pty Ltd ............................ 918 Royal Melbourne Hospital v Equity Trustees Ltd ....................... 921

STRATA AND COMMUNITY TITLE ........................................................................ 931 [13.30]

The strata or community corporation ............................................... 931 [13.30] [13.40]

[13.50]

Protection of minority interests ......................................................... 941 [13.50] [13.60] [13.65]

[13.75]

Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 ................................................................ 949

Common and individual property boundaries ................................ 955 [13.85]

[13.95]

Proprietors Strata Plan No 30234 v Margiz Pty Ltd ................. 941 Houghton v Immer (No 155) Pty Ltd ...................................... 943 Wilson v Meudon Pty Ltd ....................................................... 945

Division of entitlements and responsibilities .................................... 949 [13.75]

[13.85]

Humphries v The Proprietors of Surfers Palms North Group Titles Plan 1955 .......................................................... 931 The Owners - Strata Plan 5709 v Andrews .............................. 938

Seiwa Pty Ltd v Owners Strata Plan 35042 ............................. 955

Use of individual lots ........................................................................... 957 [13.95]

White v Betalli ...................................................................... 957

[13.100] Maintenance of common property ................................................... 960 [13.100] [13.105] [13.115]

Platt v Ciriello ....................................................................... 960 Allen v Proprietors of Strata Plan No 2110 .............................. 962 Owners Strata Plan 50276 v Chee Min Thoo .......................... 964

[13.120] Contributions to maintenance costs ................................................. 967 [13.120]

Julian-Armitage v The Proprietors Astor Centre ........................ 967

INTRODUCTION [13.05] An individual who holds a fee simple interest in land without any other interests in

that parcel of land has as close to absolute ownership as the Australian legal system allows. Even such an individual is subject to the largely theoretical rights of the State through the doctrine of tenure and the more significant exclusion of objects (primarily minerals) from and depth limitations to the grant. Moreover the State heavily regulates the use of land by planning and other laws. An individual commonly does not hold an unqualified interest. Security interests (primarily a mortgage and neighbour interests (easements and restrictive covenants) place restrictions on an owner’s freedom. Division of ownership means that there is no single decision maker. Traditionally ownership may be shared by any number of co-owners, or [13.05]

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nominal and beneficial ownership divided between a trustee and beneficiaries, or interests are limited by time so that a present owner holds for a limited period (often a lifetime) and ownership passes after that time. Co-ownership has been previously examined in Chapter 12. This chapter considers limits on a current owner in the interests of later owners primarily through the law of waste. However the inability to manage and develop the land because of the frailty of a life interest is in fact a greater social problem than the need to preserve land for later interests (though today conservation is a more highly prized goal than a century ago). In the 19th century the desire to free land for development led to the settled land legislation still in force in some jurisdictions. More recently the separation of management and beneficial entitlement has been preferred as a path to power to carry out development. This chapter outlines the settled land legislation and the powers of trustees. The need for a more complex division of ownership to allow some individual rights and a sharing of rights has led in Australia to the development of strata and later community titles. The ingenuity of property practitioners saw strata titles emerge in the late 1950s as a combination of various means of shared ownership. Such titles were used in industrial, commercial and residential settings. New South Wales and then Victoria enacted legislation for such titles and legislation was able to confer individual title under the Torrens system upon individual lot holders. Today legislation exists in all Australian jurisdictions and to varying extents provides for development in stages and often by community titles allowing more complex use of common property than car parking and utility access. This chapter examines the principles implementing such titles. The essence of strata or community titles is the vesting of title to common property in the strata or community corporation and that to the individual units in the individuals. The strata or community corporation is a creature of the legislation and its powers are derived from that legislation. In general the corporation is responsible for the care of the common property and the management of the estate. Each individual lot holder is a beneficial co-owner of a share of the corporation. The operation of corporation, the relations between individual lot owners and the carrying out of property management are the focus of this chapter.

PROTECTION FOR LATER INTEREST HOLDERS Crocombe v Pine Forests of Australia Pty Ltd [13.10] Crocombe v Pine Forests of Australia Pty Ltd [2005] NSWSC 151 YOUNG CJ IN EQ 1 HIS HONOUR: On 2 February 1983 and again on 29 March 1985, the plaintiffs entered into contracts for the sale of land with the first defendant. 2 The contracts are both in the 1982 edition of the standard form. The purchase price in each is $2,990. The land being sold is one five-hundredth share as tenant-in-common in what in due course turned out to be DP 264564. The land is described as being situate at Hai Welyki in the Shire of Oberon. The contracts are virtually identical save for the terms of payment. The second contract was an instalment contract, but in due course was completed. 3 In due course two certificates of title issued to the plaintiffs being Volume 8582 Folio 195 and Volume 8583 Folio 37. 4 Clause 33 of the contracts was as follows: 918 [13.10]

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Crocombe v Pine Forests of Australia Pty Ltd cont. 33. TENANCIES IN COMMON The purchaser acknowledges purchasing the property herein described as tenant-in-common of an undivided share of Lot 3 and in respect thereof shall for itself its heirs successors and assigns be bound by the following: (i) the purchaser appoints the vendor as manager of the land until completion or such time as the tenants-in-common meeting together shall appoint a committee of management or a manager. (ii) upon receipt of an account from the manager or from any council, shire or other statutory or local government body (whether before, on or after completion) the purchaser shall effect payment of a pro-rata share in the account. (iii) unless and until separate assessments of rates and taxes are issued in respect of the said property by the relevant authorities all necessary adjustments between the parties (whether before or after completion) shall be made on the basis of the said property shall be liable for a pro-rata share (according to the proportion of ownership as a tenant-in-common) of any such rates and taxes (other than land tax) levied or assessed against the whole of the land comprised in Certificate of Title Volume 8084 Folio 34 and Volume 10733 Folio 166. 5 As I have said, the contracts were completed but although at various stages some person purported to be the manager of the land, there was never any meeting of the tenants-in-common together to appoint a committee of management or a manager. 6 The plaintiffs appear to have entered into the contracts as a result of the activities of a salesman who provided them with brochures. The brochures are in evidence. They contain a lot of puffery and pretty pictures of forests against an attractive skyline, happy plantation owners gather around a camp fire etc, as well as statements from people who indicate they have qualifications in the forestry industry extolling the virtue of growing pinus radiata, milling it and marketing it. The brochures also pointed out the taxation advantages in investing in pine forests, an advantage that would be reaped wholly in the year of payment. 60 The mortgagee, Arrow, has a registered mortgage over the undivided shares of which Ausforest owns and is the registered proprietor and an equitable charge over other shares in which it is not registered. It has appointed receivers and so has not gone into possession. 61 As I understand the law, a mortgagor of Torrens System land in Australia may use the land as if it were his or her own up until the mortgagee goes into possession, at least so long as the mortgagor does not damage the reversion by committing waste. 62 The 11th English edition of Fisher and Lightwood’s Law of Mortgage (Lexis Nexis, London, 2002) para 19.3 sets out the law in England. It must be remembered that in England the mortgages are like an Old System mortgage in New South Wales so that the position with Australian Torrens mortgagors is an a fortiori one. The learned authors say: Although the mortgagor in possession has parted with his immediate estate, he remains in possession at the pleasure, and consistently with the right, of the grantee. He is entitled to exercise the ordinary rights of property. … Whilst in possession the mortgagor may not diminish or prejudice the security, for example by committing waste (by felling timber or pulling down a house); he can be sued by the mortgagee for injuring the property and conduct putting the security at risk will be restrained by injunction. Upon the mortgagee taking possession, the mortgagor is not entitled to the crops growing on the land at the time the mortgagee takes possession, nor to rents in arrear or accruing.

[13.10]

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Crocombe v Pine Forests of Australia Pty Ltd cont. 63 It is not often these days that one needs to refer to the law of waste. The law is summarised in Woodman’s, The Law of Real Property in NSW Vol 1 (Law Book Company, 1980) pp 144-5: 1. It is not waste for the occupier to make use of estovers, that is, wood and timber for repairing a house, burning of it, repairing fences etc, so long as this is limited to the present needs of the occupier. 2. Timber trees may be cut in the ordinary course of estate management. 3. Ornamental trees or trees for shelter may not be cut. 4. Non-timber trees can ordinarily be cut. Woodman notes at 145: Conditions as to trees are so different in Australia that it is difficult to apply these rules here. The basic problem, however, is to determine what constitutes a timber tree … He then adds something which today I can prove untrue: It may be doubted whether … there will be judicial decisions as to what are timber trees, but it may be assumed that those native trees which are normally felled for saw milling purposes would be included. 64 I now have to deal with the above question. The trees involved in the instant case are pinus radiata whose derivation I have already set out. They are not a native tree, but they have been introduced for the purpose of being logged and used as structural timber. 65 In Re Hart [1954] SASR 1, Reed J held on the material before him that pinus radiata was not a timber tree. 66 However, when one reads the judgment carefully, Reed J considered himself bound by the Full South Australian Supreme Court decision in Chapman v Strawbridge [1910] SALR 118, where that court had held that mallee growing on Kangaroo Island was not timber because there was insufficient evidence that it was commonly converted to building for the habitation of man or the like. Likewise, in Re Hart there was no such evidence. Reed J adopted that test. Applying it to the evidence in this case, the purpose of producing pinus radiata was to have millable timber for structural building. Under the test that would be timber. 67 If trees are timber strictly so called, then as Jessel MR said in Honywood v Honywood (1874) LR 18 Eq 306 at 309, that once the Court arrives at the determination that the trees in question are timber, a person liable for waste cannot cut it down. He then said: That I take to be the clear law, with one single exception, which has been established principally by modern authorities in favour of the owners of timber estates, that is, estates which are cultivated merely for the produce of saleable timber, and where the timber is cut periodically. The reason of the distinction is this, that as cutting the timber is the mode of cultivation, the timber is not to be kept as part of the inheritance, but part, so to say, of the annual fruits of the land, and in these cases the same kind of cultivation may be carried on by the tenant for life that has been carried on by the settlor on the estate and the timber so cut down periodically in due course is looked upon as the annual profits of the estate, and therefore, goes to the tenant for life. With that exception, I take it, a tenant for life cannot cut timber. 920 [13.10]

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Crocombe v Pine Forests of Australia Pty Ltd cont.

68 In the present case there is a timber estate and accordingly, even though I hold that pinus radiata is timber in the present case, until the mortgagee takes possession the mortgagor is entitled to fell timber. The receiver, however, may very well at the moment, so far as the shares in which Ausforest is the registered proprietor, have rights as the mortgagor’s agent to the income from the land, but this is of course clouded by the fact that there is some sort of nebulous management scheme in place, the full details of which have not been disclosed to me.

Notes

[13.15]

1. An act of waste involves some permanent alteration to the land but its precise definition is subject to refinements. As the above case shows in relation to timber, waste is constituted by the cutting down of timber used for building construction. In general life tenants are liable (impeachable is the traditional term) for waste unless the instrument creating the life interest exempts liability for waste (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.55]). The above case applies the principles of waste as between mortgagor and mortgagee and co-owners may be able to be restrained from committing acts of waste. 2. There are four categories of waste: ameliorating waste (improving the land), intentional waste, permissive waste (failure to repair) and equitable waste (causing exceptional harm). Liability is differentiated according to these categories (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.50]).

SETTLED LAND AND TRUSTS Royal Melbourne Hospital v Equity Trustees Ltd [13.20] Royal Melbourne Hospital v Equity Trustees Ltd (2007) 18 VR 469; [2007] VSCA 162 ASHLEY and REDLICH JJA: [Footnotes omitted] 1 We have had the advantage of reading in draft the reasons for judgment of Bell AJA. We gratefully adopt his Honour’s account of the circumstances which gave rise to this proceeding. 2 By answers to questions in proceeding 1975 No 2149 Dunn J held that Netley -by which we refer to the land described in clause 7 of the Will of the late Clements Langford - is settled land, pursuant to the provisions of the Settled Land Act 1958 (Vic) (“SLA”), and that the class constituted by the children and grandchildren of the testator are the tenant for life for the purposes of that Act. The parties to the present proceeding accepted that they were bound by those conclusions, and by others to which we will later refer. 3 It follows that the sale of all or part of Netley might have been undertaken in the circumstances set out in s 38 SLA. But this proceeding, brought by Equity Trustees Ltd (“the trustee”), was not a proceeding contemplated by that section. The two persons whom Bell AJA has described as the minority grandchildren did attempt, in the course of the trial, to obtain an order under s 21 of that Act authorising the trustee to exercise the power of sale of a tenant for life under s 38. But the learned judge held, correctly in our respectful opinion, that the application was misconceived.[1] 4 Consonantly with the nature of the proceeding brought by the trustee,[2] the orders made at first instance were founded on s 63(1) of the Trustee Act 1958 (Vic) (“TA”). The provision reads: [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may my order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income. 5 Rightly, in our opinion, no party claimed at trial or on appeal that s 63(1) could not be invoked because Netley is settled land. The position adopted by the parties on the appeal 6 The appellants, the residuary beneficiary charities (“the charities”), contended before this Court that the order for sale made below pursuant to s 63(1) was too narrow. It would have the effect that Netley would in time be completely consumed in payment of land tax and other outgoings. Their primary position was that all of Netley should be sold. They also submitted that, if so much of Netley as the Court might order should be sold produced income from investment of the proceeds of sale which exceeded that which was necessary to meet outgoings, (“surplus income”) then that excess must be treated as residue, and be paid to them pursuant to clause 12 of the will. 7 The trustee and all the grandchildren ultimately agreed at trial that “the power of sale should be limited to the sale only of sufficient property to meet the outgoings expected to fall due and payable within the ensuing 18 months.” But on the hearing of the appeal both the trustee and the majority grandchildren submitted that a broader power of sale should be conferred. The minority grandchildren, on the other hand, in essence maintained the position which they had advanced at trial. That is, they opposed the further sale of Netley, except as might be necessary from time to time to meet outgoings referable to the property. 8 A point of difference on the appeal between the trustee and the charities on the one hand, and the grandchildren on the other hand, was as to the disposition of any surplus income. The trustee, as well as the charities and the Attorney-General, argued that such a surplus should go to the appellants. All the grandchildren contended that, if there should be any surplus, then it should go to them. 43 The majority grandchildren contended that any surplus should go to them. An order to that effect under s 63(1) TA would not alter the beneficial interests under the settlement as a whole. They would be getting, by way of income, the equivalent of physical use of the land during their lifetimes. They submitted also that s 75(6) SLA would produce that outcome. It would do so because the phrase “use occupy and enjoy” is understood to carry a right to income, and because neither a comparison of the language of clauses 6 and 7 of the will, nor the decision of Dunn J, would tell to contrary effect. The wording of the will created a statutory settlement which provided that the grandchildren should have the use occupation and enjoyment of the capital of the settlement presently represented by Netley. Section 106 SLA could, if necessary, be called in aid. 44 The minority grandchildren also submitted that the language of use occupation and enjoyment carried with it a right to income. It was the fact, but it made no difference, that a similar right was conferred by the SLA. 45 We consider, on balance, that the application of the SLA would give the grandchildren the right to any surplus income. We have reservations that the approach taken by Bell AJA, which focuses on the anti-avoidance provisions of that Act, provides a solution to the issue under discussion. Whilst it is correct to say that the anti-avoidance provisions of the SLA should be given liberal application, it is another thing to conclude, in effect, that they should be treated as a source of entitlements under that Act. For that reason, we prefer not to rest our conclusion upon those provisions. 922 [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. 46 Assuming for the present, as a matter of construction of the will, that the grandchildren were not entitled to income from Netley, by operation of s 41 SLA they could lease the land with the consent of the trustees or order of the Court. We see no reason to doubt that in such circumstances they would be entitled to the benefit of rent received. We agree with Bell AJA that the structure of the Act manifests an intention that this be so. Further, The Law of Real Property has stated consistently that “[t]he normal rule is that the tenant for life is entitled to the whole of the rent from leases of settled land.” Still further, it would be a strange result if the SLA were to give the tenant for life a right – that is, to lease premises - which such person(s) did not possess under the will, and were then to say that the benefit of the right, once exercised, was to be determined by the provisions of the will - which had contemplated no right, and hence no income deriving from its exercise. 52 Whilst, then, his Honour held that clause 7 gave the class “an exclusive right of residence”, it is not the case that thereby the word “reside” was substituted into the clause in place of the words “use occupy and enjoy”. The import of those words, in our opinion, remains relevant to the question whether the class members have a right to income under the clause. 53 We were referred to cases which have considered the import of phrases such as “use, occupy and enjoy”, “use and occupy”, “free occupancy”, and the import of verbs such as “occupy” and “reside”. In a number of those cases it was held that the devisee was authorized to sell or lease the land. But that was so because the devisee was the tenant for life under the SLA or its English equivalent. They are not helpful in understanding the content of the phrase “use occupy and enjoy” apart from the legislative overlay. 54 It has also been held that the phrase “use and occupy” prima facie confers a life estate, and so gives a right of personal residence and a right to receive rents. But that does not provide the answer to the issue which we are considering, for Dunn J held that clause 7 does not confer a life estate on the class. 55 The relevant position may be that described by Cussen J in The Equity Trustees Executors & Agency Co Ltd v Buckhurst, where his Honour said this: On the one hand it was said that the words “use and occupation” had come by judicial construction to mean that a person having the right to the use and occupation had also the right to let the house and retain the rent. On the other hand it was contended that although these words prima facie confer such a right, they do not amount to more than an expression of intention, which can be controlled by the intention to be gathered from the rest of the will; that is not a rule of law, but merely a rule of construction. I think that the latter view is the right one, and although if these words had stood alone I think the widow would have been entitled to let the house, I do not think in this case she is so entitled, because there are coupled to the words “use and occupy the same” the addition “for a home”. And there are other provisions in the will which confirm this construction. I think that, reading the will as a whole, the testator intended that his widow should reside as “Goodrest”. It has always been held that a provision giving a right of residence does not give a right to let. 59 If it is correct to conclude that the phrase “use occupy and enjoy” may give an entitlement to income without there having been the creation of a life estate, the question which follows is whether the language of clause 7, considered in the context of the will as a whole, gave such an entitlement. The argument that it did not do so essentially depended on a comparison of the language of clauses 6 and 7. 60 We have already set out the relevant parts of clause 7. The language of clause 6 was pertinently this: “I direct my trustees to permit my niece … to have the free use occupation and enjoyment or the rents and profits derived from my freehold property known as ‘The Elms’ … during her life.” It was submitted that the absence of the words “rents and profits” in clause 7 gave rise to the inference that the children and grandchildren were not entitled to income. [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. 61 The approach of Cussen J in Buckhurst obliges consideration of the entirety of the will in order to see what meaning should be assigned to the critical words in clause 7. In that way, it is relevant to consider the language of clause 6. Such an approach does not mean that the meaning of the critical words in clause 7 is to be ascertained within the framework of the maxim expressio unius est exclusio alterius – although the result might be the same on either approach. 62 In the present case there were differences in the character of the properties the subject matter of clauses 6 and 7, a large difference in the prospective lengths of the use, occupation and enjoyment of those properties, and a large difference in the number of those who were able to benefit from the respective directions. Those differences have led us to conclude – whilst acknowledging the force of the contrary argument, which Bell AJA has accepted - that the language of clause 6 does not stand as a reliable indication that the testator did not intend, by clause 7, to give his children and grandchildren an entitlement to income from Netley. 63 Giving the critical words in clause 7 a meaning which, then, is available, we are of opinion that under the will the grandchildren are entitled to the income from Netley. Thus, the hypothetical exercise required by s 75(6) SLA – assuming for the present that it requires consideration of the destination of income provided for by the will itself - would result in their being entitled to the income from invested proceeds of sale. It follows that it would be compatible with the SLA for the Court to order under 63(1) TA that any surplus income be distributed to the grandchildren living at the time of such distribution. 64 We should mention one final matter, albeit briefly. If it was right to conclude that the grandchildren were given a right to income of the land by the will, it would not follow that there was no call for the application of s 63(1) TA. The need for that section to be invoked was not precipitated by the absence of a provision in the will which addressed the question of distribution of income. BELL AJA: Introduction 66 The late Clements Langford built a stately holiday house for his family on a cliff top in Sorrento. He called it Netley. 67 When Mr Langford died in 1930, he left his valuable estate, including Netley, to various beneficiaries. His will gave his descendants the right to use Netley free of charge for two generations. It then allowed Netley to be sold for the benefit of the residual beneficiaries, including the Royal Melbourne Hospital and a number of other specified charities. 68 The children have all died, so the first generation has ended. Of the second generation, 16 are still living. Actuarially speaking, the last of these grandchildren is expected to live until 2030. Netley, however, cannot survive this long intact. The estate is now reduced to that property, which means it is asset rich and income poor.Because of land tax which the estate cannot otherwise afford to pay, Netley has to be sold off lot by lot, a process that has already begun. 69 Physically, Netley comprises a number of lots – a large one with a house and tennis court and several others which are just vacant land. 70 Equity Trustees Ltd is the trustee of the estate. The charities want Equity Trustees to be able to sell the Netley lots in a managed way, with the house lot coming last, so the land tax burden can be minimised. Equity Trustees agrees. The surviving grandchildren would then have at least the house and its tennis court, which are the best features of the property, probably for longer, and something would be left over for the charities when the grandchildren die. As to income arising from the investment of the proceeds of the sale of the lots, including the house lot if this becomes necessary, the charities and Equity Trustees say that, once any tax and other expenses have been paid, the income must be accumulated or, alternatively, paid into the residual estate, not paid to the grandchildren. This, it says, is the result demanded by the terms of the will. 924 [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. 71 The grandchildren are split on one thing and united on another. 72 A majority – 14 - say Netley should be sold in a managed way, as Equity Trustees proposes. A minority – two - say the lots should be sold only when required to meet expenses, such as land tax, even if this means there will be nothing left for the charities. This minority insists the grandchildren’s interests under the will are paramount and those of the charities subordinate. To sell any part of Netley before it is strictly necessary would elevate the interests of the charities and relegate those of the grandchildren. 73 All the grandchildren are united in saying that any income arising from the investment of capital money should go to them, not to an accumulating fund and not to the residual beneficiaries. They dispute Equity Trustees interpretation of the will and, in the alternative, rely on certain provisions of the Settled Land Act 1958. 109 The will gives the children and grandchildren the right to use the property for life (cl 7), after which it falls into residue (cl 12). Once in residue, it can be sold to free up capital money which can be invested to supply an income stream to the charities (cl 13). We can therefore see two intentions running in the will, and Netley was central to the achievement of both. Why the interests of the charities must be taken into account under s 63(1) of the Trustee Act 110 The term “residue” is not defined in the will, but, as a matter of general law and the proper construction of the will, it means everything left over after specific bequests have been fulfilled. Therefore, even if I might prefer to say the interests of the grandchildren are vested and those of the charities are contingent, I cannot not cavil with the judge’s description of the interests of the charities in Netley as subordinate, for the left-overs are what they are to get. 111 Accepting that description, the fact remains that s 63(1) of the Trustee Act confers on the Court a statutory power to allow trustees expediently to manage and administer trust property. With respect I cannot agree that the proper exercise of this power in the present case can be governed by a formal classification of the interests of the relevant beneficiaries as paramount and subordinate respectively. A trust may create a diverse range of relevant interests which may all have to be considered in determining what is expedient in the management or administration of the property. Where the trust creates both vested interests in the capital and contingent interests in the residue, the interests of the remaindermen have to be considered. 124 Since the trial, lots 50-54 have been sold, but I can put that to one side for the moment. 125 The central finding of the trial judge was that, by reason of Netley’s continuing liability to land tax, which the estate could not otherwise afford to pay, the estate “cannot continue to be administered without the sale of all or part of Netley.” His Honour then dealt with the proposals of each of the parties and carefully analysed their practical consequences. In this context he elaborated on his central finding. 126 As to the charities, his Honour said their proposal “was that the whole or part of Netley be sold and that the proceeds pass to residue”. He found the practical consequences of this proposal would be that Netley would be sold in whole or in part, the grandchildren would lose their right to use Netley to that extent, the costs of holding and maintaining Netley would cease or be reduced and the proceeds of the sale would be paid to the surviving grandchildren and the charities according to the will (cll 12 and 13). 132 I should now return to the subsequent sale of lots 50-54. 133 The sales have enabled the outstanding land tax debts to be paid with some $1,250,000 left over. This will apparently be sufficient to meet the costs of maintaining Netley during 2007, and the land tax bill of some $575,000 expected for that year. Depending on how much is left over after that, it may be that the maintenance and land tax expenses for 2008 will be able to be met as well. [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. 134 Therefore, the sale of lots 50-54 has averted the immediate financial crisis. However, the problems identified by the judge will arise again in another year or two. Once again the maintenance and land tax expenses will start to mount. Once again the estate will not be able to meet those expenses without further sales being made until, in the end, Netley is all but consumed. 135 Therefore the sales have not significantly altered the long term financial problems confronting the estate; the issues surrounding the exercise of the expedience power to deal with those problems remain as alive in this appeal as they were before the trial judge. The trial judge’s order did not deal with those problems 143 I think, in an appropriate case, the expedience power can be used to facilitate the creation of a capital fund to generate income for the payment of future trust expenses. An order for the accumulation of the income earned by such a fund could also be expedient in some cases. This conclusion follows from the general terms of s 63(1) and what I say later about the nature and scope of the power. Whether or not it is expedient in a given case to facilitate the creation of such a fund, or allow for the accumulation of income, will depend upon the particular facts and circumstances. 144 In the present case, the trial judge decided it was expedient to confer a power of sale and accumulation so that expenses due or confronting Netley within the next 18 months could be met. His Honour therefore implicitly decided the scope of the power in s 63(1) was sufficient to support an order that made provision for future trust expenses. With respect, that decision was correct. It cannot be said that the financial position of the estate – as the trial judge found it to be – did not justify the exercise of the expediency discretion. His Honour decided it would better to manage Netley’s expenses – especially present and future land tax – by allowing some of it to be sold before the revenue authorities exercised their compulsory power of sale. I agree it was expedient in the interests of the estate as a whole that Equity Trustees, not the revenue authorities, carry out such a sale. But of course this question was a matter for his Honour to decide in the exercise of his discretion, and his decision in this respect was plainly open to him in the circumstances. 145 The real question raised in the appeal is whether the trial judge’s exercise of the expediency power miscarried because it did not go far enough. This is the main ground relied upon by all of the parties except the minority grandchildren. As we have seen, those parties submit his Honour erred in not conferring a power of managed sale unlimited in scope and time, except that the house lot had to come last. The scope and operation of s 63(1) of the Trustee Act Wide and beneficial 148 Section 63(1) of the Trustee Act is written in very wide and beneficial terms that must be liberally construed. The power to authorise expedient dealings with trust property is meant to cover a multifarious range of circumstances that cannot be categorised in advance and must be dealt with case by case. The operation of the section is not restricted by implications. Where the conditions in the section are satisfied, the discretion to give authorisation is unfettered. 149 The three conditions, each jurisdictional, are that the dealing must be “in the management or administration of any property vested in trustees”, “expedient” and not possible because of an “absence of any power.” I have already dealt with the third condition so I will confine myself here to the first two. “in the management or administration of” the trust property 150 The words “management or administration” in s 63(1) are, I think, of wide import and pick up everything that a trustee may need to do in practical or legal terms in respect of trust property. Thus, as to the English provision, it has been held the words refer to “the managerial supervision and control 926 [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. of trust property on behalf of beneficiaries.” As to the similar New South Wales provision, it has been held the words refer to “both the manner in which trust property is managed, administered, handled, directed or controlled and the actual carrying out of those functions.” As to the Victorian provision, in general terms, “management” has been taken to include commercial and practical matters and “administration” all the legal powers and duties that a trustee may need. The words management and administration largely overlap, but the linking word is “or”. It was inserted to ensure that an unduly narrow interpretation was not adopted. 151 The section requires the dealing to be “in” the management or administration of “property vested in trustees”, not in the management or administration of something else. That the dealing must be in the “management or administration of any trust property” is a limiting requirement: the purpose of the section is to allow the authorisation of that kind of dealing, not a dealing that regulates or varies the trust or alters the beneficial interests to which it gives rise. 152 However, generally speaking, a trust is a legal institution, sometimes complex, for the administration and management of property, sometimes extensive, in favour of beneficiaries, sometimes with disparate but interrelated interests. By its very nature, a power to authorise a dealing with the trust property for its more expedient management or administration may impact on the practical operation of the trust and the enjoyment of the interests of the beneficiaries. Depending on the nature of the dealing that the expedience of the circumstances requires, that impact could be great or small. Tension can arise between the authorisation of expedient dealings in the management or administration of trust property and the continued enjoyment of the beneficial interests specified in the trust. In some cases, and the present case is one of them, the appropriate resolution of that tension will be a necessary feature of the proper exercise of the power. To that subject, therefore, I will have to return. Can a power be expedient if it negatively affects the interests some beneficiaries? 162 You have just seen that the courts judge expedience by reference to the interests of the trust as a whole or, putting the same principle another way, the interests of the beneficiaries. What if the impact of the power is relatively positive on some beneficiaries but relatively negative on others? This is one instance of the tension of which I have spoken. I have foreshadowed that I would hold the power may still be available. It is time for me to explain why. 163 I can do so by reference to the submissions of the minority grandchildren based on Re Craven’s Estate. This was a case where a mother left her son the income from part of her residual estate, for his life, with remainders over. The capital, on her death, would pass to the remainderman. The son submitted it was expedient to allow the trustee to buy for him, out of the capital from which his income arose, underwriting membership of Lloyd’s, and he sought the Court’s authority accordingly. It was in this context that the Court said expedient means “expedient for the trust as a whole”, not just “one beneficiary”. To allow the purchase would have placed the son’s capital – which would flow to the remainderman on his death – at risk, which would not be allowed. 164 The minority grandchildren sought to draw from this statement a principle of general application that the expedience power could not be exercised if even one beneficiary was disadvantaged. I do not think the decision stands for so extreme a proposition. The Court was saying the interests of the other beneficiaries had to be taken into account which, in the circumstances, was a compelling reason to decline authorisation. Similar general statements have been made in other cases. All have to be understood in their own factual context. 165 The submissions of the minority (but not the majority) grandchildren would deny the court any capacity to bring a sense of proportion to the exercise of the expedience power. No matter how clear the settlor’s intention to create several beneficial interests, how inimical the consequences of inaction for the trust property or the interests of one class of beneficiaries, how great the sphere of beneficial [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. enjoyment preserved, how small the degree of beneficial enjoyment reduced, how fairly the scales are held between the various beneficial interests and how expedient the power is in all other respects, if conferring the power would disadvantage some or even a single beneficiary, that, it is submitted, is the end of it. Those submissions must be rejected. This “large and important” power is not exercised by the principle of the dog in the manger. 166 The true position is that a power, otherwise expedient for the management or administration of the trust property and in the interests of the trust or beneficiaries as a whole, may be conferred even if its impact may be relatively positive for some beneficiaries and relatively negative for others. A power does not necessarily lose its character of being expedient for that purpose because it may impact differentially on the beneficiaries. 215 I would make an order under s 63(1) for the purpose of ensuring that the estate can, within a prudent time-frame, operate on a financially self-sufficient basis. Consistently with the purpose of this order, I would allow Equity Trustees to retain income from invested capital if it is necessary to ensure that the estate is financially self-supporting. In the early stages, and depending on the number of lots sold and the prices obtained, it may be necessary to accumulate all income to ensure sufficient funds are available for present and future expenses. It may also be necessary to utilise capital money to meet expenses in the early period. After a number of lots have been sold, and especially when all except the house and tennis court have been sold, income from the invested capital will probably be sufficient to ensure the estate is self-supporting, and there will probably be surplus income. Once that point is reached, Equity Trustees should not continue to retain the surplus income. That is the limitation. 216 I would impose the limitation for three specific reasons which have a common objective: holding the scales fairly between the beneficiaries. 247 Our legislation was introduced in 1909. The charities submitted this Court should be wary of paying too much regard to the cases decided in the English courts because the legislation was different in significant respects from our own. I accept there are some differences between the two statutes. For example, the powers of the tenant for life to sell or lease settled land are more limited under the Victorian legislation. Nonetheless, judges of this Court have always considered the two statutes to be based on the same general policies and looked to the English decisions for guidance. More importantly, this case concerns the transmission provisions of the Victorian Act, which were lifted word for word from the English parent, and which, despite the passage of a great deal of time, have not been materially changed. Therefore I think the English cases are of relevance and, later in these reasons, I will examine them. The provisions governing the application of capital money 248 When, under the Victorian Act, a tenant for life uses their powers, say by selling the settled land, the proceeds of the sale represent “capital money arising under this Act”. The Act carefully specifies what has to be done with this money. 249 Section 75(1) requires capital money to be paid to the trustees or into Court so it can be invested or applied as the case may be. The permitted modes of application are specified in s 73(1) and include government and other authorised securities. In a case such as the present, the capital money that will arise from the sale of a Netley lot will be invested in securities. It is then necessary to look to the provisions that govern the persons on whose behalf the securities must be held and to whom any money arising from them must be paid. The anti-avoidance provisions 254 When the Settled Land Act was introduced in England, it was recognised that ingenious means might be employed in wills and other settlements to limit or destroy the powers given to tenants for life. Strong measures were included to prevent that from happening, and they are to be found in s 106 of our Act. Section 106(1) deems void any provision in a settlement that tends to prevent a tenant for 928 [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. life from exercising, or induces a tenant for life not to exercise, or puts a tenant for life in a position inconsistent with exercising, any power under the Act. Section 106(2) operates to preserve the interest of tenants for life in settled land, or money arising from it, for the period specified in the settlement after they have exercised the statutory power. As will become clear, these provisions have an important bearing on the present case. 255 By reason of the combined operation of these provisions, the scheme of the English Act has been described as one that gives the tenant for life the “power to convert the settled estate into money …” Similarly: “the effect of a sale under the Settled Land Act is merely to substitute money for land, and whatever rights persons had in the land are preserved to them in the money produced by its sale.” Under the Settled Land Act, the grandchildren get the income 293 I have held that the grandchildren do not have the power under Mr Langford’s will to lease Netley, but that under the Settled Land Act they do have that right. Under the will they do not have the right to receive the rents arising from the lease of Netley, but under the Act they do have that right. By virtue of s 106(1) of the Act, any direct or indirect interference by the will with the exercise of the rights of the grandchildren to lease Netley is void. The limitation in the will – by omission – on the right of the grandchildren to receive rent from the lease of Netley plainly falls into this category. A provision that denies the tenants for life the rent from the lease of settled land operates as a disincentive to lease that land. Therefore, under the Act, the grandchildren have the power to lease Netley and to receive the rent from so doing, despite the provisions of the will. 294 If that conclusion is correct, as I think it must be, it is necessary to take it into account when applying s 75(6) in the present context. 295 The problem I am dealing with arises because income may arise from the investment of the proceeds of all or part of Netley while a grandchild with a right of occupancy – a tenant for life under the Act – is still alive. Taken on its own, s 75(6) would deprive the grandchild of the income because the income of the land was not so payable under the settlement. Yet s 106(1) and the other provision of the Act operate to give the grandchild the right to lease the land and receive the rent. 296 It would be absurd to treat the tenants for life as having capacity to deal with the land and take the fruits of so doing under s 106(1) and, for example, ss 38 and 41, yet treat them as having no entitlement to income arising from the investment of the proceeds of the sale of the land by reason of the restrictive nature of the settlement and the operation of s 75(6). In the construction of s 75(6) that I prefer, the words “would have been payable or applicable under the settlement” take account of the operation of s 106(1) and (2) on the settlement. If, as in the present case, the provisions of s 106, together with s 41, operate to give tenants for life under a will the right to lease and be paid the rent for settled land, the income of the land “is payable or applicable under the settlement” in their favour under s 75(6). Therefore, in such a case, where income is produced from the investment of capital money arising under the Act, that income must, under s 75(6), be paid to the tenants for life, who, in the present case, are the grandchildren. 297 In making an order under s 63(1) of the Trustee Act for the expedient management or administration of the trust property, I would take the application and operation of the Settled Land Act, as I have explained it, into account. Therefore, I would make an order in terms that allowed for the accumulation of income, but only to the extent necessary to ensure the trust becomes self-sufficient. Once, in the opinion of Equity Trustees, that point is reached, any surplus income must be paid to the grandchildren, to whom it would have flowed under the Settled Land Act. Conclusion 298 Netley, a property with a stately holiday house on a cliff top in Sorrento, and the last valuable asset in the estate of the late Clements Langford, is being consumed by land tax. Despite the recent sale of [13.20]

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Royal Melbourne Hospital v Equity Trustees Ltd cont. some of its lots, a substantial part, including the house and tennis court, remains for the grandchildren who, under the will, have the right to use and enjoy it for life. But lot by lot the property will inevitably have to be sold, a process that has already begun, until even the house and tennis court are gone. If this is allowed to happen, nothing will be left for the charities who, also under the will, were intended to benefit from the residual estate in remainder. 303 Section 63(1) permits the court to confer a power of dealing where it is expedient in the management or administration of the trust property. With respect, the trial judge was correct to confer a power of sale, but he did not go far enough. It was expedient to confer a full power of managed sale to reduce the land tax burden, for this would ensure the house and tennis court were preserved for the use and enjoyment of the grandchildren for the longest period, and also ensure something was left over for the charities when the last grandchild died. Such a power could be conferred even though its impact would be relatively positive for the charities and relatively negative for the grandchildren, for it was in the interests of the beneficiaries as a whole, and the exercise of the power in this way would hold the scales fairly between them. 304 I would confer on Equity Trustees sufficient power to allow it to sell the several lots of Netley, with the house and tennis court coming last, so as to create a capital fund from whose income land tax and other expenses could be paid – in other words, so as to ensure the estate became financially self-sufficient. If it is initially necessary to allow capital monies to be used to meet estate debts, I would allow that also. Equity Trustees should have a discretion to determine the timing and order of sales, for this will be a matter for judgment having regard, among other things, to the state of the market. Equity Trustees should have a power to accumulate income, but if, in its opinion, more income is produced than is needed to meet actual land tax or other expenses, or those reasonably anticipated in the future, the surplus should go to the grandchildren, for the power in s 63(1) is for the expedient management of trust property, not the alteration of the beneficial interests it creates. 305 It is relevant to take account of the position of the grandchildren under the Settled Land Act 1958. Under that Act, because they are beneficially entitled to possession of Netley, they are the statutory tenants for life, which means they are entitled to receive its income, particularly its rent. Under the will, they do not hold the position of a true life tenant, but the anti-avoidance provisions of the Settled Land Act protect their statutory entitlement to the income of Netley so that, under that Act, they must be treated for all purposes as if they had that entitlement. That entitlement can and would be affected by the order I would make under s 63(1) of the Trustee Act, but the existence of the entitlement is one reason why the grandchildren should get any surplus income. 306 I would therefore uphold the charities appeal. I would make an order under s 63(1) of the Trustee Act conferring a power of managed sale of Netley on Equity Trustees in the terms set out in these reasons. I would answer the questions in the appeal accordingly.

[13.25]

Notes

1. If the doctrine of waste imposes limitations on the use of land, the indeterminate nature of the life estate creates major problems for any commercial dealing with the land, including any sale or mortgage. This weakness appealed to an English landed class seeking to preserve land within families. But in the 19th century the overriding need was seen as being able to sell or raise capital on the security of the land, and in social terms to promote land development. Thus settled land legislation was introduced. That legislation remains in widely varying forms in New South Wales, Victoria, South Australia, Tasmania and the 930 [13.25]

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Northern Territory: Conveyancing and Law of Property Act 1898 (NSW), Pt IV; Settled Land Act 1958 (Vic); Settled Estates Act 1880 (SA); Settled Land Act 1884 (Tas); Trustee Act (NT), s 69. 2. In Queensland and Western Australia and seemingly the Australian Capital Territory, the settled land legislation has been repealed and replaced by the imposition of trusts for sale. 3. Express trusts often confer only limited powers to deal with the land so those powers have been expanded by legislation (see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.190]–[13.205]). The most significant power is the equivalent of s 63(1) of the Trustee Act 1958 (Vic) discussed in Royal Melbourne Hospital v Equity Trustees Ltd (2007) 18 VR 469; [2007] VSCA 162 which allows trustees to do whatever is for the expedient management of the property.

STRATA AND COMMUNITY TITLE The strata or community corporation

Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 [13.30] Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 (1994) 179 CLR 597 BRENNAN AND TOOHEY JJ: The respondent is a body corporate constituted under the Building Units and Group Titles Act 1980-1988 (Qld) (the Act) for a property known as “Surfers Palms North”. The appellants are the assignees of a management agreement dated 31 January 1989 between the body corporate as owner and the appellants’ assignor, Bartlett Researched Securities Limited (Bartlett), as manager. Bartlett was the developer of the property and, at the time when the management agreement was made, it was the sole proprietor of the lots delineated in the group titles plan. The management agreement contained a clause (cl 8) entitling the manager to an annual remuneration of $60,000 payable monthly and indexed to the All Groups Consumer Price Index. On 17 January 1991 a deed of assignment was executed by Bartlett, the appellants and the body corporate whereby Bartlett assigned all its rights under the management agreement to the appellants and the appellants agreed to perform the duties specified in the management agreement. The appellants sued the body corporate in the Supreme Court of Queensland to enforce the management agreement. The appellants had acquired one of the lots in the group titles plan. They had started to perform the management duties specified in the agreement. They were paid the stipulated remuneration for a time but a dispute broke out between them and the body corporate. On 26 February 1991 at the annual general meeting of the body corporate a resolution was passed challenging the validity of the management agreement and refusing to make any further payments pursuant to that agreement. On 7 June 1991, the appellants commenced the action claiming, inter alia, remuneration under the management agreement. On 22 November 1991, they purported to exercise an option to extend the term of the management agreement from 31 January 1992 for a further three years. The period in respect of which remuneration was claimed at the trial commenced on 10 February 1991 and extended to the elapsed portion of the period of the extension purportedly effected by the appellants’ exercise of the option. On 1 February 1992 at the annual general meeting of the body corporate a motion was passed, purportedly pursuant to s 50(9) of the Act, terminating the appointment of the appellants as managers. [13.30]

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Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 cont. The body corporate denies any liability to the appellants under the management agreement on two grounds: first, that the management agreement was void ab initio and, secondly, that, if the management agreement was valid, it was terminated by the resolution passed on 1 February 1992. The appellants, on the other hand, assert that the management agreement is valid and subsisting and that it was not susceptible of termination pursuant to s 50(9) of the Act. The body corporate succeeded on its first ground before the Court of Appeal but would have failed on the second. The appeal relates to the first ground; but, if the appellants should succeed on that ground, the body corporate seeks special leave to raise and rely upon the second ground. It is convenient first to consider the question whether the management agreement was invalid. The body corporate challenges the validity of the management agreement on the ground that among the duties which that agreement purports to impose on the manager is a duty which the body corporate has no power to perform, namely, the duty of conducting a letting agency for the owners of those lots who require that service. The body corporate submits that it has no power to commit its funds for this purpose. Clause 8 of the management agreement specifies the lump sum remuneration which the body corporate promises to pay the manager for the performance of the duties specified. Those duties are specified in general terms by cl 1: SCOPE OF THE MANAGER’S DUTIES – The Manager shall be responsible (to the Owner) to at all times ensure that the Property is properly maintained and administered and kept in good repair, and shall attend to the secretarial requirements of the Owner (as will be involved in the discharge of the Owner’s functions pursuant to the Act). The Manager shall be responsible to the Owner for the care and maintenance and administration of the Property in terms of this Agreement. Clause 2 then sets out specific duties including cl 2(r). The relevant parts of cl 2 read as follows: SPECIFIC DUTIES TO BE PERFORMED BY THE MANAGER – Without limiting the generality of the Manager’s duties as described in Clause 1 of this Agreement some of the Manager’s specific duties and functions shall be as follows: (r) Letting Agency – The Manager shall conduct, from his unit, a letting agency for the letting of townhouses on the Property for such owners of the townhouses, as shall require that service, or with prior written approval of the Owner arrange with a licensed real estate agent or agents to provide a letting agency for the lettings. The Manager shall ensure that at all times he is properly licensed to perform these functions having regard to the provisions of the Auctioneers and Agents Act 1971 (as amended) and any other relevant legislation or requirements of other governmental or semi-governmental authorities from time to time. The remuneration prescribed by cl 8 is not apportioned among the several duties which, by the terms of the management agreement, the manager is to perform. The promise to pay was therefore made in consideration in part of the manager’s promise to provide the letting agency. The submission that a body corporate’s funds could not be expended in the payment of remuneration for the provision of this service found favour with the Court of Appeal. Their Honours said: Whether or not a body corporate has power to appoint a letting agent to provide a service to individual proprietors who seek to avail themselves of it, no power to expend the body corporate’s funds in payment of the letting agent for such services to individual proprietors has been identified. To ascertain the relevant limit on the powers of a body corporate, the provisions of the Act conferring powers must be construed in context. The Act provides, inter alia, for the registration of building units plans and group titles plans: (s 9). The land comprised in each group titles plan is divided into lots and common property (“group titles plan” is defined by s 7 to mean “a plan which – 932 [13.30]

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Humphries v The Proprietors of ‘Surfers Palms North’ Group Titles Plan 1955 cont. (a) is described in the title or heading thereto as a group titles plan; (b) shows the land comprised therein as being divided into lots and common property; and (c) complies with the requirements of section 9, and includes a plan of resubdivision of a lot or common property or a lot and common property in a group titles plan registered under this Act”). The Act provides for the constitution of the proprietors of the lots delineated in a group titles plan as a body corporate: (s 27). The powers, authorities, duties and functions of the body corporate are prescribed by or under the Act or the by-laws of the body corporate (s 27(3)), and the proprietors are liable to pay contributions levied by the body corporate (s 32) in the amounts which, in the opinion of the body corporate, are necessary to meet its actual and expected liabilities in respect of items of legitimate expenditure (ss 38A, 38B). The chief duties of a body corporate are set out in s 37(1) of the Act; s 37(2) sets out powers which, in the discretion of a body corporate, it may exercise. Apart from specific paragraphs relating to the care of the personal property of the body corporate and the provision of a mail box, the duties of a body corporate imposed by s 37(1) relate either to what is or is part of the common property or to fixtures or fittings in one lot intended to be used for the servicing or enjoyment of any other lot or of the common property. None of the duties extends to the provision by the body corporate of services to the proprietors of individual lots. The powers of a body corporate conferred by s 37(2) include the power specified in para (a) of that subsection: A body corporate may – (a) enter into an agreement, upon such terms and conditions (including terms for the payment of consideration) as may be agreed upon by the parties thereto, with a proprietor or occupier of a lot for the provision of amenities or services by it to the lot or to the proprietor or occupier thereof. Section 37(2)(a) authorizes the making of an agreement for the provision of services “to the lot or to the proprietor or occupier thereof”; it does not authorize the making of an agreement with a person other than the proprietor or occupier of the lot to whom or to which the body corporate is to provide the services. Neither the broadly stated duties imposed by cl 1 nor the particular duty imposed by cl 2(r) of the management agreement falls within this paragraph. The body corporate did not enter into an agreement with the proprietor or occupier of any lot to provide the services of a letting agency for the benefit of that proprietor or occupier. Had it done so, it would have had authority to perform that agreement by employing an agent or servant (such as the appellants) to provide the services contracted for: see Fourth Schedule, cl 1. However, if an agreement had been made with particular proprietors or occupiers, it would not have been a proper exercise of the body corporate’s powers to require the funds raised by contribution from all proprietors to bear the cost of provision of the service for particular proprietors or occupiers. In any event, cl 2(r) of the management agreement was not made in implementation of any agreement made under s 37(2)(a) between the body corporate and an individual lot proprietor or occupier. None of the other powers conferred by s 37(2) authorizes the making of an agreement for the conduct of a letting agency for the benefit of those proprietors of individual lots who might require such a service. The appellants seek to uphold the management agreement by pointing to the by-law making power conferred on a body corporate by s 30. That section authorizes the amendment of the pro forma by-laws contained in the Third Schedule “for the purpose of the control, management, administration, use or enjoyment of the lots and common property the subject of the plan” (s 30(2)). Whatever the scope of that power may be, it does not avail the appellants in this case. There was no by-law made which might have authorized the body corporate to secure the provision of the services of a letting agency for the proprietors of the individual lots. In general, the Third Schedule does not authorize a body corporate to provide services to individual lots although cl 10 impliedly authorizes a body corporate to provide a garbage disposal service for individual lots. If cl 10 is an exception to the [13.30]

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Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 cont. general scheme of the Third Schedule, the exception is explicable by the common interest of all proprietors and occupiers in the removal of garbage from any part of the premises. In Coastalstyle Pty Ltd v The Proprietors, Surf Regency Building Units Plan 4246 (Unreported, 20 December 1991 at 17), Thomas J stated his view to be that the making of a letting agreement (similar to the present management agreement) “is within the general management powers of a Body Corporate for the benefit of unit holders”, but he noted that that view was contrary to an assumption made by the Full Court in a case in which his Honour had agreed with the principal judgment (Victorian Professional Group Management Pty Ltd v The Proprietors “Surfers Aquarius” Building Units Plan No 3881 (1991) 1 Qd R 487) and from which he did not “feel free to depart”. When Coastalstyle went on appeal to the Court of Appeal, the attack on the letting agreement seems to have focused on the granting to the letting agent of special privileges in respect of the common property. The Court of Appeal said (Coastalstyle Pty Ltd v The Proprietors, Surf Regency Building Units Plan 4246 (Unreported, 12 October 1992 at 11-12.)): By subs 37(1)(a), a body corporate is required to “control, manage and administer the common property for the benefit of the proprietors” and, by subs 27(3), it is required, subject to the Act, to “do all things reasonably necessary” for that purpose. These are extensive powers and, except where the Act otherwise expressly provides, there seems no reason to exclude from their ambit a power in the body corporate to grant exclusive use or enjoyment, or special privileges, in respect of the common property for the purpose of a business engaged in on behalf of the proprietors of the units in the building. Provided that the service provided by the business is available for the benefit of all proprietors, it seems unimportant that some may choose not to participate. The passage cited suggests that it is within the ordinary powers of a body corporate to provide services for the proprietors of individual lots who wish to use those services. With respect, we are unable to agree. The powers of a body corporate are confined chiefly to management and control of common property, and expenditure of the funds of the body corporate on the provision of services for individual proprietors is not sanctioned merely because the services are available to all proprietors who wish to use them. A power to provide such services is not incidental to the body corporate’s statutory duties or powers. In our opinion, there was no statutory power authorizing, and there was no by-law which might have authorized, the respondent to conduct a letting agency for the benefit of those proprietors of lots who might require that service or to procure another person to conduct such a letting agency. Nor was there any agreement under s 37(2)(a) which might have been implemented by procuring another person to provide a letting service for particular lot proprietors or occupiers. It was therefore beyond the powers of the body corporate to enter into a contract to procure the provision of services of the kind stipulated in cl 2(r) of the management agreement. The principle, as Lord Selborne stated it in Ashbury Railway Carriage and Iron Co v Riche ((1875) LR 7 HL 653 at 693), is that: a statutory corporation, created by Act of Parliament for a particular purpose, is limited, as to all its powers, by the purposes of its incorporation as defined in that Act. The ultra vires issue As I have said, the central issue in the present case is whether in Queensland, in the absence of an authorising by-law, a body corporate formed under the Act has power to enter into an agreement by which it pays money to a person in consideration of that person conducting a letting agency for the benefit of those owners of lots in the complex who require that service. In my opinion, a body corporate has no such power. Nothing in the Act expressly authorises such an agreement or the payment of moneys to a letting agent for services rendered to individual proprietors. Nor can such a power be implied. Indeed, the implication to be drawn from the Act is that a body corporate has no such power in the absence of an authorising by-law. 934 [13.30]

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Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 cont. The scheme of the Act Section 9 of the Act provides for the registration of group titles plans. A group titles plan means a plan which is so described and which shows the land comprised therein as being divided into lots and common property and which complies with s 9 of the Act: (s 7(1)). Section 9 requires, inter alia, that a group titles plan delineate the lots and common property and distinguish the lots by numbers. Upon registration of the plan, the proprietors of the lots become a body corporate: (s 27(1)). Section 32 authorises the body corporate to levy contributions from the proprietors. They are to be paid into an administrative fund and a sinking fund: (s 38). Moneys are not to be disbursed from those funds except to meet the liabilities incurred by the body corporate in performing its duties and functions or exercising its powers and authorities under the Act: (ss 38, 38A). The Companies Act 1961 (Qld) does not apply to or in respect of a body corporate constituted under the Act: (s 27(2)). Consequently, the doctrine of ultra vires applies to such a body corporate. Section 27(3) provides: Subject to this Act the body corporate shall have the powers, authorities, duties and functions conferred or imposed on it by or under this Act or the by-laws and shall do all things reasonably necessary for the enforcement of the by-laws and the control, management and administration of the common property. The principal duties imposed on a body corporate by the Act are set out in s 37 of the Act. That section also confers powers on a body corporate. So far as relevant, s 37 provides: (1) A body corporate shall (a) control, manage and administer the common property for the benefit of the proprietors; (c) subject to section 37A, properly maintain and keep in a state of good and serviceable repair … – (i) the common property; …(2) A body corporate may (a) enter into an agreement, upon such terms and conditions (including terms for the payment of consideration) as may be agreed upon by the parties thereto, with a proprietor or occupier of a lot for the provision of amenities or services by it to the lot or to the proprietor or occupier thereof. Did ss 27 and 37 authorise the agreement? Unquestionably, ss 37(1)(a) and 37(1)(c) authorise a body corporate to enter into a contract to maintain and administer the common property. But nothing in those paragraphs confers any authority on a body corporate to enter into an agreement to pay money to a person in consideration of that person providing a letting service for the benefit of unit proprietors. They confer power in relation to the common property. They do not confer a power to enter into an agreement with a third party which affects the lots of other individuals as well as the common property. Furthermore, nothing in ss 27 and 37 authorises an agreement which gives the Manager the exclusive right to carry on the business of letting units in a complex. The exclusivity provisions of the Agreement are also inconsistent with the right of other proprietors to conduct lawful businesses from their lots. See, for example, s 42(2) of the Auctioneers and Agents Act 1971 (Qld). If a body corporate has power to enter into an agreement giving exclusive rights to a particular person in relation to the use of the lots and common property, it must also have the implied power to prevent proprietors from enjoying those rights. The making of the exclusive arrangement by itself cannot interfere with the rights of the proprietors. Some further power is needed to enable a body corporate to carry out its implied undertaking that it will prevent the proprietors of lots from exercising those rights. However, apart from the by-law making power (see below), nothing in the Act authorises a body corporate to interfere with the rights of proprietors in respect of their lots. [13.30]

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Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 cont. Moreover, by implication, the terms of s 37(2) exclude the making of an exclusive letting agreement of the kind involved in this case. By authorising an agreement with a proprietor for the provision by the body corporate of services to his or her lot, it impliedly excludes a power to make an agreement with a third party to provide services to that lot and also impliedly excludes any general power in the body corporate to interfere with the rights of proprietors in respect of their lots. That sub-section also tends to indicate that services for the benefit of a proprietor are to be paid for by the proprietor and not out of the funds contributed by the other proprietors. The general powers conferred on the body corporate by ss 27(3) and 37 are, therefore, insufficient in my opinion to enable the body corporate to enter into an agreement which would require the body corporate to act in a way which would affect the rights and obligations of proprietors in respect of their lots. However, the appellants contend that the intended width of the powers conferred by ss 27(3) and 37 can be seen from the definition of “prescribed arrangement” (Section 49(2) of the Act requires an original proprietor to give to a prospective purchaser a statement setting out details of any prescribed arrangement.) in s 7 of the Act and from the licence provisions of s 42 of the Auctioneers and Agents Act 1971 (Qld). Paragraph (e) of the definition of “prescribed arrangement” in s 7 of the Act includes an agreement “for the conduct of a business upon the parcel (whether upon a lot or the common property) of letting of lots on behalf of any proprietors of lots”. Section 42 of the Auctioneers and Agents Act requires a person carrying on a letting business of the kind involved in the present case to be licensed. Where the business is restricted to the letting of lots in a building in which the applicant resides, however, there is an exemption from certain requirements: (s 42(2)(a)). if the applicant has an office in that building (s 42(2)(b)) and has entered into an agreement in writing with the body corporate authorising the applicant to carry on the business: (s 42(2)(c)). Contrary to the contention of the appellants, these provisions are not a statutory recognition of a general power in a body corporate to enter into a letting agreement of the kind in issue in the present case. They assume the making of a valid agreement, but they are silent as to how such an agreement can be validly made. The by-laws The conclusion that the general powers conferred by ss 27 and 37 did not authorise the making of the Agreement is confirmed by s 30(2) of the Act which provides: Save where otherwise provided in subsections (7) and (11), a body corporate, pursuant to a special resolution, may, for the purpose of the control, management, administration, use or enjoyment of the lots and common property the subject of the plan, make by-laws amending, adding to or repealing the by-laws set forth in the Third Schedule or any by-laws made under this subsection. That sub-section indicates that the body corporate can interfere with the rights of proprietors in respect of their lots only by means of by-laws passed in accordance with the Act. The general powers conferred by ss 27 and 37 are insufficient for this purpose. The Third Schedule to the Act contains specific by-laws, but none of those by-laws authorised the making of the Agreement. Nor has the body corporate exercised the power conferred by s 30(2) to make a by-law giving it power to enter into an arrangement containing cll 2(r), 9 and 12 of the Agreement.

[13.35]

Notes

1. Overview of the affairs of the corporation is achieved by an annual and other general meetings of the corporation whose members are the individual unit owners; see Strata 936 [13.35]

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Schemes Management Act 2015 (NSW), Sch 2; Owners Corporation Act 2006 (Vic), s 69; Body Corporate and Community Management Act 1997 (Qld), s 62; Community Titles Act 1996 (SA), s 82; Strata Titles Act 1985 (WA), s 49(1); Strata Titles Act 1998 (Tas), s 75; Unit Titles (Management) Act 2011 (ACT), s 17; Unit Titles Schemes Act (NT), s 78. 2. In its original form strata title was confined to situations where an existing building was divided horizontally and usually vertically. The legislation has gradually extended the range of situations for which strata or community title can be used so that it can be employed for most residential, commercial or industrial purposes. The need for a division within a building has been abolished so that the minimum requirement is usually that there be two or more units and some common property; the units may be simply separate parcels of land. The strata or community corporation may then be concerned not with building management but management of grounds for recreational or conservation purposes or the operation of a central computing and communication system for a number of businesses. 3. Membership of the strata corporation is conferred upon the owners of the individual lots and the responsibilities of the corporation are directed matters affecting owners: maintenance of the common property and enforcement of the obligations of unit holders. However letting out of units is common and problems of community life and indeed property maintenance may affect the tenants of these units more than the owners. In New South Wales the Strata Schemes Management Act 2015 (NSW), s 33 allows for the election of a tenant representative where there are tenants in at least half the units in the scheme. That representative may attend meetings of the corporation but may not vote. Do you consider that further methods of involving non-owner residents should be investigated? 4. Strata or community title developments may now be created in stages and early buyers will be presented with information as to the future development of the site Binding obligations are imposed on the original developers and their successors in title by undertakings such as scheme descriptions and development contracts. The contents of these descriptions and contracts are prescribed by the legislation and the parties between whom obligations are imposed are prescribed by the legislation; see Strata Schemes Development Act 2016 (NSW), ss 9, 28A–28QH; Subdivision Act 1988 (Vic), s 37; Land Title Act 1994 (Qld), s 36; Community Titles Act 1996 (SA), s 13; Strata Titles Act 1985 (WA), ss 10, 18, 19; Strata Titles Act 1998 (Tas), ss 35, 46; Unit Titles Act 2001 (ACT), s 17; Unit Titles Schemes Act (NT), s 18. 5. Whilst the legislation is framed in terms of participation by unit holders in decision making by the strata or community corporation with opportunities for democratic processes, in practice these democratic rights are viewed much like voting in the United States as a chore or burden and responsibilities are commonly delegated to management agents. Specialist firms have been created to take on this work and the insurance industry has been keen to foster close relations with such firms as extensive insurance by strata or community corporations is compulsory. The regulation of management agents has in turn received attention, in particular in New South Wales where the activities of managing agents are regulated in ss 28 – 40 of the Strata Schemes Management Act 2015 (NSW). 6. A detailed statement of the strata and community title legislation in each jurisdiction is provided in The Laws of Australia, Vol 28, “Real Property” subtitle 11, “Strata and Group Titles”. [13.35]

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7. The type of dispute in Humphries v The Proprietors of “Surfers Palms North” Group Titles Plan 1955 (1994) 179 CLR 597 has arisen in a number of cases in many Australian jurisdictions. The common theme is an attempt by a management firm to obtain exclusive rights with respect to particular services for the estate. In general the courts have been reluctant to allow strata or community corporations to confer exclusive rights upon a contractor although authorisation through the adoption of a relevant by-law may provide an acceptable course of action. Significant cases include Birstar v Ocean Breaze [1996] QCA 110; Owners of Metro Inn Apartments Strata Plan 11880 v Transmetro Corporation Ltd [2000] WASC 293; Regis Towers Real Estate Pty Ltd v CSS Holdings Pty Ltd [2001] NSWSC 139.

The Owners - Strata Plan 5709 v Andrews [13.40] The Owners - Strata Plan 5709 v Andrews [2009] NSWCA 189 New South Wales Court of Appeal HODGSON JA: 1 Strata Plan 5709 consists of two townhouses, two carport garages and common property situated in Cremorne. The respondents Mr and Mrs Andrews are registered proprietors as joint tenants of Lot 2 in that Strata Plan, and are entitled to forty per cent of strata scheme units. Mr and Mrs Metford are registered proprietors of Lot 1 in the Strata Plan, and are entitled to sixty per cent of the strata scheme units. The appellant (OSP) is the owners corporation for this strata scheme, which, pursuant to s 8 of the Strata Schemes Management Act 1996 (the Act), has the principal responsibility for the management of the scheme. 2 OSP brought proceedings in the District Court against Mr and Mrs Andrews claiming unpaid levies, interest and costs pursuant to s 80 of the Act. Mr and Mrs Andrews defended the proceedings, and put on a cross-claim against OSP claiming an indemnity in relation to the requirement to pay unpaid levy contributions. 3 On 3 July 2008, pursuant to reasons given on 17 June 2008, O’Toole DCJ made orders giving a verdict for Mr and Mrs Andrews on OSP’s claim, dismissing the cross-claim, ordering OSP to pay Mr and Mrs Andrews’ costs of the proceedings, and making an order pursuant to s 229 of the Act that the costs payable by OSP be paid from contributions only against Lot 1 in Strata Plan 5709. 7 Part 4 of Chapter 2 of the Act deals with strata managing agents, who may be appointed by the owners corporation (s 27). Functions of the owners corporation may be delegated to a strata managing agent, pursuant to s 28, subs (1) and (3) of which provide: 28 What functions of an owners corporation can a strata managing agent exercise? (1) An owners corporation may, by the instrument appointing a strata managing agent or some other instrument, delegate to the strata managing agent: (a) all of its functions, or (b) any one or more of its functions specified in the instrument, or (c) all of its functions except those specified in the instrument, but only if authorised to do so by a resolution at a general meeting and subject to subsection (3). (3) An owners corporation cannot delegate to a strata managing agent its power to make: (a) a delegation under this section, or (b) a decision on a matter that is required to be decided by the owners corporation, or (c) a determination relating to the levying or payment of contributions. 938 [13.40]

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The Owners - Strata Plan 5709 v Andrews cont. Circumstances 16 Prior to 22 May 2003, there was a long history of disputes between Mr and Mrs Andrews and Mr and Mrs Metford. On that day, an adjudicator made the following order, among others: 1.

I appoint John Patman, trading as John Patman Strata Management licence number 895053) as strata manager of Strata Scheme SP 5709 with all the powers of the owners corporation executive committee, chairperson, secretary and treasurer of the owners corporation for a period of 12 calendar months commencing 23 June 2003.

Issues 39 The notice of appeal sets out the following grounds: 1. 2.

The primary judge erred in dismissing the proceedings (paragraph [217] of the judgment delivered on 17 June 2008 (“the judgment”). The primary judge should have found that: a. The strata managers Bright & Duggan Pty Ltd and John Patman Strata Management (“the strata managers”) had been duly appointed pursuant to of the Strata Schemes Management Act, 1996 (“the SSMA”) with the full powers of the Owners Corporation (paragraphs [174], [175], [177-180] of the judgment); b.

The strata managers, having been duly appointed pursuant to of the Strata Schemes Management Act 1996, had not (and could not) delegate their full authority or full powers of the Owners Corporation to the lot owners of the strata scheme (paragraphs [174], [175] and [191] of the judgment);

c.

No meetings or notices of meetings were required as a precondition to the making of determinations by the strata managers (paragraphs [188], [189], [190], [194], [198], [201], [209] and [213] of the judgment);

d.

Each of the determinations made by the strata managers was a valid exercise of authority by the respective strata managers;

e.

The managing agent’s authority to instruct the plaintiff’s solicitors was not circumscribed by section 80D of the SSMA or the regulations thereunder (paragraph [183] of the judgment);

f.

If a meeting/s of lot owners were necessary for any purpose then in consequence of the operation of clause 10(8) of schedul 2 of the SSMA, the respondents were disentitled from casting any effective vote at any such meeting.

Did Mr Patman exercise the function of OSP? 46 In the Further Amended Grounds of Defence, Mr and Mrs Andrews admitted that Mr Patman “convened the relevant meetings and prepared to pass special resolutions to raise special levies” (par [2]). It is likely that the word “prepared” was a typographical error for “purported” (cf par [3]). There was no suggestion in defence that Mr Patman had not purported to pass special resolutions to raise the levies. 59 In my opinion there is merit in the view expressed in Smith that in this area overly legalistic standards should not be imposed; and in my opinion it is also appropriate to have regard to the presumption of regularity, although I would not suggest that in these circumstances it operates very strongly. However, that presumption would tend against a finding that Mr Patman intended to delegate his function, contrary to s 32 of the Act, as found by the primary judge. 60 Having regard to all these considerations, in my opinion Mr Patman understood that the functions of OSP to be exercised at the meetings had been vested in him, and what happened at the meetings [13.40]

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The Owners - Strata Plan 5709 v Andrews cont. was an exercise by him of those functions, on the basis of consultation with the unit holders and their indication by their votes of the views that they held. Were general meetings necessary? 65 Mr Beech-Jones submitted that for raising special levies under s 76(4) and for initiating legal action under s 80D, the Act specifically required a general meeting. It was not to the point that unit owners could not effectively vote, because all the functions of OSP were being exercised by the Strata Managing Agent. Mr Beech-Jones referred to cl 32 of Schedule 2 of the Act, and submitted that seven days notice was required even if the owners had no entitlement to vote; and he submitted that accordingly all meetings held by Mr Jaworski were invalid, because this notice had not been given. 66 Mr Beech-Jones referred to Re Compaction Systems Pty Limited [1976] 2 NSWLR 477, in which Bowen CJ in Eq held (at 484-5) that the right of shareholders in a company to receive notices of meetings applied to shareholders not entitled to vote. Bowen CJ in Eq noted that the right to advance arguments and to influence the course of discussion could be significant. Mr Beech-Jones referred also to a decision to similar effect in Royal Mutual Benefit Building Society v Sharman [1963] 1 WLR 581. He submitted that the case of Smith, referred to earlier, was distinguishable because the legislation then applying did not require the holding of meetings, as do ss 76(4) and 80D. 67 Mr Beech-Jones accepted that, in the case of an appointment under s 162(1)(a), the determination referred to in s 76(4) would have to be the determination of the strata managing agent, and the resolution referred to in s 80D would be that of the strata managing agent. However, he submitted, that did not detract from the necessity of having a properly constituted general meeting of which proper notice was given. 68 In my opinion, these submissions should be rejected. It is to be remembered that this was a case in which orders had been made under s 162 appointing a strata managing agent to exercise all the functions of an owners corporation, which was not subject to any limitations of the kind referred to in s 28(3) of the Act. 69 Section 76(4) sets out one function of an owners corporation; and if that function is to be exercised by a strata managing agent pursuant to s 162(1)(a), it is not exercised by the owners corporation itself. What s 76(4) requires to be determined at a general meeting is the contribution “it”, that is the owners corporation, must levy; and if the levying function is exercised by the strata managing agent, so it is not the owners corporation itself that is levying the contribution, in my opinion the requirement of a general meeting has no application. 70 Section 80D deals with other functions of an owners corporation, including initiating legal action; and again, if that function is exercised by a strata managing agent appointed pursuant to s 162(1)(a), it is not exercised by the owners corporation itself; and again, in my opinion, s 80D has no application. This view is confirmed by the language of s 80D. The language “resolution is passed” is inapt to refer to a determination unilaterally made by a strata managing agent exercising the functions of the owners corporation. Conclusion 71 For those reasons, in my opinion the following orders should be made: (1)

Appeal allowed.

(2)

The judgment and orders of the District Court of New South Wales made on 3 July and 17 July 2008 in proceedings 3831 of 2006 are set aside.

(3)

Judgment be entered in favour of the appellant in the sum of $255,685.62, to take effect as at 3 June 2009.

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The Owners - Strata Plan 5709 v Andrews cont. (4)

Order that the respondent in addition pay interest on unpaid levies up to and including 3 June 2009, pursuant to section 79 of the Strata Schemes Management Act 1996, in the sum of $77,664.11, this order also to take effect as at 3 June 2009.

(5)

Order that the respondents pay the costs of the proceedings in the District Court of New South Wales.

(6)

Order that the respondents pay the costs of the appeal, and that they have a certificate under the Suitors’ Fund Act 1951 if otherwise eligible.

Tobias JA and Young JA agreed with Hodgson JA.

Note

[13.45]

A key aspect of the operation of the corporation is the annual general meeting at which all unit holders may vote, see Strata Schemes Management Act 2015 (NSW), Sch 2; Owners Corporation Act 2006 (Vic), s 69; Body Corporate and Community Management Act 1997 (Qld), s 62; Community Titles Act 1996 (SA), s 82; Strata Titles Act 1985 (WA), s 49(1); Strata Titles Act 1998 (Tas), s 75; Unit Titles (Management) Act 2011 (ACT), s 17; Unit Titles Schemes Act (NT), s 78. The startling aspect of Andrews is the delegation of these powers to the agent (admittedly after a voting deadlock) so that the lot holders had no participation in the decision making. Moreover they were not even entitled to notice of the meeting and thus an opportunity to make representations on matters of significant financial liability. Protection of minority interests

Proprietors Strata Plan No 30234 v Margiz Pty Ltd [13.50] Proprietors Strata Plan No 30234 v Margiz Pty Ltd (1993) 32 NSWLR 294 Equity Division, Supreme Court of New South Wales McLELLAND CJ: Ground (i) So far as presently material, s 68(1) provides as follows: 68(1) A body corporate shall, for the purposes of the strata scheme concerned, … (a) control, manage and administer the common property for the benefit of the proprietors (b) properly maintain and keep in a state of good and serviceable repair: (i) the common property; and (ii) any personal property vested in the body corporate; (c) where necessary, renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the body corporate. It has not been shown that the board was in error in holding that the body corporate had failed to “properly maintain and keep in a state of good and serviceable repair” the air-conditioning system so far as it related to the lower ground floor. The intermittent absence of any air flow at all and the air frequent delivery of dirty air are a sufficient indication that the air-conditioning system was not in a state of good and serviceable repair. The fact that by the expenditure of a substantial sum of money the air-conditioning system had been restored “to its rated capacity” is not inconsistent with the [13.50]

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Proprietors Strata Plan No 30234 v Margiz Pty Ltd cont. proposition that further work was necessary to prevent the interruptions to the supply of air, and the frequent delivery of dirty air, to the lower ground floor. This ground is not made out. Ground (ii) Although the duty arising under s 68(1)(b) to keep the common property in a state of good and serviceable repair extends to making elements of the common property good and sound irrespective of whether they were good and sound at some time earlier (Proprietors of Strata Plan No 6522 v Furney [1976] 1 NSWLR 412; Simons v Body Corporate Strata Plan 5181 [1980] VR 103), that duty does not in my opinion extend to replacement of a discrete system forming part of the common property (such as an air-conditioning system) by a new or different system. Such a replacement as that would be governed by para (c) rather than para (b). To the extent permitted by their language, paras (b) and (c) should be construed so that they do not overlap, since the funding of expenditure under those respective paragraphs has different sources, in the case of para (b) the administrative fund, and in the case of para (c) the sinking fund: see s 68(2). The distinction may be illustrated by reference to the circumstances of the present case. If the fact were that the efficient and effective operation of the air-conditioning system in relation to the lower ground floor required the addition to that system of return air vents, then the installation of such vents would properly be regarded as falling within para (b). But if the fact were that the efficient and effective provision of conditioned air to the lower ground floor required the replacement of the whole air-conditioning system, the installation of the replacement system would properly be regarded as falling not within para (b), but within para (c). The order made by the board in the present case is expressed in terms of a duty “to install … an air-conditioning system so as to provide to the lower ground floor comfortable and coo airconditioning”. This suggests that the installation of a replacement air-conditioning system is required. At the very least it indicates that the installation of a replacement system may be required. (The use by the board of the expression “perhaps” in relation to the failure to install return air vents as the cause of the problem is significant.) For reasons already given, the installation of a replacement system would go beyond keeping the air-conditioning system in a state of good and serviceable repair within the meaning of s 68(1)(b). Accordingly, this ground is made out since the board relied on s 68(1)(b) as justifying the order made. Whether there should be made an order appointing a managing agent to add return air vents to the existing air-conditioning system (based on para (b) of s 68(1)), to replace the existing air-conditioning system with a new or different system and, if so, with what characteristics (based on para (c)), or to carry out some other specified action (based on either or both of paras (b) and (c)), are matters for the further consideration of the board. Ground (iii) It was argued for the appellant that it was not open to the board to hold that the installation of an air-conditioning system designed to deliver efficient and effective air-conditioning to the lower ground floor would benefit proprietors generally, as opposed to Margiz alone. The material before me does not establish this. Accordingly, as argued, this ground is not made out. However, the issue raised as a false one since the question of who would benefit from the provision of efficient and effective air-conditioning to the lower ground floor is irrelevant to the existence or scope of any duty arising under para (b) or para (c). The nature and extent of the duties imposed on the body corporate by 942 [13.50]

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Proprietors Strata Plan No 30234 v Margiz Pty Ltd cont. those paragraphs are not affected by whether any particular action would enure for the benefit of proprietors generally, or one or more proprietors in particular: see Proprietors of Strata Plan 159 v Blake (1986) NSWSTC 30-068.

Note

[13.55]

The adjustment of financial contributions to reflect special benefit from work on common property arises both with respect to the maintenance of such property and its replacement. Again the issue is one for which different legislative responses have been adopted, with one response being to differentiate contributions according to benefit: see [13.75] and Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.340].

Houghton v Immer (No 155) Pty Ltd [13.60] Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Supreme Court of New South Wales HANDLEY JA: Was the resolution a fraud on the power? The Judge found, as an alternative ground for granting the plaintiff relief, that the 1996 resolution was a fraud on the minority. This approved the plan and authorised a future transfer to the defendants of the body corporate’s interests in lots 18 and 19 for $1. He held that the resolution deprived the plaintiff of valuable rights, and said that it was an irresistible inference that the resolution was only for the benefit of the first and second defendants. Mr McDougall’s first submission on this issue was that the doctrine of fraud on a power was excluded by the comprehensive provisions in the Act governing the common property, and in particular the safeguards for minorities in the provisions relating to its sub-division and alienation. He also relied on the provisions in Pt 5 dealing with the resolution of disputes but this submission is easily disposed of since s 146 (1) provides: Nothing in this Act derogates from any rights or remedies that a proprietor … of a lot … may have in relation to any lot or the common property apart from this Act. The earlier submission must suffer the same fate, not only because of s 146(1), but also because it is contrary to principle. Compliance with the formal requirements for the valid exercise of a power does not exclude the right to equitable relief. In fact the formal validity of an exercise of the power is a pre-condition for the grant of equitable relief against its fraudulent exercise. If the attempted exercise of the power was void, adequate relief was available at law, and there was no occasion for equity to intervene. Thus Sugden on Powers, 5th Ed, 1831, p 415 states: But there are some cases which a court of law cannot reach. This happens where the power is duly executed according to the terms of it; but there is some bargain behind, or some ill motive, which renders the execution fraudulent, and will enable equity to relieve. The same point was made by Dixon J in Mills v Mills (1938) 60 CLR 150 in dealing with a challenge to an issue of shares when he referred, at 185, to resolutions of directors “which … are ostensibly within their powers”. The power of a proprietor to vote at general meetings of the body corporate is not fiduciary, and within limits it may be exercised by the proprietor for his or her own benefit. Mr McDougall also submitted that the principles which restrain the exercise by shareholders of their power to alter the [13.60]

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Houghton v Immer (No 155) Pty Ltd cont. Articles of Association of limited liability companies are not applicable because bodies corporate were not subject to the general legislation affecting companies. See s 54(2). This submission overlooks the fact that the doctrine of fraud on a power is of general application, and was developed long before the earliest legislation dealing with companies. As Lord Lindley said in Free Church of Scotland v Overtoun [1904] AC 515 at 695: I take it to be clear that there is a condition implied in this as well as in other instruments which create powers, namely, that the powers shall be used bona fide for the purposes for which they are conferred. Lord Parker explained in Vatcher v Paull [1915] AC 372 at 378: The term fraud in connection with frauds on a power does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral. It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power. The application of this doctrine to the exercise of powers conferred on a majority, or special majority, of shareholders at a general meeting is well established. In British Equitable Assurance Company Limited v Baily [1906] AC 35 at 42, Lord Lindley said: Of course, the powers of altering by-laws, like other powers, must be exercised bona fide, and having regard to the purposes for which they are created, and to the rights of persons affected by them. The relevant principles were explained in Peters’ American Delicacy Company Limited v Heath & Ors (1939) 61 CLR 457 by Dixon J in the following passage at 511: If no restraint were laid upon the power of altering articles of association, it would be possible for a shareholder controlling the necessary voting power so to mould the regulations of a company that its operations would be conducted or its property used so that he would profit either in some other capacity than that of member … or, if as member, in a special and peculiar way inconsistent with conceptions of honesty so widely held or professed that departure from them is described, without further analysis, as fraud … The chief reason for denying an unlimited effect to widely express powers such as that of altering a company’s articles is the fear or knowledge that an apparently regular exercise of a power may in truth be but a means of securing some personal or particular gain, whether pecuniary or otherwise, which does not fairly arise out of the subjects dealt with by the power and is outside and even inconsistent with the contemplated objects of the power. See also Gambotto v W C P Ltd (1995) 182 CLR 432 at 444-445. In my judgment these principles apply to bodies corporate formed under the Act, and to the powers of the proprietors exercisable at general meetings. The Judge found that the common property appropriated by the defendants, pursuant to the 1996 resolution, was worth $600,000. They challenged this finding and argued that the relevant common property was worthless. It will be necessary to consider the valuation evidence at a later point in these reasons. However, if the common property had more than a nominal value, there can be no doubt that the special resolution authorised the appropriation of what had been common property for their 944 [13.60]

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Houghton v Immer (No 155) Pty Ltd cont. exclusive benefit, and the resolution was a fraud on the minority. See Cook v Deeks [1916] 1 AC 554 at 564-565. [Mason P and Beazley JA agreed.]

Wilson v Meudon Pty Ltd [13.65] Wilson v Meudon Pty Ltd [2004] NSWSC 1183 Supreme Court of New South Wales JUDGMENT 1 The plaintiffs, Michael Wilson and his wife Roberta Wilson bought shares in the first defendant, Meudon Pty Ltd, entitling them to the exclusive use and enjoyment of home unit 17 on the top floor of its building. The second defendant, John Baker, acquired the shares in Meudon that entitled him to the exclusive use and enjoyment of a penthouse on the roof of the building. 2 The penthouse did not encroach upon any portion of the roof directly above the Wilsons’ home unit. Mr Baker wished to extend the penthouse into that area of the roof. Meudon had given permission to Mr Baker’s predecessor in title to do so and there was an alternative proposal of Mr Baker to be put to a general meeting of the shareholders of Meudon. 3 The Wilsons claimed that the previous approvals were void, the proposed resolution, if passed, would be void and Meudon should be restrained from approving any development on the roof and Mr Baker should be restrained from carrying out any such works. 4 The directors of Meudon resolved to levy all members, including the Wilsons, for the purpose of funding the current proceedings. The Wilsons claimed that the resolution was invalid or a fraud on the minority. By his cross claim, Mr Baker sought declaratory relief that he had the exclusive use and enjoyment of the roof area. 5 The issues raised in the proceedings are, first, whether upon the proper construction of its articles of association, the approvals and proposed approval of Meudon were void and Mr Baker was denied the right to extend the penthouse into the roof area above the Wilsons’ home unit. Secondly, whether the approvals and the proposed approval were oppressive to, unfairly prejudicial to, or unfairly discriminatory against the Wilsons. Thirdly, whether they were contrary to the interests of the members of Meudon as a whole. Fourthly, whether the board of Meudon was entitled to raise the levy for the costs and, if so, fifthly, whether the levy against the Wilsons was oppressive or discriminatory. Oppression 35 On 22 October 1996, the annual general meeting of Meudon resolved unanimously that the company agreed to support a building application to South Sydney City Council for an extension of the penthouse into the roof area above the Wilsons’ home unit for an enclosed sunroom with new timber flooring of 25.92m2. The support was subject to the then owner of the penthouse shares, Bill Blundell, agreeing that in the event of approval by the local authority, the extension was to be carried out within 18 months. On completion, the share-holding was to be increased or an additional levy imposed or some other appropriate financial adjustment made in recognition of the increased residential area. It was to be based upon some equitable criterion such as the percentage increase in the floor area or market value of the unit. The work was to be carried out under such conditions as the board might determine. The new extension, on completion, was to be deemed to be vested in the company. All expenses incurred by the company in processing the application and consequent upon any approval being given were to be borne by the shareholder. [13.65]

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Wilson v Meudon Pty Ltd cont. 36 The planned sunroom was of a dogleg shape, the eastern extremity running from north to south for about half its length and then running towards the south east parallel to the north eastern wall of the central stair and lift well. 37 The notice of meeting did not state that the resolution was to be a special one, but the minutes recorded it as such. The Wilsons attended the meeting and voted in favour of the resolution. It was complained that this was the first meeting attended by the Wilsons and they were given insufficient information. They asserted that no plans were tabled at the meeting. There was, however, unchallenged evidence from two other attendees that architect’s plans were displayed and explained at the meeting. I accept that evidence. 104 The Corporations Act 2001 (Cth), s 232(e) empowered the court to make orders it considered appropriate if the conduct of a company’s affairs, or an actual or proposed act or omission, or a resolution or a proposed resolution, was oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members. 105 The Wilsons’ arguments in this regard were that the resolutions approving the original and extended Blundell proposals, the conferring of any additional rights on Mr Baker to build above the Wilsons’ home unit and the imposition by the board of directors of the levy to pay the costs of these proceedings, fell within this category. 106 I have already indicated that, in my view, the Wilsons had no rights that were adversely affected by the approval of the Blundell plans or by an extension of the penthouse. It would be different if a structure were to be approved that did not constitute a living area and caused undue interference with the amenity of the Wilsons’ home unit. 107 The statutory power to grant relief is couched in terms of unfairness in order to free the court from technical considerations of legal rights (O’Neill v Phillips [1999] 1 WLR 1092 at 1098). Thus in situations in which equitable principles would preclude a company from exercising its legal rights, a court may act. 108 There was, however, nothing in the nature of a legitimate expectation on the part of the Wilsons that would make it inappropriate for equity to allow Meudon to grant permission to extend the penthouse (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [324], [418] to [423]). 109 In my view, no equitable principle has been established that would justify the court’s intervention on the basis that the Wilsons had been unfairly treated by the board’s approval of the planned extensions of the penthouse. The Wilsons initially agreed to the extension of the penthouse. When they raised objections, Mr Wilson was invited to attend board meetings even though he was not a director. He was subsequently invited to join the board. Thereafter, he was consulted by the chairman on matters appertaining to the penthouse extensions. The objections of the Wilsons were considered by the board and it had the power to determine the matter under art 111. Nonetheless, at the Wilsons’ urging, it put subsequent proposals to general meetings. 110 In a non-commercial company such as Meudon, the test of oppressive or unfairly prejudicial or discriminatory conduct is to be judged from the viewpoint of a reasonable person associated with a home unit company. In Reid House 5 ACLC at 457, Needham J said that the court would not interfere if the evidence showed that the board gave consideration to the proposal in question and rejected it on grounds that could not be said to be such as no reasonable person could adopt. It was not the function of the court to interfere in management decisions of the board of directors. 111 In my view, the Wilsons have failed to establish oppression or a lack of fairness on the part of Meudon in dealing with their objections to the penthouse extensions. Interests of members as a whole 112 The Corporations Act 2001 (Cth), s 232(d) enabled the court to act if the conduct, act or omission, or resolution in question was contrary to the interests of the members as a whole. 946 [13.65]

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Wilson v Meudon Pty Ltd cont. 113 The initial approval of Mr Blundell’s plans required an allotment of shares, an additional levy, or some other appropriate financial adjustment in recognition of the increased residential area resulting from the building extension. In August 2001, the directors sought $100,000 from Mr Baker if he proceeded with the amended Blundell plans and$300,000 if he proceeded with his then suggested plans. 114 The board subsequently abandoned its demand for $100,000 and, instead, sought $1,500 for the allotment of additional shares at par. The agreement with Mr Blundell did not contemplate allotment at par. As one of the mechanisms for obtaining a suitable financial return for the extension of the penthouse, the issue of shares was mentioned but, clearly, that was to be at a price to give the suitable financial adjustment. 115 There was nothing to prevent the board putting to a general meeting a special resolution to allot Mr Baker 1,500 shares for $100,000. Mr Weeks said the deal was lost. But there appears to have been little negotiation on the board’s part. Rather, it appears to have capitulated to Mr Baker’s refusal to pay more than $12,500 for the shares. 116 The penthouse was in a state of disrepair. Internally, it had been semi-gutted and piles of masonry littered its floor. No doubt the board was keen to have the penthouse restored. But that does not mean that the directors should have capitulated when the board was aware that the valuable rights were involved. Mr Weeks was aware of the value of the right to develop the roof garden area. 117 A company, whether by a general meeting or by its board of directors must act bona fide for the benefit of the company as a whole (Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 at 671). The statutory requirement in the Corporations Act 2001 (Cth), s 232(d) is no different (New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86 at 96). 118 Notwithstanding the shortcomings of the board in negotiating with Mr Baker, it has not been established, in my view, that the board acted in bad faith in accepting the limited payment of $12,500 from Mr Baker. 119 In those circumstances, it is not the function of the court to review the decisions of the appropriate organs of a company and reverse those decisions if the court disagrees with them. As Brooking J put it in Zephyr Holdings Pty Ltd v Jack Chia (Aust) Ltd (1989) 14 ACLR 30 at 36 in considering the forerunner of the Corporations Act 2001 (Cth), s 232(d): Where, as in the present case, bad faith is not established and where, as in the present case, the allegation is that the proposed course of action is detrimental to the members as a whole, the court must take care that it does not too readily intervene in the affairs of a company under s 320. Compare Thomas v H W Thomas Ltd (1984) 1 NZLR 686 at 697; Wayde v New South Wales Rugby League Ltd, 61 ALR 225 at 231. It is only stating the obvious to say that, under s 320, the court does not sit as an appellate tribunal to review the decisions of the organs of a company or of a class of its members on the footing that the court will, as it were, automatically reverse the decision if it disagrees with it. Costs levy 124 With effect from about March 2004, the board of directors of Meudon resolved to make a special levy on all members, including the Wilsons, for the purpose of funding the company’s conduct of these proceedings. 125 Article 21(n) of Meudon’s constitution provided that the directors might, from time to time, make a levy on the holders of the groups of shares of an amount sufficient to provide for payment in respect of Meudon being any other expenditure properly incurred in the running or conduct of the building as a first class residential unit. [13.65]

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Wilson v Meudon Pty Ltd cont. 126 It was submitted that the provision was insufficient to entitle the directors to raise the levy. It was said that the running or conduct of the building did not envisage the costs of proceedings such as the present. 127 Article 21 of the constitution contains a list of specific losses and expenses that one might expect a first class residential building company to incur. Article 21(m) included management, secretarial and accountancy charges. In my view, art 21(n) was meant to encompass any other expenditure properly incurred in the running or conduct of the building. In my view, the directors of Meudon were entitled to raise a levy to cover the costs of these proceedings under art 21(n) of the constitution. Contribution from the Wilsons 128 It was argued that the imposition of the levy on the Wilsons was oppressive or unfairly prejudicial because, at the risk of forfeiture of their shares, they required to partially fund the defence to their proceedings. 129 In my view, the Wilsons have made out a case of oppression or unfair prejudice with respect to the levy. The Wilsons ought not to have been asked to contribute to the cost of the defence to the proceedings brought by them. In my view, the directors ought to have realised that the Wilsons’ conduct of the proceedings cast a burden for costs on them and the directors ought to have realised that their burden would be exacerbated by contribution to a fighting fund against them. 130 In my judgment, the directors should not have exercised their power to raise the levy against the Wilsons or they should have waived compliance by the Wilsons with the levy. Relief 131 I will make an order the effect of which will be to exempt the Wilsons from the levy. The Corporations Act 2001 (Cth), s 233(1) is not exhaustive of the orders the court may make. I will hear the parties on the appropriate terms of such an order. 132 In all other respects, I will dismiss the Wilsons’ amended originating process and relieve Meudon from the undertakings it gave to the court. 133 I will grant relief on Mr Baker’s cross claim to the effect that he has exclusive use and enjoyment of the roof garden, Meudon is free to erect any structure on the roof that does not unreasonably interfere with any shareholder’s exclusive use and enjoyment of a home unit in the building, that the board’s power to erect such structures stems from art 111 of Meudon’s constitution and that the board duly authorised Mr Blundell to carry out his extended plans.

[13.70]

Notes

1. The creation of a strata or community title means that there is a group of unit holders whose interests will sometimes differ. As well as the general doctrine of fraud on a minority (as discussed in Wilson v Meudon Pty Ltd [2004] NSWSC 1183) procedures are established by the legislation to attempt to protect the interests of all parties. Consequently, decisions which could benefit some to the detriment of others may be required to be passed unanimously or by a nominated special majority at a meeting of unit holders; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [13.265]. 948 [13.70]

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2. The legislation establishes detailed rules for the making of decisions and the adoption of rules or by-laws at meetings of unit holders. In turn processes for the review of those decisions are established. In New South Wales, in particular, an elaborate structure exists for appeals. 3. The original developer will set up the management structure for the estate but the strata or community corporation is then responsible for operation of the estate. In the event of staged development, continuing obligations will be imposed on the developer. To fulfil its obligations the strata or community corporation must hold an annual meeting and other meetings as prescribed. Office bearers (normally including a chairperson, a treasurer and a secretary) must be appointed. The operation of the estate will not only relate to internal relations but also to dealings with the outside world. Internally the estate is governed by rules affecting neighbourliness (such as noise levels and pets), property maintenance, and financial contributions. The legislation commonly sets out a standard body of rules, often described as by-laws, some of which cannot be changed and others are subject to decisions of the corporation. Both by-laws and decisions of the corporation may be challenged as harsh or unconscionable. Division of entitlements and responsibilities

Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 [13.75] Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 [2004] QCA 214 Queensland Court of Appeal CHESTERMAN J: The applicants for leave to appeal are owners of lots in an apartment building known as Centrepoint which is located at 69 Leichhardt Street, Spring Hill. Centrepoint consists of two towers, all the lots in which are residential. One tower contains 20 apartments and the other 31. As well there are three levels of underground car parks. Of the 51 apartments, six have one bedroom, 28 have two and 17 are three bedroomed. They vary in size. The smallest is 81 square metres in extent, and the largest, 241 square metres. The common area contains a number of amenities for lot owners and their guests. These include a sauna, a swimming pool and a games room. The respondent, the body corporate for Centrepoint, was originally incorporated pursuant to the Building Units and Group Titles Act 1980 (Qld) and titles to the lots in the buildings were granted pursuant to that Act. It provided that the owners of the realty comprising the residential lot had an entitlement to “lots” which determined the proportionate share of the lot owner to the common property and to the contributions to be paid for the costs of maintaining and providing services to the building. [4] To avoid confusion in use of the word “lot” - which means both the real property represented by the residential unit and the designated number representing the obligation to contribute to body corporate expenses - I will use the word “apartment” to refer to the former use and the word “lot” to refer to numbers in the contribution schedule, which will be described shortly. [5] The Building Units and Group Titles Act was repealed in 1997 and replaced by the Body Corporate and Community Management Act 1997 (Qld) (“the Act”), which provides that there should be two sets of “lot entitlements” for each apartment in a community titles scheme, formerly a building units plan. The two sets were “contribution schedule lots” and “interest schedule lots”. The former is the means by which the respective contributions of the apartment owners to the maintenance cost of the building are determined. The interest schedule is the means by which the respective owners’ interests in the common property are determined. In each case there is a schedule of lot entitlements which consists of a whole number allocated to each apartment. [13.75]

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Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 cont. [6] To determine the amount of an apartment owner’s contribution to expenses the total of body corporate expenses is divided by the total number of contribution lots. The quotient is then multiplied by the number of contribution lots in respect of each apartment to arrive at the respective amounts to be paid. [7] The respondent, having been incorporated under the Building Units and Group Titles Act, has only one schedule of lot entitlements. That schedule is taken to be both the contribution schedule lot entitlement and the interest schedule lot entitlement for the purposes of the Act. [8] Section 48 of the Act provides that the owner of a lot may apply to the District Court for an order for the adjustment of a lot entitlement schedule. [9] By an application dated 10 February 2003 the applicants applied for an order varying the contribution entitlement schedule of the respondent. The application was heard on 28 and 29 January 2004 and dismissed on 13 February 2004. The applicants seek leave to appeal against the dismissal of their application. [10] The Act was amended by the Body Corporate and Community Management and Other Legislation Amendment Act 2003 (Qld) (“the 2003 Act”), which came into effect on 4 March 2003. It was thus the Act as amended which contained the relevant law when the District Court came to decide the application. This is not controversial but some of the amendments made are referred to as assisting in the proper construction of the Act. [11] Section 47 of the Act provides: (1) This section states the general principles for the application of lot entitlements to a community titles scheme, but has effect subject to provisions of this Act providing more specifically for the application of lot entitlements. (2) The contribution schedule lot entitlement … is the basis for calculating (a) the lot owner’s share of amounts levied by the body corporate, unless the extent of the lot owner’s obligation to contribute to a levy for a particular purpose is specifically otherwise provided for in this Act; and (b) the value of the lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution. (3) The interest schedule lot entitlement … is the basis for calculating (a) the lot owner’s share of common property; and (b) the lot owner’s interest on termination of the scheme, including … body corporate assets …; and (c) the unimproved value … for the purpose of a … rate or [land] tax … (4) Neither the contribution schedule lot entitlement nor the interest schedule lot entitlement … is used for the calculation of the liability of the owner … of the lot for the supply of a utility service … if the amount of the … service supplied … is capable of separate measurement, and the owner … is billed directly. [12] Section 48 provides: (1) The owner of a lot … may apply (a) to the District Court for an order for the adjustment of a lot entitlement schedule; or (b) … (4) The order of the court … must be consistent with (a) if the order is about the contribution schedule - the principle stated in subsection (5); or (b) … 950 [13.75]

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Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 cont. (5) For the contribution schedule, the respective lot entitlements should be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal. [13] Section 49 provides relevantly: (1) This section applies if an application is made for an order … for the adjustment of a lot entitlement schedule. (2) This section sets out matters to which the court … may, and may not, have regard for deciding (a) for a contribution schedule - if it is just and equitable in the circumstances for the respective lot entitlements not to be equal; and (b) … (3) However, the matters the court … may have regard to … are not limited to the matters stated in this section. (4) The court … may have regard to (a) how the community titles scheme is structured; and (b) the nature, features and characteristics of the lots included in the scheme; and (c) the purposes for which the lots are used. (5) The court … may not have regard to any knowledge or understanding the applicant had, or any lack of knowledge or misunderstanding on the part of the applicant, at the relevant time, about (a) the lot entitlement for the subject lot or other lots included in the … scheme; or (b) the purposes for which a lot entitlement is used. The “relevant time” is that at which an applicant contracted to buy his lot which is designated the “subject lot”. [14] The applicants and the respondent respectively called a witness who was knowledgeable about the types of costs incurred by building owners and bodies corporate in maintaining and providing services to those who inhabit the buildings and the means by which those costs might be allocated between apartment owners. There was little difference in the evidence given by the respective experts. To a large extent they performed a mechanical exercise: identifying the relevant costs, categorising them and then allocating them among the lot owners at Centrepoint. [15] It was common ground that the existing lot entitlements, deriving as they do from the Building Units and Group Titles Act, are not equal. There is a degree of arbitrariness between the allocation of lot entitlements to the various apartments. Both experts agreed that the present allocation of lots, and therefore the percentage of burden of contributing to maintenance, is not “just and equitable”. The approach taken by both experts was identical in methodology and varied in result in only one particular. [16] The approach taken to the allocation of lot entitlements appears from the report of Mr Sheehan who gave evidence on behalf of the applicants. At pages 8 and 9 of his report he wrote: Certain administrative and sinking fund items should not be shared on an equal basis amongst all lots … Certain lots within the scheme place a greater demand for the underlying service then [sic] other lots … 8.1 Method 1 - Costs shared equally There are certain administrative and sinking fund items that should be shared amongst all lots on an equal basis. These items of expense either are directly proportional to the number of lots in the scheme (eg body corporate administration contract) or are fixed without reference to the number of lots (eg fee for preparation of a tax return). No particular lot places any greater or lesser demand on the underlying services. [13.75]

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Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 cont. 8.2 Method 2 - Support and shelter costs The purpose of the structure of the building is to provide support and shelter to the lots. … The nature of the construction makes it appropriate to share the support and shelter costs based on the area of the lot in proportion to the total area of all lots. Intuitively, if lot A is twice as big as lot B then it requires twice the support and shelter. 8.3 Method 3 - Potential accommodation factor (bedrooms) Some costs are directly related to the use of the common property. The use of the common property depends on - … the number of people who are resident … The most logical determinant of the number of residents … is the number of bedrooms, … 8.4 Method 4 - Lift Costs The lift costs deserve unique treatment as the 2 towers benefit in different ways from the existence of the lifts. The costs associated with the provision of a working lift should be shared equally between the 2 towers and then equally between the lots in those towers. 8.5 Method 5 - Lattice Costs … only [some] lots have lattice. … I have allocated the costs of the lattice only to these lots. [17] The result of Mr Sheehan’s examination of the expenditure of the respondent body corporate, and his categorisation of that expenditure in accordance with the quoted description, produced a table which showed what percentage of the total costs should be allocated to each category. From this analysis Mr Sheehan was able to arrive at a table of appropriate lot entitlements for each lot. The precise mechanism by which this was done was not explained and was not necessary. [18] Mr Linkhorn, who gave expert evidence for the respondent, adopted the same methodology. He differed only in that he allocated the costs of operating and maintaining the lifts separately between the apartments in each tower, though equally between the apartments in each. This produced a different set of lot entitlements but the difference is quite small. [19] In reaching their conclusion that the existing contribution lot entitlement schedule is not “just and equitable,” and that it would not be “just and equitable” to make the lot entitlements in respect of all apartments equal, both Mr Sheehan and Mr Linkhorn had regard only to the expenses incurred by the respondent in operating and maintaining its buildings and the extent to which the apartments “consume” those expenses differentially. The exercise undertaken, and the basis for the opinions as to the proper allocation of lot entitlements, did not go beyond identifying and classifying the extent to which different apartments placed greater financial burden on the body corporate than other apartments. [24] The point in issue is a narrow one. It is whether in determining an application for the adjustment of a contribution lot entitlement schedule and, in particular, in determining the extent to which it is just and equitable that respective lot entitlements not be equal, the enquiry is at large (save for the matter described in s 49(5)) or whether it is limited to matters which show how apartments differently affect the cost of running and maintaining a community titles scheme. The learned trial judge took the first view and thought it appropriate to consider the application by reference to the affect of the change on the value of apartments, and the amenity of the apartments. His Honour did so because of the terms of s 49(4), which provides that the court may have regard to the structure of the community titles scheme and the nature, features and characteristics of the apartments in the scheme. His Honour took the view, not unnaturally, that amenity and location were features or characteristics of apartments. [25] The submission for the applicants is that this part of the Act is concerned with the just and equitable distribution of body corporate expenses among apartment owners and that in making an adjustment of a lot entitlement schedule the court must pay regard only to the origin and allocation of body corporate expenditure. [26] Although the Act gives no clear indication one way or the other, the preferable view is that a contribution schedule should provide for equal contributions by apartment owners, except insofar as 952 [13.75]

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Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 cont. some apartments can be shown to give rise to particular costs to the body corporate which other apartments do not. That question, whether a schedule should be adjusted, is to be answered with regard to the demand made on the services and amenities provided by a body corporate to the respective apartments, or their contribution to the costs incurred by the body corporate. More general considerations of amenity, value or history are to be disregarded. What is at issue is the “equitable” distribution of the costs. [27] There are a number of reasons for this conclusion. The first is to be found in the terms of the Explanatory Notes which accompanied the 2003 Act and the content of the Second Reading Speech when the Bill for it was debated. Because the meaning of the Act is unclear it is permissible to consult these materials. [28] Section 10 of the 2003 Act inserted s 46(7) which is in these terms: (7) For the contribution schedule for a scheme for which development approval is given after the commencement of this subsection, the respective lot entitlements must be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal. This replaced an earlier provision, which was repealed by the 2003 Act, to the effect that upon registration a community titles scheme did not have to provide for equal contribution lot entitlements. Explaining the change the Note said: The change is intended to reinforce the concept that usually all lot owners are equally responsible for the cost of upkeep of common property and for the running costs of the community titles scheme. However, it is recognised that there are many valid instances where the contribution schedules do not have to be equal. The amendment provides that usually the numbers in this schedule are equal, unless it can be demonstrated that it is just and equitable for there to be inequality. [30] These materials make it tolerably plain that the Act is intended to produce a contribution lot entitlement schedule which divides body corporate expenses equally except to the extent that the apartments disproportionately give rise to those expenses, or disproportionately consume services. That determination can only be made by reference to factors which have a financial impact or consequence on the body corporate. It cannot be affected by factors which go to an apartment’s value or amenity. [31] Secondly, the nature of a contribution lot entitlement schedule itself suggests that the allocation of lot entitlements is to be made on the basis of the impact that individual apartments make upon the costs of operating and running a community titles scheme. Contribution lot entitlements determine the apartment’s share of the outgoings. The starting point is that the entitlements should be equal. A departure from that principle is allowable only where it is just, or fair, to recognise inequality. The departure must take as its reference point the proposition, from which it departs, that apartment owners should contribute equally to the costs of the building. The focus of the inquiry is the extent to which an apartment unequally causes costs to the body corporate. [32] The third consideration is that if this principle not be the applicable one then there is no basis on which applications for adjustment of contribution lot entitlement schedules can consistently be made. As the evidence in this application shows, if the inquiry is limited to the extent to which an apartment creates costs, or consumes services, above or below the average, one can readily determine what the contribution lot entitlement should be. The high degree of similarity in the reports of Mr Sheehan and Mr Linkhorn demonstrates this. If the inquiry be wider and include such nebulous criteria as the structure of the scheme, or the nature, features and characteristics of the apartments in the scheme, and the purposes for which they are used, there is no intelligible basis on which there could be a consistent and coherent determination of applications for adjustment of lot entitlements. [13.75]

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Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 cont. Each case would be determined idiosyncratically and a vast variety of circumstances might be relied upon to depart from, and therefore erode, the principle said to be paramount, that there should be an equality of entitlements. [33] Accordingly I would construe s 49 of the Act, and in particular subsection (4), as meaning that those identified matters to which a court may have regard are to be regarded only to the extent, if any, that they affect the cost of operating a community titles scheme. [34] The evidence adduced by both parties proceeded on this basis. It established that: • The present lot entitlement schedule is not equal. • The present lot entitlement schedule is not just and equitable. • An equal contribution lot entitlement schedule would not be just and equitable. • A contribution lot entitlement schedule in the terms compiled by Mr Sheehan or Mr Linkhorn would be just and equitable. [Atkinson and McPherson JJ concurred.]

Note

[13.80]

The general scheme for financial contributions is to divide according to a system unit entitlement where responsibility (and often power) reflects the relative burden of the units on the body corporate. The process for the adjustment of unit entitlements was discussed in Fantl v The Owners of Strata Plan 60492 (unreported, Consumer Trader & Tenancy Tribunal, 2002) in the following terms: On 20 November 2001 an application was lodged by Ms Fantl, the owner of lot … in the scheme, for an order reallocating unit entitlements. The initial reasons given for applying by Ms Fantl were that the “unit entitlements were based on the initial unrealistic asking price of $1,400,000.00”. The application was accompanied by a valuation report prepared by Mr Boulougouris, a certified practicing valuer. Background The parcel comprises 6 lots. When the strata plan of sub-division was registered, on 29 June 1999, the unit entitlements among the lots had been allocated as follows: Lot 1 - 15 Lot 3 - 14 Lot 5 - 15

Lot 2 - 11 Lot 4 - 17 Lot 6 - 28

I may only make an order if I consider that the allocation of the unit entitlements among the lots was unreasonable when the strata plan was registered. In making this determination I have to have regard to the respective values of the lots. I have before me two conflicting valuation reports. Neither valuer gave oral evidence. Neither valuer’s expert opinion was tested by cross-examination. While agree with the submission made by the applicant that Mr Perkins’ reference to his conversation with the original developer should be given little, if any, weight, nevertheless the report by Mr Perkins clearly refers to other matters which were taken into account, including evidence of sales of properties outside the parcel around the time of registration of the strata plan. In arriving at an estimate of the value of lot …, Mr Perkins’ conclusion is that it was more than the amount paid for by Ms Fantl but less than the value reflected in the allocation of unit entitlements. Mr Boulougouris simply states in his report that the sale prices did provide a true indication of the market value. On balance I prefer the expert opinion of Mr Perkins. In any event, ultimately I may only make an order under s 183 if I am satisfied that the original allocation was unreasonable. 954

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Taking into account the evidence before me, I am unable to conclude that the allocation was unreasonable. Although Mr Perkins also estimates the relative value of lot … as being a little lower than the value reflected in the original unit allocation, the difference is not such it would make this allocation unreasonable. The application is dismissed. John Bordon, Member, Consumer, Trader & Tenancy Tribunal

Common and individual property boundaries

Seiwa Pty Ltd v Owners Strata Plan 35042 [13.85] Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 New South Wales Supreme Court BRERETON J 1 HIS HONOUR: The plaintiff Seiwa Australia Pty Ltd, whose sole director and shareholder is Shojiro Azuma, is the owner of Unit 14 in Strata Plan 35042. The defendant is the owners corporation of that strata plan. Seiwa claims damages and injunctive relief in respect of alleged breaches by the owners corporation of its duty under (NSW) Strata Schemes Management Act 1996, s 62, properly to maintain the common property, in particular the rectangular steel uprights which provide the framework enclosing a balcony that forms part of Seiwa’s unit, and the waterproofing membrane that seals the floor of its external patio so as to prevent water from the surface of the patio entering into the unit. The owners corporation does not admit that the relevant structures are common property so as to fall within s 62, denies the alleged breaches, says that it has taken all reasonable steps to comply with its duty under s 62, says that Seiwa has caused the damage by its own negligent failure to notify defects to the owners corporation at an appropriate time, and contends that the proceedings should have been instituted in the Consumer Trade and Tenancy Tribunal. 8 Strata Plan 35042 was registered under the 1973 Act. That Act, like the 1996 Act, had the effect that a strata lot comprised one or more cubic spaces, the base of each being designated as one lot or part of one lot on the floor plan forming part of the strata plan, and being cubic space the base of whose vertical boundaries is as delineated on the sheet of the floor plan and which has horizontal boundaries as ascertained under Strata Schemes (Freehold Development) Act 1973, s 5(2), but does not include “structural cubic space”. Section 5(2) provides as follows: (2) The boundaries of any cubic space referred to in paragraph (a) of the definition of floor plan in subsection (1): (a) except as provided in paragraph (b): (i) are, in the case of a vertical boundary, where the base of any wall corresponds substantially with any line referred to in paragraph (a) of that definition–the inner surface of that wall, and (ii) are, in the case of a horizontal boundary, where any floor or ceiling joins a vertical boundary of that cubic space–the upper surface of that floor and the under surface of that ceiling, or (b) are such boundaries as are described on a sheet of the floor plan relating to that cubic space (those boundaries being described in the prescribed manner by reference to a wall, floor or ceiling in a building to which that plan relates or to structural cubic space within that building). 9 For that purpose, Strata Titles Regulations 1973, Reg 9, prescribed as follows: (9) A floor plan required for the purposes of s 8 or 9, a strata plan of consolidation or a building alteration plan shall be drawn showing – … (e) where the boundary of a lot is defined by reference to the surface of a floor or ceiling – such vertical connections and notations as are necessary to define that boundary; … [13.85]

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Seiwa Pty Ltd v Owners Strata Plan 35042 cont. 10 By virtue of s 5(2), if the base of any wall corresponds substantially with a line on a floor plan, the boundary of the relevant cubic space is the “inner surface” of that wall. Generally speaking, walls that coincide with the boundaries of a strata lot are common property, and the lot boundaries are their inner (from the perspective of the relevant lot) surfaces [Symes v Proprietors Strata Plan 31731 [2001] NSWSC 527, [25]-[26]]. The rusted steelwork 11 As has been foreshadowed, Seiwa’s complaints have two aspects. The first relates to the rusting of steelwork that formed the framework of the enclosed balcony. 12 Although it was not admitted that this steelwork was common property, no submission was made on behalf of the owners corporation to the contrary. Indeed the owners corporation replaced it, not long after proceedings were instituted. It formed part of the external wall, and substantially coincided with the external boundary of the lot marked on the plan. The lot boundary was its inner surface, and the steelwork was outside the lot and thus common property. 13 The evidence shows that the steel uprights rusted through, a few centimetres above the level of the sill. The rust damage was extreme, and deprived the uprights of structural integrity. The owners corporation was advised by their own consultant that this posed a danger to the public (as it did to occupants of and entrants in Seiwa’s unit). There is not the slightest question but that in this respect the common property was not properly maintained, and accordingly there was a breach of s 62. 14 Much evidence addressed when the owners corporation first knew of the breach, and how long it took to remedy it. It suffices to say that the problem was present and was drawn to the attention of the owners corporation not later than 3 March 2003, but not remedied until August 2005, a few weeks after these proceedings were instituted. As the duty is a strict one, it matters not whether the problem could have been rectified more rapidly. Breach of the s 62 duty in respect of the steelwork is established through the period from 3 March 2003 until August 2005. The water penetration 15 The second aspect of Seiwa’s complaint is water penetration from the patio into the living area of the unit, resulting from a defect in the waterproof membrane which sits on top of the concrete floor of the patio underneath the tiles. 16 Mr Sirtes submitted that the membrane was not common property. On the strata plan, the patio bears an annotation in the following terms: Denotes terrace limited in height to 2.5 above the upper surface of the concrete floor thereof except where covered. 17 Although Mr Young, for Seiwa, at first submitted that the words “except where covered” referred to a cover on the concrete floor, I prefer the construction advanced by Mr Sirtes, that those words refer to a cover of some part of the cubic space above the patio, such as a roof or awning. The effect of the annotation is to describe the upper boundary of part of the relevant cubic space, by reference to a floor. It does not describe the lower boundary. Accordingly, as the floor joins vertical boundaries of the relevant cubic space, the lower boundary of the lot is, pursuant to s 5(2)(a)(ii), the upper surface of the floor. 18 The evidence of Mr Azuma establishes that the tiles (and therefore, necessarily, the membrane, which is under the tiles) had been affixed prior to the date of registration of the strata plan. In those circumstances, the upper surface of the floor was the top of the tiles. The tiles were not themselves within the cubic space and thus do not form part of the lot. As common property is comprised of those parts of an allotment which are not within an individual lot, the tiles, and more particularly the membrane underneath them, were part of the common property. 956 [13.85]

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Seiwa Pty Ltd v Owners Strata Plan 35042 cont. 19 Once again, although there was much dispute as to when the owners corporation was first given notice of this problem, that matters not; it was at least on notice of it by 3 March 2003. Some remedial action was taken, in that a course of tiles was apparently lifted and the waterproof membrane beneath it inspected and the tiles relayed. Some repairs were also made to the window seals. However, Seiwa complains that water penetration continued. In or about June 2005, Seiwa had a water flood test performed, which involved blocking the drains, sandbagging the patio, and filling it with water. As a result, water penetrated through the hob which separates the patio from the interior, into the living area. This proved a defect in the waterproof membrane - as was the opinion not only of Seiwa’s expert Mr Ryan, but also of the owners corporation’s expert Mr Baxendale: if the membrane was functioning properly, water should not have been able to enter the living area, which it could have done only by permeating through the membrane and then the hob. According to Mr Ryan, whose evidence on this I accept, the penetration of water into the unit was attributable to a combination of a defect in the membrane, a defect in the hob, and a defect in the window seals. However, he added that if the membrane were repaired, it would be unnecessary also to repair the hob. [It is unnecessary for present purposes to consider whether defects in the membrane also resulted to the penetration of water into unit 13, below Seiwa’s unit]. 20 The owners corporation had the window seals repaired in about March and April 2006. Mr Sirtes submitted that there was no evidence of any ingress of water into the unit since then. That may be so, but as Mr Young rightly submits, it defies logic that repairing window seals could fix a proven defect in the membrane. I am satisfied that there has been a breach of the s 62 duty, by failure to maintain or repair the membrane, since at least 3 March 2003, and that that breach continues.

Note

[13.90]

The definition of property boundaries varies in the legislation of the various jurisdictions. In essence, subject to a contrary statement in the relevant plan of subdivision, in New South Wales, South Australia, Western Australia and the Northern Territory the boundary is the inner surface of walls, fences, floors, ceilings or roofs: Strata Schemes Management Act 2015 (NSW), s 5(2); Community Titles Act 1996 (SA), s 19; Strata Titles Act 1985 (WA), s 3(2)(a); Unit Titles Act (NT), s 4(2) and in Victoria, Queensland, Tasmania and the Australian Capital Territory it is the centre: Owners Corporation Act 2006 (Vic), s 24; Qld, Registrar of Titles Directions for Preparation of Plans, 9.17; Strata Titles Act 1998 (Tas), s 9; Unit Titles Act 2001 (ACT), ss 14, 15. Use of individual lots

White v Betalli [13.95] White v Betalli (2007) 71 NSWLR 381; [2007] NSWCA 243 SANTOW JA: Introduction 1 The appellant, owner of Lot 2 in a two-lot strata scheme, challenges the validity of a by-law (by-law 20) purporting to give the respondent owners of Lot 1 a watercraft storage area on the appellant’s lot. The appellant Lynda Margaret White sought leave to appeal and a concurrent hearing. 2 By-law 20 purported to provide access for Lot 1 to use a specified watercraft storage area on the adjoining Lot 2, the latter being a waterfront lot. By-law 20 if valid, was created as a by-law when [13.95]

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White v Betalli cont. adopted by and lodged with the strata plan registered by the Registrar General for the strata scheme as in force at the date of lodgement. This could only be pursuant to s 43 of the Strata Schemes Management Act 1996 (“SSMA”). Thus it was not a by-law made by the owners’ corporation relating to common property (compare s 52 SSMA). Nor was it registered as a statutory easement under s 88B of the Conveyancing Act 1919 that being said by the appellant to be its vice. Rather it was associated with such a registered easement being the right of footway allowing the respondents access over Lot 2 to its waterfront on Port Hacking. 3 The question of validity ultimately turns on the answer to two questions: Question One: was s 88B of the Conveyancing Act 1919 the only available source of power for creating what was, if validly created, in the nature of an easement or restrictive covenant? In particular was the “Anthony Hordern principle” applicable that, when the Legislature expressedly gives a power by a particular provision which prescribes the mode in which it should be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power. Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9; (1932) 47 CLR 1 at 7. Question Two: was the purported by-law rendered invalid under s 43(4) SSMA due to inconsistency with s 42 Real Property Act 1900 (NSW), on the basis that Lot 2 could not be said to be burdened by the interest in favour of Lot 1 where that interest was not recorded on the folio of Lot 2? 38 Section 43 in the same Division, is in the following terms: 43 What can by-laws provide for? (1) By-laws may be made in relation to any of the following: safety and security measures matters appropriate to the type of strata scheme concerned. (2) Subsection (1) does not limit the matters for which by-laws may be made. (4) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law. 39 I agree with the trial judge’s conclusion that the proposed restriction under by-law 20 did constitute a matter “appropriate to the type of strata scheme concerned” (see judgment [38]-[39]). I also agree with the trial judge that s 43(2) could be called in aid were that necessary as extending the scope for by-laws beyond that in the list. Thus there is no threshold difficulty in by-law 20 providing as it does for the right to store small watercraft in the limited area. While it may affect the exercise or enjoyment by the appellant of her land, I do not consider that it is incompatible with the appellant’s right of possession; compare Wright v Macadam [1949] 2 KB 744(CA) and Copeland v Greenhalf [1952] Ch 488. The area in question is a small one, it allows the continued use by the appellant of the affected area, though subject to the respondent’s right to store a small watercraft within the designated area. Thus even were the traditional constraints applicable to easements to be imported to the strata titles legislation, I would not consider this requirement to be contravened that an easement must not be incompatible with the servient owner’s right of possession. McCOLL JA: 77 This case concerns the question whether the power to make by-laws in the Strata Schemes Management Act 1996 (the “Management Act”) can be used to confer a right on one proprietor in a strata scheme to use or occupy part of the lot of another proprietor. In this case by-law 20 purported to confer on the respondents the right to use part of the appellant’s lot, measuring approximately 15 square metres, to store watercraft. 958 [13.95]

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White v Betalli cont. 78 I have had the benefit of reading Santow JA’s reasons in draft. I agree with his Honour that leave to appeal should be granted. However I differ with his Honour’s proposal as to the disposition of the appeal. 79 In my opinion by-law 20 is invalid. The Management Act does not expressly authorise the making of a by-law conferring a right on one proprietor in a strata scheme to use or occupy part of the lot of another proprietor. Nor can the power to make such a by-law be implied. 168 Sydney Diagnostic supports the proposition that in a commercial strata scheme, by-laws can be passed which requires one lot to be used by its proprietor in a particular way to ensure a “mix” of uses regarded as appropriate by the necessary majority of members of the owners’ corporation. Such a by-law would be expressly authorised now by the power in s 43 to make by-laws appropriate to the type of strata scheme concerned. Meagher JA reached his conclusion by giving the words “for the purpose of …the use of a lot” their literal meaning. However he also had regard to the historical context in which the by-law making power was adopted, a context in which buildings were constructed for special purposes, and by-laws ensuring that the right “mix” was maintained operated for the benefit of the strata scheme as a whole. 169 By-law 20 does not operate for the benefit of the strata scheme as a whole. It operates only for the benefit of the respondents, to the detriment of the appellant. Sydney Diagnostic does not, in my opinion, support the conclusion that by-law 20 is valid. 170 In my opinion by-law 20 is inconsistent with the Management Act and, accordingly, has no force and effect: s 43(4). CAMPBELL JA: 195 The term “by-law” is an ancient expression in English law. Its antiquity can be gauged from the fact that its etymological origin is in the Danish word “by” (sometimes spelt “byr”), meaning a town. Thus, in etymological origin, a by-law is a law applicable only to a local community. 196 Harding, A Social History of English Law (Penguin Books, London, 1966) says that in the 13th century … the disputes of the peasantry, the bye-laws necessary for fruitful agriculture, the substance of daily life, were still matters for the landlord and were transacted in his manorial court. (p 70) 197 Such by-laws were at one stage customary, and not necessarily written. Stoljar, Groups and Entities (Australian National University Press, Canberra, 1973) records: Such by-laws (i.e. the laws of a by or tun or township or village) begin to be recorded, though at first only sporadically, when manorial rolls begin in the thirteenth century; and they are recorded often at the express request of the villagers themselves who then declare the by-laws to have been by “all the tenants”, or by “the community”, or “plebiscitum ville”, thus also indicating their customary independence of the lord, at least as regards their own communal affairs. (p 21) 198 The range of topics covered by by-laws was wide. Stoljar, op cit, page 21, gives as examples: For example, only those might be allowed to glean who were too young or too old to reap; or neighbours might be forbidden to carry off sheaves as it was difficult to say whether they had come by them “well and truly” or had got them “without leave”. Some by-laws even deal with hired labour, specify a maximum wage etc., thus anticipating “in a remarkable way the Statute of Labourers of 1351” …. 204 It is that ancient notion of a by-law that the New South Wales legislature chose to adopt, without definition or explanation, when first enacting legislation concerning strata titles in 1961: section 13 Conveyancing (Strata Titles) Act 1961. It has appeared in legislation governing strata titles ever since. Such legislation creates a statutory framework within which a type of local community can be created [13.95]

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White v Betalli cont. and administered. It is a type of community where co-ownership, and the physical proximity of the spaces that the owners are entitled to occupy, create the opportunity for both cooperation and conflict. It is a type of community that was new in 1961, though it had some analogies with the communities that had previously existed through the creation of home unit companies under the Companies Act, or allowing for individual occupation of apartments in a building through a tenancy in common scheme. 205 There is nothing in the notion of a by-law that, of itself, imposes any kind of limitation on the kind of regulation that might be adopted, beyond that it is for the regulation of the particular community to which it applies. Any limitation on the type of restriction or regulation that can be a by-law must arise from the statute that enables the by-laws to be created, or from the general framework of statute law, common law and equity within which that local community is created and administered. 206 The particular local community that was created under the strata plan in question in the present case involves only two lots of land in separate ownership. However, they are located in a part of Sydney where access to the water is a significant benefit to a lot of land. Nothing in the notion of a by-law prevented there being a by-law entitling the owner of the lot that was located away from the water frontage to store a boat within a defined area immediately adjacent to the waterfront but within the lot located on the water frontage. And, as Santow JA has demonstrated, nothing in the particular legislative framework that governs the strata plan in question detracts from the validity of the by-law that is the subject of this litigation. 218 I am not prepared to conclude that by-law 20 does not operate for the benefit of the strata scheme as a whole. The strata plan is one that enables two houses and associated facilities to be separately owned on land where formerly only one land title existed. It arranges the land so that both lots can have car parking immediately adjacent to the street, and, through by-law 20, also makes provision for both lots to have boat parking immediately adjacent to the water. In my view, arranging the land use in that way can be seen as being for the benefit of both lots. Including by-law 20 in the strata plan as registered was part of the developer making available to potential purchasers the advantage of both car and boat parking, for a dwelling constructed on a smaller parcel of land. 220 As mentioned earlier, I agree with the orders proposed by Santow JA.

Maintenance of common property

Platt v Ciriello [13.100] Platt v Ciriello [1998] 2 Qd R 417 Supreme Court of Queensland McPHERSON JA: Reasons for judgment This appeal arises out of disputes between the proprietors of lots under a building unit plan No 3894 registered on 10 February 1982 in respect of land comprising commercial premises known as the Panitz Centre at Nerang. There are 10 lots in the plan of which the appellants Platt own lots 1 to 4 which confer on them an aggregate lot entitlement of 609 out of 1000. The remaining Lots 5 to 10 owned by the respondents Ciriello confer the balance entitlement of 391 out of 1000. The rear basement area of the centre is occupied and used by the appellants for conducting the business of a squash court and gymnasium. The building faces a public road, and the front of it is physically divided into five shops in which the businesses of a butcher, a chemist, a fruiterer, a takeaway food outlet and a real estate agent are conducted by the respondents or their tenants. The 960 [13.100]

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Platt v Ciriello cont. disputes, in the form in which they came before a referee under the Building Units and Group Titles Act 1980, sought orders that the respondents or their tenants refrain from placing on the common property in front of the shops items such as display stands with goods for sale, standing signs, and tables and chairs; and also from placing rubbish bins or pallets there. In addition, an order was sought to restrain the respondents from maintaining advertising signs on the fascia of the building, and also on the roof, which tends to obscure a sign at the rear advertising the squash gym. Complaint was also made about a sign “Emergency Prescriptions Parking Only” which, on one view of it, affects to appropriate a parking space or spaces on the common property for the use of customers of the chemist business. The body corporate is, however, invested by s 30(7)(a) with the power, pursuant to a resolution without dissent, of making a by-law conferring on a proprietor the exclusive use and enjoyment of the whole or part of the common property. It is difficult to see how this power could be exercised without interfering in some way with the entitlement under s 51(1)(c) of using and enjoying the common property. It would therefore appear to follow that the entitlement under s 51(1)(c) is in its turn also qualified to the extent that the body corporate has validly exercised its power under s 30(7)(a) of making a by-law conferring exclusive use and enjoyment of the common property on a specified proprietor. It is, however, not necessary to arrive at a final conclusion on the point because no such by-law has been adopted by the body corporate in this instance. What s 30(7)(a) does not say, at any rate in express terms, is that without such a by-law a proprietor may not make exclusive use of common property without interfering unreasonably with the entitlement of others to use it as well. The magistrate who constituted the Building Units Appeal Tribunal appears, on one reading of his reasons, to have decided that, in authorising the body corporate to confer on a specified proprietor a right of exclusive use of the whole or part of the common property, s 30(7)(a) of the Act necessarily precluded a proprietor who was not so authorised from appropriating a part of that property to his exclusive use. At one point in his reasons he spoke of “the simple fact … that the body corporate has lawfully ruled that there be no exclusive use”. This appears to be a reference to the resolution identified in the grounds of application No 40-93 as having been passed at the first meeting on 28 August 1992. However, that resolution can be justified, if at all, only as an exercise of the power conferred by s 37(1)(a) on the body corporate of controlling, managing and administering the common property. For the reasons already given, that power of the body corporate must be read as being subject to the entitlement under s 51(1)(c) of a proprietor to use and enjoy the common property without unreasonably interfering with the entitlement of others to do the same. In the court below, the learned Judge considered that the question to be determined was not simply whether the conduct of the proprietor involves a use that is exclusive, but whether it transgresses the prohibition imposed by s 51(1)(c) and judged by the standard prescribed in that provision, which is whether, in manner or purpose, it unreasonably interferes with the entitlement of others under that provision to the use and enjoyment of the common property. On such an inquiry the fact that the use is exclusive is not by itself decisive, although it may be a factor to be considered in determining whether or not the conduct complained of contravenes s 51(1)(c). It was because the magistrate, sitting as the appeals tribunal, had not approached the question in this way that the Judge allowed the appeal, set aside the tribunal’s decision, and remitted the matter for re-determination by that tribunal. In interpreting the relevant provisions of the Act there was an error of law within the terms of s 108(1), which consequently exposed the tribunal’s decision to an appeal to the Supreme Court. From what has been said, it follows that his Honour was correct in interpreting the statutory provisions as he did. The approach adopted by the referee in determining the applications also appears to have accorded generally with that view of the law. It is, however, not possible simply to restore the decision of the referee that the use being made of the common property in placing the signs and other things on it was not unreasonable. An appeal under s 107(1) to the Building Units Appeal Tribunal is, at least [13.100]

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Platt v Ciriello cont. in some sense, a hearing de novo. Evidence may be admitted that was not before the referee when the order under appeal was made. It may be that, if the tribunal had applied the appropriate test, the conclusion might perhaps have followed that the manner or purpose of the use by the respondents (or their tenants) of the common property, or some part of it, did in fact interfere unreasonably with the use or enjoyment of the common property by the appellants or by some other person entitled to use it. What constitutes unreasonable interference is a question of fact. The erection of commercial advertising signs may well interfere unreasonably with the enjoyment of the common property of residential units, but not necessarily with the enjoyment of a common property of a commercial complex. The referee here held that the respondents’ use of the common property did not unreasonably interfere; but, having regard to the approach erroneously adopted by the magistrate, that question has not yet been determined by the appointed appeal tribunal. In these circumstances the order made by the primary Judge must stand. The appeal tribunal must consider the matter afresh in accordance with these reasons.

Allen v Proprietors of Strata Plan No 2110 [13.105] Allen v Proprietors of Strata Plan No 2110 [1970] 3 NSWR 339 Supreme Court of New South Wales STREET J: This is an application to the Court for a declaration and an injunction regarding a dispute that has arising in connexion with the affairs of a block of home units in Manly. The plaintiffs are the registered proprietors of Lot 1, being a unit on the ground floor of the multi-storey building comprising the block; the defendant is the body corporate. The plaintiffs acquired their unit late in the year 1966. They were, it seems, the original purchasers of this unit form the promoter of the home unit building. According to the evidence of Mr Allen, the first plaintiff, he and his wife went into occupation of their unit at the beginning of November 1966. A question has arisen as to whether or not there were then in evidence signs of dampness in the unit. Mr Allen has been cross-examined upon his claim that he took particular note of whether or not the unit was then damp. After seeing him in the witness-box and giving due weight to his evidence, in conjunction with the evidence of other witnesses to which I have been referred, in particular a Mrs Thompson, I have formed the conclusion that I should accept what Mr Allen says: there was no sign of dampness in his unit either before or at the time he moved into it at the beginning of November 1966. I accept also his evidence that there were falls of rain, some of a heavy nature, round about this time, and that the first occasion that he noticed dampness in his unit was at the earliest in June 1967. I find accordingly as a fact that there were no significant signs of dampness in the unit prior to June 1967. From that point of time onwards a dampness problem become manifest. It reached proportions which have caused damage not only to the carpet and furnishing and the floor and trowelled – on pulp floor surface abutting the southern wall. There is what is described by Mr Aynsley, an architect, as a sizable crack at the wall abutment on the southern side. The present suit concerns two issues, namely what is the origin of this dampness problem, and secondly who, as between the plaintiffs and the defendant, bears the responsibility for rectifying that problem. So far as concerns the origin of the problem the matter unfortunately still rests in the realm of opinion. It is not at this point of time possible to demonstrate conclusively the cause of this dampness. I am satisfied, however, that it is more probably than not that the dampness is due to water entering 962 [13.105]

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Allen v Proprietors of Strata Plan No 2110 cont. the cavity on the southern wall and being contained within that cavity so as to enable it to permeate through the inner of the two skin walls and cause the damage I have already referred to. The fact that the water enters this cavity is not of itself of particular significance. Clearly enough the water must be entering through the southern or western external skin of the double walls. What is of significance, however, is that the water is not escaping form the cavity. In the ordinary course water entering such a cavity should be able to flow out without obstruction. This would preclude a dampness problem such as exists in the present case from arising. The reason for the water not being able to escape cannot be demonstrated with complete certainty. I am cast back to the expert opinion evidence of Mr Aynsley. I am satisfied on that expert evidence that it is more probably than not that the obstruction to the escape of water from the cavity is due to a silting-up or other build-up of material which precludes the water from escaping through the weep holes or other apertures in the external skin. The obstruction may be in the weep holes or apertures themselves or it may be due to a silting-up of an agricultural drain on the common property outside the external wall on the southern side: the lower part of this southern wall is below ground level so that the weep holes or apertures are themselves some distance below ground level. My conclusion that there was no dampness problem before June 1967 carries with it a conclusion that the water which theretofore found its way into the cavity was able to escape through weep holes. It is, of course, a possibility that no water got into the cavity before this time, but the weight of evidence (and by that I refer to Mr Aynsley’s evidence and Mr Allen’s evidence) tends to favour the conclusion that in the ordinary course water would have come into the cavity in such downpours of rain as did occur prior to June 1967 and that, if it had not been able to escape, the dampness problem would have been present before June 1967. I accordingly conclude that is it more probably than not that there are weep holes or means of escape for water to run out from the cavity through the external skin, and that water can no longer escape through them. The plaintiffs seek in this application two declarations, namely (1) that it is the duty of the defendant to carry out at its expense such work as is necessary as a consequence of the condition of any part of the common property to prevent water penetrating into Unit 1, and (2) a declaration that the centre of the external walls is the common boundary between Unit 1 and the common property. So far as concerns the dispute raised by the second declaration sought, I am of the view that s 4(2) covers the point. That subsection is in the following terms? “Unless otherwise stipulated in the strata plan the common boundary of any lot with another lot or with common property shall be the centre of the floor, wall or ceiling as the case may be.” There is no stipulation otherwise in the present strata plan. It has been argued that the provision in s 4(2) does not extend to a wall such as the external wall of a building containing a unit on the one side and being open on the other side to the outside common property. I see no justification for reading s 4(2) in this manner. In my view the subsection is to be construed as placing the boundary of the plaintiffs unit at the centre line of both the external wall on the southern side of the unit as well as the center line of the other walls, floor, and ceiling confining the plaintiffs’ unit. I would accordingly, if it were of significance so to do, be prepared to make a declaration in terms of the second declaration sought by the plaintiffs. The principal dispute turns upon where may lie the responsibility for rectifying the drainage obstruction that I have held on the probabilities exists in the present situation. Section 15(1) para (f) is in the following terms: “The duties of the body corporate shall include the following to keep in a state of good and serviceable repair and properly maintain the common property” The findings of fact in this case result in s 15(1)(f) imposing upon the body corporate, that is to say, the defendant, the responsibility for cleaning out the weep holds or other means of escape of water (including the outside agricultural drain) from the cavity between the two skin walls on the southern side of the plaintiffs’ unit. [13.105]

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Allen v Proprietors of Strata Plan No 2110 cont. There has been argument as to whether or not the duty in s 15(1)(f) extends to what might be described as original defects either in the workmanship or in the quality of the materials or in some other aspect of the construction of the building. There was a factual dispute as to whether the dampness problem in the present case is due to such original defect or to silting-up. If it had been due to original defect then it would have been necessary to consider this argument upon the meaning of s 15(1)(f) and other associated provisions of the Act. In view of my finding on the facts, this question does not arise, and I refrain expressly from indicating any opinion on this difficult point.

[13.110]

Note

A similar approach to Allen v Proprietors of Strata Plan No 2110 [1970] 3 NSWR 339 was adopted in Proprietors of Strata Plan 6522 v Furney [1976] 1 NSWLR 412. A mid-point boundary was involved in Simmons v Body Corporate of Strata Plan 5181 [1980] VR 103 and as the wall as a whole was defective, liability was divided equally between the unit holder and the strata corporation.

Owners Strata Plan 50276 v Chee Min Thoo [13.115] Owners Strata Plan 50276 v Chee Min Thoo [2013] NSWCA 270 New South Wales Court of Appeal TOBIAS AJA: 4. Many of the 58 Lots that comprise Strata Plan 50276 operate to retail food. These are principally located on the first floor, or Food Court area of the Hunter Connection, and in the basement level of the building. Some but not all of these food shops are connected to the exhaust ventilation system installed within the common property of the building. 5. In February and March 2007 Dr Thoo submitted plans for the fit out of Lot 17 to the Owners Corporation and applied to connect Lot 17 to the exhaust ventilation system in the common property. In December 2007 he requested that the Owners Corporation guarantee to accommodate Lot 17 with exhaust ventilation capacity from the system of 3,600 litres per second (l/s). In response the Owners Corporation: accepted that Lot 17 may be connected to the exhaust ventilation system; claimed the system was already being fully utilised to the limits of its available capacity by lots already connected to the system; declined to give any guarantee that Lot 17 would receive any particular level of exhaust from the exhaust ventilation system; and, estimated that after Lot 17’s connection and without a system upgrade, only about 620 l/s in ventilation capacity would be likely to be available to Lot 17 from the system. Dr Thoo says that 620 l/s of exhaust capacity is inadequate to service his future plans for Lot 17 as a retail food outlet. 6. Commencing in July 2007 the Owners Corporation engaged an exhaust ventilation expert, Mr Warwick West, to investigate whether it was feasible to install a supplementary exhaust ventilation system to increase the existing system’s capacity. By September 2008 Mr West informed the Owners Corporation that installing an additional system: would involve significant cost; would interfere with the retail operations at the Hunter Connection; and would only be achievable after meeting a number of third party requirements outside the control of the Owners Corporation. The Owners Corporation could not satisfy Dr Thoo’s request for a guarantee of exhaust capacity, Dr Thoo commenced these proceedings on 19 March 2008. 24. The first respondent, Dr Chee Min Thoo (“Dr Thoo”), is the registered proprietor of several lots in the Strata Plan, including Lot 17 at the northern end of the basement level of the Building. He 964 [13.110]

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Owners Strata Plan 50276 v Chee Min Thoo cont. acquired that lot in February 2006, at which time it was (as it still is) used for retail purposes not involving the commercial cooking and retailing of hot food. 25. Shortly after acquiring Lot 17, Dr Thoo submitted plans to the Council of the City of Sydney (“the Council”) to subdivide the lot into three separate retail tenancies. That application was duly approved, subject to a condition that the specific use of each tenancy be the subject of a further development application to the Council and that the premises be ventilated in accordance with the Building Code of Australia and the Council’s Ventilation Code. 26. Dr Thoo’s intention was to lease each of what then became known as Shops 1, 2 and 3 for the commercial cooking and selling of hot Asian food. However, the Council’s condition required that before the shops could be used for that purpose, each must be provided with an adequate exhaust ventilation system to extract cooking fumes and vapours from the shop. 52. The extent of the duties imposed under Management Act , ss 62(1) and (2) was much debated before the Court. When stating the law in respect of these duties it is convenient to gather the principles that relate to Management Act, ss 62(1) and 62(2) and then deal with the distinctions in the duties under each sub-section. The principles that emerge from judicial consideration of s 62(3) are dealt with later in these reasons, in the section concerning the validity of Resolution 7 at the 5 August 2009 AGM. 53. Common features of Management Act, s 62 duties. There was less controversy between the parties about the common features of the duties imposed by the Management Act, ss 62(1) and (2). Each of the duties imposed under s 62(1) and (2) is an absolute duty and compliance with it is mandatory: Ridis v Strata Plan 10308 [2005] NSWCA 246; (2005) 63 NSWLR 449 at [5] per Hodgson JA; and Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [21] per Brereton J. The strict nature of ss 62(1) and (2) duties makes irrelevant any issues of whether or not an owners corporation took all reasonable steps to comply with those duties, if ultimately the owners corporation failed to meet the strict requirement of the s 62 duty: Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [21]. The duty of an owners corporation under Management Act, s 62 is owed to each lot owner and breach of the duty gives rise to a private cause of action under which damages may be awarded to a lot owner for the breach: Lubrano v Proprietors of Strata Plan No 4038 (1993) 6 BPR 13,308 at 13,310-11. The obligation imposed on an owners corporation under Management Act, s 62 extends to oblige the owners corporation to do things which could not be for the benefit of the proprietors as a whole or even a majority of them: The Proprietors of Strata Plan No 159 v Blake [1986] NSW Titles Cases 50,650 at 50-564 per Yeldham J; Ridis v Strata Plan 10308 [2005] NSWCA 246; (2005) 63 NSWLR 449 at [166] per McColl JA and Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [4] per Brereton J. Under both Management Act ss 62(1) and (2), breach of the absolute duty occurs as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair: Ridis v Strata Plan 10308 [2005] NSWCA 246; (2005) 63 NSWLR 449 at [177] per McColl JA; Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 at [5] per Brereton J. 54. Management Act, s 62(1) obligations . The obligation in Management Act, s 62(1) upon an owners corporation to “properly maintain and keep in a state of good and serviceable repair of common property” has been well defined in authority. Prima facie the obligations of maintenance and repair in Management Act, s 62(1) are directed to keeping the common property operational and restoring something which is defective: Ridis v Strata Plan 10308 [2005] NSWCA 246; (2005) 63 NSWLR 449 at [158] per McColl JA. The primary meaning of “repair” in Management Act, s 62(1) is to restore to sound condition that which has previously been sound, to make good, and the operation of making an article good, irrespective of whether the article has been good or sound before: The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 (“Furney’s Case”) at 416, citing Lord Patrick in Burns v National Coal Board Management Act [1957] SC 239 at 245; The Proprietors [13.115]

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Owners Strata Plan 50276 v Chee Min Thoo cont. of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 at 297-8 per McLelland CJ in Eq; and Lin & Anor v The Owners - Strata Plan No 50276 [2004] NSWSC 88; (2004) 11 BPR 21,463, at [48] per Gzell J. But the duty of repair in Management Act, s 62(1) can include making additions to the common property of necessary building articles even if not originally included in the building: The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 at 416, per Needham J. 55. Management Act, s 62(2) obligations . It is first necessary to examine the differences between ss 62(2) and (1). When Needham J decided The Proprietors of Strata Plan No. 6522 v Furney & Anor (1976) 1 NSWLR 412 the 1973 Act contained, in the then s 68(1)(b), an equivalent of what is now Management Act, s 62(1) “to maintain and keep in a state of good and serviceable repair of common property”, but no equivalent of Management Act, s 62(2). After Furney’s Case and before McLelland CJ in Eq decided The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 , the 1973 Act was amended to add, as s 68(1)(c), the equivalent of Management Act, s 62(2) in the almost identical words to the present provision “a body corporate shall, for the purposes of the strata scheme concerned...(c) where necessary, renew or replace any fixtures or fittings comprised in the common property and any personal property invested in the body corporate”. In The Proprietors of Strata Plan (No. 30234) v Margiz Pty Ltd (1993) 32 NSWLR 294 McLelland CJ in Eq explained the different operation of the then equivalent of ss 62(1) and (2) in the context of considering the replacement of a discrete system forming part of the common property (for example an air conditioning system) by a new or different system. He concluded that such a complete replacement would not fall within s 62(1) to “properly maintain and keep in a state of good and serviceable repair...the common property”. But his Honour concluded that such a complete replacement would, if required, fall within the obligation described in s 62(2) to “renew or replace any fixtures or fittings comprised in the common property”. The distinction made by McLelland CJ in Eq between the two provisions has been subsequently reaffirmed in many cases: in Lin & Anor v The Owners - Strata Plan No 50276 [2004] NSWSC 88; (2004) 11 BPR 21,463 at [50]; Ridis v Strata Plan 10308 [2005] NSWCA 246; (2005) 63 NSWLR 449 at [168] [170] per McColl JA. 121. In my opinion, the Owners Corporation’s submissions should be accepted and those of Dr Thoo rejected. Unlike Order 4 made by Gzell J in Lin, Order 7 made by the primary judge in the present case was framed narrowly, mandating that the Owners Corporation “modify, or add to, repair, or replace the MEVS to ensure that Lot 17 receives a reasonable supply of exhaust ventilation capacity from the MEVS of not less than 3,600 l/s”. However, there is no doubt from any number of statements contained in his Honour’s detailed reasons that the duty of the Owners Corporation under s 62(2) was to provide an exhaust ventilation system which had the capacity to meet the reasonable demands for access of all lots on Level 1 (the Food Court) and in the basement. 122. I have already referred to the Owners Corporation’s submission that the duty imposed by s 62(2) is confined to the renewal or replacement of an exhaust system which is not operating in a manner sufficient to service the lots which it was designed to service. As the primary judge recognised at [64] and [65] of his reasons, s 62(2) in a case such as the present imposes on an owners corporation the duty to make the system efficient and adequate. His Honour recognised that for that purpose the work may be quite extensive, although he acknowledged that s 62(2) would not necessarily justify the replacement of an existing system which only serviced one floor of a building with another system that also serviced other floors of the building. Having said that, his Honour considered that an owners

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Owners Strata Plan 50276 v Chee Min Thoo cont. corporation may be required to exercise judgment so that the planned capacity of the system within the common property meets the expected future needs of all lot owners in the relevant part of the strata scheme.

Contributions to maintenance costs

Julian-Armitage v The Proprietors Astor Centre [13.120] Julian-Armitage v The Proprietors Astor Centre [1998] QCA 111 Court of Appeal Supreme Court of Queensland McPHERSON JA: Reasons for judgment This is an appeal from a decision in the Supreme Court concerning the liability of the proprietor of a lot in a registered building units plan to bear a share of the cost of electricity used to operate a lift or lifts serving the building comprised in the plan. The building, which is residential and is known as The Astor Centre, has 13 levels designated A to M accommodating a total of 45 lots or units. Lot 1, of which the appellant is proprietor, occupies the whole of Level A, which is at ground level and is referred to in the material as being below street level. As such, there is no need to make use of the passenger lifts, of which there are two in the building, in order to have access to that lot; and in fact the lifts do not serve or “service” that unit or level but only those above it. The first Annual General Meeting of the proprietors of the Astor Centre was held on 26 April 1989. Minutes of that meeting show that it was resolved that the following By-law be added to those previously approved: The proprietors for the time being of Lots 2 to 45 shall be entitled to the exclusive use and enjoyment for themselves, their invitees and their licensees of that part of the common property which is delineated in red on the plans marked “A” (“the area”). In addition to the grant of exclusive use and enjoyment the proprietors for the time being of Lots 2 to 45 shall also be entitled to special privileges for themselves, their invitees and their licensees of being permitted to operate the two passenger lifts which have been installed in the area. The grant of exclusive use and enjoyment and special privileges are made subject to the following terms and conditions: (a) The area shall only be used for the operation of passenger lifts; (b) No proprietor shall create a nuisance or hazard by his use of any of the passenger lifts; (c) No proprietor shall misuse or permit to be misused any of the passenger lifts and shall not obstruct or damage the same or otherwise interfere with or impede with their normal operation; (d) The proprietors shall observe the terms of any notice displayed in any of the passenger lifts by the body corporate or by any relevant statutory authority; (e) The proprietors shall ensure that, at all times, no rubbish, litter or other unsightly materials or substances be allowed to accumulate in or upon the area or in or upon the internal surfaces of the lift wells; (f) The proprietors shall ensure that the area and the internal surfaces of the lift wells are at all times kept in a clean and tidy condition; [13.120]

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Julian-Armitage v The Proprietors Astor Centre cont. (g) The proprietors shall at their own cost and expense carry out all the usual and necessary inspections and tests (including any necessary statutory tests) with respect to the passenger lifts; (h) The proprietors shall at their own cost and expense rectify and make good all stoppages and malfunctions in the operation of the passenger lifts; (i) The proprietors shall at their own cost and expense properly maintain and keep in a state of good and serviceable repair (including where reasonably necessary renew or replace the whole or part thereof) the two passenger lifts and all associated equipment and appurtenances (including both electrical and mechanical components and wiring); (j) The proprietors shall at their own cost and expense be responsible for the payment of the costs associated with any lift maintenance agreement which the body corporate may have entered into with respect to the passenger lifts; (k) The terms and conditions contained in this by-law bind the proprietors jointly and severally; (l) The liability of the proprietors for the payment of any monies payable under this by-law shall be in shares proportional to the lot entitlement of their respective lots; and (m) In respect of any monies payable by a proprietor under this by-law, then the proprietor of a lot is, liable, jointly and severally with any person who was liable to pay those monies when that proprietor became the proprietor of that lot, to pay such part of the monies as are unpaid when he became the proprietor of that lot; and that for the purpose of meeting actual or expected liabilities incurred as a result of this By-Law the proprietors of Lots 2-45 contribute to a special fund established for lift maintenance and eventual replacement at a rate of $5.00 entitlement per quarter from 1st May, 1989, which amount shall be reviewed annually each year by the Committee of the body corporate in accordance with lift service agreement increases, maintenance requirements and evaluations as to the life expectancy of the lifts and such fund shall be properly maintained by the body corporate manager/treasurer and presented as part of the financial report for each annual general meeting. This additional By-law, which was duly registered or recorded on the plan, was numbered By-law 56. It is the subject of this application, which, before coming before the Court had already been before a referee under the Building Units and Group Titles Act 1980, followed by an appeal to the Tribunal and then to the Supreme Court, from which this appeal now comes. The effect, briefly stated, of the first part of By-law 56 is to confer on the proprietors and their invitees and licensees, the exclusive right to use the access area or areas on each level of the common property delineated on the accompanying plan “A” together with the “special privileges” of being permitted to operate the two passenger lifts in question. The validity of the By-law is not challenged in these proceedings. What is in issue is the proper interpretation to be given to it. The only question for determination is whether under its terms the appellant is in law justified in insisting that only those proprietors who enjoy the exclusive rights or privileges of using the lifts should be obliged to pay for the electricity needed to operate it. What this comes down to in the end is whether the cost of that electricity is a charge to be met out of the funds of the Body Corporate derived from the levies paid by all the proprietors; or whether those entitled to use the lifts, and not the appellant, are bound to meet that expense from the special fund constituted under the last part of the By-law. By-law 56 deals in para (h) with the cost of carrying out usual and necessary inspections and tests with respect to the lifts, and in para (i) with the cost of properly maintaining and keeping in good and serviceable repair, “the two passenger lifts and all associated equipment and appurtenances (including 968 [13.120]

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Julian-Armitage v The Proprietors Astor Centre cont. both electrical and mechanical components and wiring)”. As to those matters of expenditure, the cost is to be met by proprietors who are privileged to use the lifts. Under para (j), they are also to be responsible for paying the costs associated with any lift maintenance agreement entered into by the Body Corporate. The By-law does not refer specifically to the cost of the electricity used in operating it. The omission may have been deliberate, or it may have been the result of accidental oversight. The appellant submits that that particular cost or expense is covered under para (i) by the requirement in that paragraph that the privileged proprietors are at their own cost and expenses to “properly maintain and keep [the lifts] in a state of good and serviceable repair …”. Without keeping the electric current flowing, the lifts, it is said, will not be either maintained or serviceable; in short, it will not be possible for those proprietors to operate the lifts, which is what the first part of By-law 56 expressly says that they are “permitted” to do. In effect, therefore, the expression “maintain” ought, it is submitted, to be read as meaning “maintain in operation”. In support of these submissions, reliance was placed on John Fairfax & Sons Ltd v Australian Telecommunications Commission [1977] 2 NSWLR 400 at 413, where in the context of a contractual duty to maintain two teleprinters, Mahoney JA said that the word “maintain” referred “not to the placing of the services with the plaintiff but, in general, to the keeping of them in operating condition”. The appellant also relied on Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 at 39, where Young J quoted from Galashiels Gas Co Ltd v O’Donnell [1949] AC 275 at 286, in which Lord McDermott said that the word “maintained” was synonymous with “serviced” or “looked after” or “attended to” but, in the context of the legislation considered there, concluded that the expression “every hoist to be properly maintained” connoted the continuance of a state of working efficiency. None of these authorities is, however, of any real assistance to the appellant here. On the contrary, they tend, if anything, to suggest that machinery or equipment is “maintained” if it is in working order, so that it will operate if power or fuel is supplied to make it do so. It is not the ordinary expectation of consumers who hire or purchase equipment, such as photo-copiers or computers, that the obligation of someone who undertakes to service or maintain them extends to providing the electric power needed to make the equipment function. In the end, however, it is probably right to say that equally little help is to be gained from examples of this kind, which do not involve arrangements like those encountered in building units, in which proprietors own separate units or lots, but share the right to use as well as the obligation to pay for the upkeep and maintenance of common property. As to that, the general principle adopted in the Act is that proprietors share the expense of maintenance and running costs rateably in proportion to their lot entitlements, and that they do so irrespective of the extent to which they in fact make use of the common property or its facilities. In providing an exemption from liability to bear some of the expense associated with lifts which the appellant is not privileged to use, By-law 56, apparently in the interests of fairness to the proprietor of Lot 1, introduces a qualification upon that general principle. The fact that it fails in all respects to achieve a completely fair result is not sufficient justification for interpreting the word “maintain” in such a way as to alter its natural or ordinary meaning of ensuring it is in a state of working efficiency rather than keeping it operating. Complete fairness would be virtually impossible to attain. Almost inevitably, some proprietors or their licensees will make more use of the lifts than do others; and, as was pointed out in the course of the hearing, those who live at the upper levels of the building will almost certainly use more electricity in doing so than others who reside at lower levels. By-law 56 does not, and probably could not be, expected to cater for or equalise all differences of that kind. It follows that the primary judge was correct in his interpretation of By-law 56. The appeal should be dismissed with costs. [Derrington and Pincus JJ agreed with the orders of McPherson JA and with his reasons.] [13.120]

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CHAPTER 14 Leases [14.05]

NATURE OF LEASES AND BAILMENTS ................................................................. 972 [14.10]

[14.20]

CHARACTERISTICS OF A LEASE ............................................................................ 975 [14.20]

Exclusive Possession ............................................................................ 975 [14.20]

[14.30]

Raymond Pemberton v Milivoj Dimitrijevic .............................. 979

CREATION OF CO-OWNERSHIP – CERTAINTY OF DURATION .......................... 980 [14.40]

Legal and equitable leases under the general law ........................... 980 [14.45]

[14.55]

Walsh v Lonsdale .................................................................. 981

Periodic leases ..................................................................................... 983 [14.55] [14.65]

[14.75]

Radaich v Smith .................................................................... 975

Certainty of duration .......................................................................... 979 [14.30]

[14.40]

Townsend v BBC Hardware Ltd ............................................... 974

Turner v York Motors Pty Ltd .................................................. 983 Moore v Dimond ................................................................... 990

LEASES AND THE TORRENS SYSTEM ................................................................... 993 [14.75]

The registration of leases .................................................................... 993 [14.80]

[14.90]

Mercantile Credits Ltd v Shell Co of Australia Ltd ..................... 994

Leases as a statutory exception to indefeasibility of title ................ 995 [14.105] [14.115]

Downie v Lockwood .............................................................. 995 United Starr-Bowkett Cooperative Building Society v Clyne ................................................................................... 999

[14.125] THE RIGHTS AND DUTIES OF LANDLORDS AND TENANTS ........................... 1001 [14.125] Express terms ..................................................................................... 1001 [14.130] Implied terms: general approach .................................................... 1002 [14.130]

Liverpool City Council v Irwin ............................................... 1002

[14.140] Repair obligations ............................................................................. 1007 [14.140] [14.145]

Smith v Marrable ................................................................ 1007 Hart v Windsor .................................................................... 1008

[14.160] Obligations relating to occupation of the premises ...................... 1010 [14.160] [14.175]

Southwark London Borough Council v Mills ........................... 1010 Warren v Keen .................................................................... 1015

[14.185] Duties of respect ............................................................................... 1017 [14.185]

Dogrow Pty Ltd v Teakdale Pty Ltd ....................................... 1017

[14.195] ASSIGNMENTS AND SUBLEASES ....................................................................... 1020 [14.195] Nature of assignments and subleases ............................................. 1020 [14.200] [14.210]

Melksham v Archerfield Airport Corp ..................................... 1021 International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd .................................................................... 1027

[14.220] Enforceability of covenants after assignment; general principles ............................................................................................ 1032 971

Australian Property Law: Cases and Materials

[14.225] Enforceability of covenants after assignment; touching and concerning the land .......................................................................... 1032 [14.225] [14.230]

P&A Swift Investments v Combined English Stores Group Plc ........................................................................... 1032 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd ........................................... 1034

[14.237] Enforceability of covenants after assignment; further principles ............................................................................................ 1038 [14.240]

Spencer’s Case .................................................................... 1038

[14.250] THE DETERMINATION OF LEASES ...................................................................... 1041 [14.250] General principles as to determination ........................................... 1041 [14.255] Determination: the right to forfeit .................................................. 1042 [14.255] [14.265]

Moore v Ullcoats Mining Co Ltd ........................................... 1042 Argyle Art Centre v Argyle Bond & Free Stores Co Pty Ltd ..................................................................................... 1046

[14.275] Determination: relief against forfeiture ........................................... 1049 [14.275]

Jam Factory Pty Ltd v Sunny Paradise Pty Ltd ........................ 1049

[14.285] CONTRACTUAL REMEDIES ................................................................................. 1054 [14.290]

Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd ........................................... 1054

NATURE OF LEASES AND BAILMENTS [14.05] At common law, leases were accorded the rather strange status of “chattels real”. The

reason for this is historic. Leases did not fall within the system of feudal tenure and estates, and were regarded as merely personal property. The effect of this was that the only remedy available to a tenant was an action for damages based on trespass. The possessory remedy available to freeholders, the assize of novel disseisin, was not granted to tenants for a term of years; accordingly, a tenant who was dispossessed was unable to recover possession and merely had an action against his landlord based on breach of contract. Tenants were eventually granted in the late 15th century a universal remedy to recover possession by the action of trespass de ejectione firmae, and from this time onwards leases have effectively constituted interests in land at common law. However, leases were still regarded as personal rather than real property because the old real actions were inapplicable. The effect of this classification at common law was that, whereas freehold land passed on death to the eldest son, under the feudal principle of primogeniture, leases passed on intestacy to all the children of the deceased equally as next of kin. During the 19th century, state legislation in Australia intervened to apply the rules concerning the intestate succession of personal property to real property (see, for example, Real Estate of Intestates Distribution Act 1862 (NSW), since repealed and replaced by the Wills, Probate and Administrative Act 1898 (NSW)). Since that time the common law classification of leasehold estates as personal property has had no practical significance. Various types of leases distinguished by the term of the interest are recognised by common law and legislation now governs leases distinguished by their subject-matter: 1.

The most common type of lease is a fixed-term lease, historically called a lease for a term of years. A fixed- term may be for any defined period from 999 years or more to commonly for six months or even one week. Without further action by the parties a fixed-term lease comes to an end on the expiry of the term.

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2.

Periodic leases run for a nominated term, often a year, six months or one month and then continue for a further period until one of the parties gives notice to terminate. These interests may arise in any of four situations: (i) they may be created by express agreement between the parties by deed or in writing; (ii) they may be created orally at the commencement of the agreement: (iii) they arise by operation of law where the tenant enters into possession of the rented premises and pays rent pursuant to a fixed-term lease which is invalid at common law or for any other reason; (iv) they arise where a fixed-term lease expires and the tenant remains in possession of the premises with the consent of the landlord and pays rent in respect of the overholding period.

3.

Tenancies at will arise whenever the tenant enters or remains in possession of property with the consent of the landlord without paying rent. Thus, they often arises when a tenant under a formally invalid lease enters into possession or when a fixed-term lease expires and the tenant remains in possession with the express permission of the landlord (see, for example, Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; Banjo v London Borough of Brent [2005] All ER (D) 282 (Mar); [2005] EWCA Civ 292; [2005] 1 WLR 2520 (CA); Meye v Electric Transmission Ltd [1942] Ch 290). In both cases, the payment of rent by the tenant and its acceptance by the landlord will convert the tenancy at will into a periodic lease. A tenancy at will may be determined without notice on demand at any time by either party (Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 49).

4.

Tenancies at sufferance arise whenever a tenant overholds after the expiration of a fixed-term lease without the express consent of the landlord (see, for example, Anderson v Bowles (1951) 84 CLR 310; Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 at [74]).

5.

Legislation has been introduced in all jurisdictions relating to retail or shop premises: Retail Leases Act 1994 (NSW); Retail Leases Act 2003 (Vic); Retail Shop Leases Act 1994 (Qld); Retail and Commercial Leases Act 1995 (SA); Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA); Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (Tas); Leases (Commercial and Retail) Act 2001 (ACT); and Business Tenancies (Fair Dealings) Act (NT). These leases are analysed in Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [14.90]–[14.95].

6.

Legislation in all jurisdictions regulates residential tenancies: Residential Tenancies Act 2010 (NSW); Residential Tenancies Act 1997 (Vic); Residential Tenancies and Rooming Accommodation Act 2008 (Qld); Residential Tenancies Act 1995 (SA); Residential Tenancies Act 1987 (WA); Residential Tenancy Act 1997 (Tas); Residential Tenancy Act 1997 (ACT); Residential Tenancy Act (NT); see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [15.155]ff. Whilst this legislation applies primarily to leases for residential purposes, the definition of the types of agreements to which the legislation applies extends beyond leases in a technical sense. In addition legislation now extends to roominghouses, see [15.115]ff, residential or caravan parks, see [15.155]ff, and retirement villages; see [15.180]ff. [14.05]

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In relation to goods, separation of ownership and possession creates what is traditionally known as a bailment. Today the grant of possession of goods under a commercial relationship is often described as a lease and detailed requirements govern consumer leases ; see National Consumer Credit Code (Cth), Pt 11. Gratuitous bailments are common as persons often lend goods to one another for personal non-commercial reasons. Bailments may even arise without the knowledge or consent of the bailee as when goods are left on shop premises. Much learning applies to the obligations of bailees to care for the goods, and obligations differ according to the circumstances by which possession was obtained. In a commercial setting a bailor has a duty with respect to the quality of the goods.

Townsend v BBC Hardware Ltd [14.10] Townsend v BBC Hardware Ltd [2003] QCA 572 Queensland Court of Appeal Background facts [3] In 1974, the respondent was employed by Wilson Hart as a labourer in a business manufacturing roof trusses in Garbutt, Townsville. In about 1983, Wilson Hart told the respondent that, if he wished to continue to do their work, their relationship must change from employee to subcontractor. Wilson Hart later sold the business to McEwan’s, who sold to Campbells, who in turn sold to Hardware House who then sold to the respondent. During these changes in ownership, the respondent remained a subcontracting manufacturer of roof trusses. In the early 1990s, the business moved from Garbutt to Kirwan. [4] The contract between the appellant and the respondent was wholly oral. The learned primary judge found that the parties agreed that the respondent and his partner would supply the necessary labour to cut and assemble roof trusses using the appellant’s plant and materials. [5] It was common ground on this appeal that the respondent was injured because the appellant’s saw was defective in that for some years it had no safety guard nor return mechanism and, for 12 months preceding the injury, it had demonstrated a propensity to move freely along its radial arm. The appellant did not have in place a system of regular safety inspection of the plant and machinery it provided to the respondent’s firm. [6] The saw had been in use in the business for many years before the respondent’s injury and the respondent was never responsible for its maintenance or service; this was always done by the current owner of the machinery. An officer of the appellant said had he been told the saw was dangerous he would have had it repaired. [7] His Honour was unpersuaded there was any contractual obligation on the respondent to draw to the appellant’s attention the defective state of the equipment which had persisted over so many years and must have been patently obvious to any person qualified to inspect and maintain the equipment. Was there an implied term under the contract that the appellant would provide reasonably safe plant and equipment? [8] The appellant contends that because the respondent’s firm had the largely exclusive use of the machinery, there was no implied duty requiring the appellant to maintain the plant and equipment. It submitted at trial and on appeal that because the parties were not in a master-servant relationship, a term could only be implied in the contract if it was within the principles set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council; that there was no reason why the primary judge should imply a term that the appellant would provide safe plant and equipment rather than terms that the respondent was responsible to keep the machinery in good condition and that the appellant was only required to repair equipment which the respondent reported as defective. 974 [14.10]

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Townsend v BBC Hardware Ltd cont. [9] Although the respondent did not plead bailment, as McPherson JA pointed out in argument, that was the effect of the contractual relationship between the parties. The appellant as bailor was required to ensure the saw was safe and fit for use in roof truss manufacture: see Derbyshire Building Co Pty Ltd v Becker; Cottee v Franklins Self Serve Pty Ltd; Carter on Contract and Palmer on Bailment. On the facts here, the learned primary judge was plainly correct in concluding that the appellant had a duty, implied in the contract under which he supplied the saw to the respondent for the manufacture of roof trusses, to ensure the saw was fit and safe for the purpose for which it was intended. Contributory negligence [17] The High Court in Astley held that an award of damages for breach of contract may not be reduced under apportionment of liability legislation for contributory negligence where a claimant has succeeded in contract. The effect of Astley has been statutorily modified by amendments in 2001 to the Law Reform Act 1995 (Qld) but because the respondent commenced his action before those provisions came into force, s 10 Law Reform Act 1995 (Qld) does not apply here. This case falls within that narrow window of time which means that the respondent’s contribution to his own injuries by failing to take reasonable care does not affect his right to recover damages for the appellant’s breach of contract. The respondent undoubtedly behaved irresponsibly in not demanding that the appellant repair the saw, if not for his own safety then for that of his employees, but Astley means it is pointless to further consider the appellant’s contention that the learned primary judge erred in apportioning the respondent’s liability for his injuries at only 15 per cent.

Note

[14.15]

This case provides only an introduction to the body of both common law and statutes that apply to bailments with obligations of both bailor and bailee to one another, see, for example, Fisher, Commercial and Personal Property Law (Butterworths, 1997), Ch 5.

CHARACTERISTICS OF A LEASE Exclusive Possession

Radaich v Smith [14.20] Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209 High Court of Australia WINDEYER J. The distinction between a lease and a licence is clear. “A dispensation or licence properly passeth no interest, nor alters or transfers property in anything but only makes an action lawful which without it had been unlawful”: Thomas v. Sorrell [1673] EWHC J85 (KB); (1673) Vaugh 330 (124 ER 1098). Whether when one man is allowed to enter upon the land of another pursuant to a contract he does so as licensee or as tenant must, it has been said, “be in the last resort a question of intention”, per Lord Greene MR in Booker v Palmer (1942) 2 All ER 674, at p 676. But intention to do what? – Not to give the transaction one label rather than another – Not to escape the legal consequences of one relationship by professing that it is another. Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the person entering upon the land shall have in relation to the land. When they have put their transaction in writing this intention is to be ascertained by seeing what, in accordance with ordinary principles of interpretation, are the rights that the instrument creates. If [14.20]

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Radaich v Smith cont. those rights be the rights of a tenant, it does not avail either party to say that a tenancy was not intended. And conversely if a man be given only the rights of a licensee, it does not matter that he be called a tenant; he is a licensee. What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. And he cannot be other than a tenant, because a legal right of exclusive possession is a tenancy and the creation of such a right is a demise. To say that a man who has, by agreement with a landlord, a right of exclusive possession of land for a term is not a tenant is simply to contradict the first proposition by the second. A right of exclusive possession is secured by the right of a lessee to maintain ejectment and, after his entry, trespass. A reservation to the landlord, either by contract or statute, of a limited right of entry, as for example to view or repair, is, of course, not inconsistent with a grant of exclusive possession. Subject to such reservations, a tenant for a term or from year to year or for a life or lives can exclude his landlord as well as strangers from the demised premises. All this is long-established law: see Cole on Ejectment (1857) pp 72, 73, 287, 458. (at p222). 2. Recently some transactions from which in the past tenancies at will would have been inferred have been somewhat readily treated as creating only licences. And it has been said – especially in connection with family relationships, charity or hospitality – that allowing a person to have the exclusive possession of premises does not necessarily indicate a tenancy as distinct from a licence. These decisions are largely a by-product of rent restriction statutes and other legislation here and in England. They are all explicable if they mean, as I think they all do, that persons who are allowed to enjoy sole occupation in fact are not necessarily to be taken to have been given a right of exclusive possession in law. If there be any decision which goes further and states positively that a person legally entitled to exclusive possession for a term is a licensee and not a tenant, it should be disregarded, for it is self-contradictory and meaningless. We are not here concerned with the way in which a court of equity would control the parties in the exercise of legal rights, but with the simple question whether at law this document created a lease or a licence. And the proper touchstone still is: did it give the so-called licensee a legal right to the exclusive possession of the premises during the term? The question must of course, be resolved by considering the terms of the deed. But they are to be read in relation to the relevant surrounding circumstances, in particular the nature of the premises; for this deed, like any other instrument, is to be interpreted having regard to its subject matter. Here the subject premises are in fact a lock-up shop at The Spit, Mosman. It was said that the stated case does not expressly state this to be so. This is true, and the learned judge who heard the appeal in the Supreme Court may have been somewhat hampered because the case stated by the magistrate did not fully describe the subject premises. But it is stated that they are No. 83 Parriwi Road, Mosman; and from the deed itself it appears that this is a separate part of a larger holding held by the respondents the so-called licensors - under a special lease from the Crown, a form of tenure under the Crown Lands Acts of New South Wales. From the deed itself it is also a reasonable inference that the subject premises are a lock-up shop used as a refreshment room and milk bar and adjacent to another shop where fish foods are sold. And the notice of appeal to this court referred, as one of the grounds of appeal, to matter stated in the affidavit sworn on the application for special leave to appeal. So far as that affidavit sought to explain why the document took the form it does it must be entirely disregarded; for the parties have reduced their agreement to writing and cannot by parol evidence explain their deed. But the fact stated in the affidavit that the subject premises are a lock-up shop is clearly relevant; and so I think is the fact that the appellant had bought from the respondents the business carried on upon the premises and that it was in connection with this transaction that the deed in question was executed. Turning then to its terms: its opening operative clause is expressed to be a grant for a five-year term of 976 [14.20]

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Radaich v Smith cont. “the sole and exclusive license and privilege to supply refreshment to the public admitted to premises situate at 81-83 Parriwi Road, The Spit, Mosman, and to carry on the business of a milk bar therein in such rooms as are shown in the sketch contained in Schedule one annexed hereto and the right to use of toilet at rear and passage thereto.” These words, standing by themselves, would create only an exclusive licence to supply refreshments, which is essentially different from an exclusive right to possession. But these opening words are not at all appropriate to the actual circumstances - and they do not stand by themselves. To describe the lock-up shop as “such rooms as are shown in sketch” is inapt, for one room, the shop, is what is shown by the sketch. And it is inapt to speak of a right to supply refreshments “to the public admitted to premises 81-83”. And several of the later provisions are not only not appropriate to a mere licence to sell refreshments on the landlord’s premises, but clearly suppose a grant of possession of specific premises to the appellant so that she can carry on a business there. It was argued that the deed follows an accepted precedent for the grant of a licence, having been taken from the form given in Evatt and Beckenham’s Conveyancing Precedents, 2nd ed (1938) p 542, which in turn is taken from a form in The Conveyancer vol. 10, p 485. We have to decide what is the result of the words used by the parties, not what is the result which the draftsman of a form thought they would have. But what has happened is simply that the form has been used in circumstances for which it was never intended. In The Conveyancer it is described as a “License for the Exclusive Right of Supplying Refreshments within a Railway Station or Building”; and in Evatt and Beckenham’s Precedents as “Licence for the Exclusive Right of Supplying Refreshments within a Building”. Whether all its clauses are really appropriate to a licence to sell refreshments at a stall on a railway station or in the foyer of a theatre to persons admitted to such premises need not be considered. It is inapt to create a licence of a lock-up milk bar at The Spit. References in the deed to the licensee “giving up possession of the said building occupied by her”, and to “that part of the premises occupied by her”, are consistent with a tenancy, and in their setting are not really consistent with the supposed licence. The appellant is required to keep her business open during business hours. Clearly she could shut it at other times. I imagine all concerned would have been astounded if they had been told that the appellant had no right to exclude persons from her shop; that the respondent might, if he wished, license other people to carry on any activity there other than the sale of refreshments, provided their presence did not prevent her selling refreshments or conducting the milk bar; and that, although she might lock the shop up at night and on holidays, the respondents could not only enter it themselves whenever they wished but could admit as many persons as they chose, provide them with keys and license them to use the premises in the absence of the appellant for any purpose of pleasure or business they liked, provided only that they did not sell refreshments. If the matter is to be tested by the apparent intention of the parties arising from the circumstances, that clearly was not their intention. If it is to be tested, as I consider it is, by their intention as reflected in the words of their deed with knowledge of the nature of the subject premises, then, in the words of Blackburn J. (as he then was) in Roads v. Overseers of Trumpington (1870) LR 6 QB 56 “the whole nature of the agreement shews that the appellant was intended to have exclusive possession of the land” (1870) LR 6 QB, at p 63 . The use in what purports to be the principal provision of the deed of words taken from a precedent designed for another purpose cannot outweigh its total effect. (at p225). 3. The final clause of the deed may, I think, be ignored. In the Supreme Court the learned judge thought that the word “not” must have been dropped out. But whether the clause be read with “not” in or out, makes, I think, no difference. Such a provision could not make the deed a lease if it were not one, and it cannot prevent it being a lease if it be one. (at p225).

[14.20]

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Radaich v Smith cont. 4. The magistrate was right. The deed created a lease of the part of the building shown in the sketch annexed to it, that is the shop, and a licence in relation to the part described as “the toilet at rear and passage thereto”. The question in the stated case should be answered accordingly. (at p225).

[14.25]

Notes and Questions

1. Although the judgment of Windeyer J is but one of the judgments of the members of the High Court in the case, the members of the court all agree in the result and subsequently Australian courts have cited this judgment as the basis for requirement of exclusive possession and the meaning of the concept; see, for example, Lewis v Bell (1985) 1 NSWLR 731; Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) NSW ConvR 55-367; National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732 and Federal Airports v Makucha Developments Pty Ltd (1993) 115 ALR 679. 2. The decision in Radaich v Smith (1959) 101 CLR 209 is as significant for its rejection of earlier cases as for its positive statement of the law. In particular, it rejected a chain of English decisions including Marcroft Wagons Ltd v Smith [1951] 2 KB 496 (CA), Cobb v Lane [1952] 1 All ER 1199 (CA), Errington v Errington and Woods [1952] 1 KB 290 (CA) Facchini v Bryson [1952] 1 TLR 1386 (CA) and culminating in Somma v Hazelhurst [1978] 2 All ER 1011; [1978] 1 WLR 1014 (CA). Lord Denning played a leading role in these decisions which proposed a further element to the constitution of a lease and that element was that the parties must intend to create a lease. Often the cases involved the issue of the potential application of tenant protection legislation and the intention test can be regarded as enabling landlords to avoid the protections for tenants by describing the agreements as licences. This means of avoidance led Australian legislators to adopt a wider base than leases for the application of residential tenancy legislation; see Moore, Grattan and Griggs, Australian Real Property Law (6th ed, Thomson Reuters, Sydney, 2016), [15.25]. The English decisions were finally overruled by the House of Lords in Street v Mountford [1985] AC 809. Lord Templeman in that case indicates that if exclusive possession at a rent for a term does not constitute a tenancy then the distinction between a contractual tenancy and a contractual licence of land becomes meaningless and in effect destroys any boundary between proprietary and other interests. 3. Based on the principle that in questions of construction of a document the court will look to the substance rather than at its form, the use of the terms “lease” or “licence” has never been accepted by Australian courts as decisive. Young J in Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) NSW ConvR 55-367, stated that the terminology is relevant, although only one of a number of important factors to consider; see also National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732; Federal Airports Corp v Makucha Developments Pty Ltd (1993) 115 ALR 679 (Fed Ct).

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Certainty of duration

Raymond Pemberton v Milivoj Dimitrijevic [14.30] Raymond Pemberton v Milivoj Dimitrijevic [2001] NSWSC 54 Supreme Court of NSW The Special Conditions of the Contract include the following: 1(a) It is a term and condition of this contract that the Purchaser will, at no cost to the Vendor, their heirs, executors or assigns, reconvey to the Vendor, or his heirs or executors or assigns, that parcel of land comprised in the plan annexed and marked “F” and coloured in red (hereafter referred to as the “Licensed Premises”). (b) The vendor shall not be entitled to demand the reconveyance pursuant to clause 1(a) until the Blacktown City Council or the then zoning authority rezones the property such that the licensed premises may be subdivided from the property. The Lease 33 The defendant accepted the plaintiff’s contention that a lease is void for uncertainty when its duration is not fixed with certainty: Lace v Chandler (1944) 1 All ER 305. The defendant also accepted the plaintiff’s contention that registration under the Real Property Act 1900 does not save a lease otherwise void for uncertainty of the term: Re Lehrer and the Real Property Act (1960) 61 SR NSW 365; Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [52]. 34 Mr Raphael helpfully referred me to numerous cases and to Professor Lang’s learned work Leases and Tenancies in New South Wales. In the circumstances of the approach adopted by the defendant it is not necessary to refer to these in detail. 35 In purporting to fix the termination date of the term of the Lease at fourteen days after registration of the proposed plan of subdivision, clause 3 (a) relies upon an event, the date of which cannot be ascertained. Indeed the evidence during the trial makes it abundantly clear that the registration of any plan is dependent upon advice or consent of the Minister and a subsequent approval by Council. The dates of those events are unascertainable and uncertain. 36 Having regard to the terms of clause 3 of the Lease and the position adopted by the defendant, I am satisfied that the Lease is void for uncertainty and the plaintiff is entitled to a declaration consistent with this finding.

[14.35]

Notes and Questions

1. The above decision is an Australian application to a transaction registered under the Torrens system of a well-known decision of the English Court of Appeal in Lace v Chantler [1944] KB 368 (CA). In that case a purported fixed-term lease entered into in 1940 for the duration of the war was held to be invalid on the ground that the length of the war was unknown in 1940. The court held that the maximum duration of a fixed-term lease must be ascertained at the commencement of the lease. It is not sufficient that the parties can ascertain when the lease has come to an end, they must be able to calculate the term at the commencement of the lease. 2. Does the rule serve any useful purpose at the present time? Does it cause unfairness? What problems might be encountered if the rule were overturned? For a general discussion and critique of Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386, see Sparkes, Certainty of Leasehold Terms (1993) 109 LQR 93. 3. If parties enter into a fixed-term lease which is later held to be invalid under the principle in Lace v Chantler [1944] KB 368; [1944] 1 All ER 305, what will be the legal status of the tenant under the agreement? [14.35]

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Raymond Pemberton v Milivoj Dimitrijevic cont. 4. Consider the validity of the following hypothetical leases: (a) A lease expiring on Easter Sunday 2016. (b) A lease until such time as the tenant ceases to be a student at the University of Adelaide law school. (c) A lease for the first two weeks in January each year from 2012 to 2018, inclusive. 5. A fixed-term lease may validly be created so as to allow for its possible determination prior to its date of termination. Thus, for example, a fixed-term lease for three years may be subject to a proviso that it may be determined on six months’ notice given by either party (Turner v York Motors Pty Ltd (1951) 85 CLR 55; Porter v Williams (1914) 14 SR (NSW) 83). Similarly, a lease is valid as a fixed term lease for two years even though the tenant has an option to determine the lease before the expiration of the two-year period (Blackler v Felpure Pty Ltd (2000) NSW ConvR 55-921). What is the legal justification for these qualifications to the fixed term principle? Do they mean that the principle is one of form and subject to ready avoidance?

CREATION OF CO-OWNERSHIP – CERTAINTY OF DURATION Legal and equitable leases under the general law Legal and equitable leases

A major distinction must be drawn between equitable and legal leases (frequently referred to as leasehold estates). This division exists by virtue of the adoption by each Australian jurisdiction of legislation which states that all conveyances of land or any interest in land are void for the purpose of conveying or creating a legal estate unless made by deed; see Conveyancing Act 1919 (NSW), s 23B(1); Property Law Act 1958 (Vic), s 52(1); Law of Property Act 1936 (SA), s 28(1); Property Act 1969 (WA), s 33(1); Conveyancing and Law of Property Act 1884 (Tas), s 60(1); Civil Law (Property) Act 2006 (ACT), s 203). In Queensland, the requirement of a deed has been replaced by the rule that there must be merely a written document signed by the person making an “assurance of land” and in the Northern Territory by legislation to a similar effect: Property Law Act 1974 (Qld), s 10(1); Law of Property Act (NT), s 9(1). The legislation is deived from equivalent to the English Statute of Frauds. Except in Tasmania, there is no requirement that the deed be sealed (Conveyancing Act 1919 (NSW), s 38(3); Property Law Act 1958 (Vic), s 73A; Property Law Act 1974 (Qld), s 45(2); Law of Property Act 1936 (SA), s 41(4); Property Law Act 1969 (WA), s 9(2)(4); Law of Property Act (NT), s 47(2)). An exception to the requirement for a deed exists in favour of certain types of leases. This statutory exception reads: “Nothing in the foregoing provisions of this Division shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine.” See Conveyancing Act 1919 (NSW), s 23D(2); Property Law Act 1958 (Vic), s 54(2); Property Law Act 1974 (Qld), s 10(2); Law of Property Act 1936 (SA), s 30(2); Property Law Act 1969 (WA), s 35(2); Conveyancing and Law of Property Act 1884 (Tas), s 60(4); Civil Law (Property) Act 2006 (ACT), s 203; Law of Property Act (NT), s 11(2)). The effect of this exception is that oral leases of all types may exist at law provided that the length of term does not exceed three years. 980 [14.40]

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Walsh v Lonsdale [14.45] Walsh v Lonsdale (1882) LR 21 Ch D 9 English Court of Appeal [In May 1879 the defendant agreed to lease to the plaintiff a mill for a term of seven years. The agreement stipulated that the plaintiff would operate at least 540 looms, the rent to be calculated according to the number of looms in operation. The agreement also allowed the defendant to demand in advance a whole year’s rent (plus arrears), if quarterly rent was not paid in advance. The defendant paid rent (to the lessor’s mortgagee), but not in advance. In March 1882 the defendant made demand for a year’s rent in advance and the balance of rent owing for that quarter, and then distrained for rent (and took possession). The plaintiff argued that as the agreement did not create a legal interest, the legal remedy of distress could not apply. He claimed damages, and sought an injunction and specic performance of the agreement.] JESSEL MR: The question is one of some nicety. There is an agreement for a lease under which possession has been given. Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one Court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specic performance. That being so, he cannot complain of the exercise by the landlord of the same rights as the landlord would have had if a lease had been granted. On the other hand, he is protected in the same way as if a lease had been granted; he cannot be turned out by six months’ notice as a tenant from year to year. He has a right to say, “I have a lease in equity, and you can only re-enter if I have committed such a breach of covenant as would if a lease had been granted have entitled you to re-enter according to the terms of a proper proviso for re-entry.” That being so, it appears to me that being a lessee in equity he cannot complain of the exercise of the right of distress merely because the actual parchment has not been signed and sealed. Cotton and Lindley LJJ concurred.

[14.50]

Notes and Questions

1. The rule in Walsh v Lonsdale (1882) LR 21 Ch D 9 did not apply to leases only. The principle seemed applicable to any situation where there was a specifically enforceable contract or agreement for grant of any type of interest in land. Importantly the rule applied to contracts for the sale of the fee simple in land: Lysaght v Edwards (1876) 2 Ch D 499. Provided the agreement for the grant of an interest in land constituted a binding and specifically enforceable contract equity would intervene, finding that the vendor held the property on a constructive trust for the purchaser. These matters are discussed in Chapter 9. 2. An agreement for lease, binding at equity under the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9, will not come into existence unless the agreement constitutes a binding contract under normal common law principles (Insearch Ltd v Kin Hing Pty Ltd [2004] ANZ ConvR 111; [2003] NSWSC 875; Inglis v Clarence Holdings Ltd [1997] 1 NZLR 268; Euston Centre Properties Ltd v H&J Wilson Ltd (1982) 262 EG 1079 at 1081; Brownsea v National Trustees Executors & Agency Co of Australasia Ltd [1959] VR 243; [1959] ALR 650 at 244 (VR)). To constitute a binding contract, the parties must have [14.50]

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reached final agreement on the essential terms of the lease. The essential terms have been held to be the property to be leased, the rent payable, the names of the parties, and the commencement date and maximum duration of the term (see, for example, Equus Corp Pty Ltd v Antonopoulos [2008] VSCA 179; Bishop v Taylor (1968) 118 CLR 518; 42 ALJR 277; Harvey v Pratt [1965] 2 All ER 786 (CA); [1965] 1 WLR 1025; Pemberton v Dimitrijevic [2001] NSWSC 54; Picwoods Pty Ltd v Panagopoulos (2005) NSW ConvR 56-120; [2004] NSWSC 978; Long v Piper [2002] ANZ ConvR 43; (2002) NSW ConvR 56-000; [2001] NSWCA 342). In addition, the court must be satisfied that the contract is intended to be final. If the document contemplates the execution of a future lease, before it will be held to be enforceable in equity as an agreement for a lease the court must be satisfied that the future lease will merely embody the terms already agreed upon. If the court believes that the parties intend to reopen negotiations on any aspect of the terms of the lease prior to signing a formal lease, the document will not be enforceable in equity as an agreement for a lease. The issue is one of construction for the court in each case on the facts. For example, an agreement for a lease containing the phrase “subject to contract” has been held to be unenforceable in that it indicates the parties’ intention to hold further negotiations on the content of the lease (Masters v Cameron (1954) 91 CLR 353; 28 ALJR 438). For other cases on this point, see Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412; Brunswick Developments Pty Ltd v Shock Records Pty Ltd (1996) V ConvR 54-604; Lockett v Norman-Wright [1925] Ch 56; Ratto v Trifid Pty Ltd [1987] WAR 237; (1985) 56 LGRA 22; [1985] ANZ ConvR 202; and Chipperfield v Carter (1895) 72 LT 487. 3. In addition to a binding contract, the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9 will not apply unless the terms of the agreement are embodied in a signed memorandum or note in writing or unless there is part performance of the agreement. The requirement for a memorandum or note in writing is contained in Conveyancing Act 1919 (NSW), s 54A; Instruments Act 1958 (Vic), s 126; Property Law Act 1974 (Qld), s 59; Law of Property Act 1936 (SA), s 26; Conveyancing and Law of Property Act 1884 (Tas), s 36(1); Civil Law (Property) Act 2006 (ACT), s 204; Law of Property Act (NT), s 62. In Western Australia, , s 4 of the English Statute of Frauds 1677 (ENG) remains in effect, subject to the Law Reform (Statute of Frauds) Act 1962 (WA)). 4. In relation to the part performance requirement, the act relied upon must be unequivocally, and of its own nature, referable to some such agreement as that alleged; see, for example, Maddison v Alderson (1883) LR 8 App Cas 467 at 477; [1883] All ER Rep 742 (HL); Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; McMahon v Ambrose [1987] VR 817; Regent v Millett (1976) 133 CLR 679; 10 ALR 496). The current Australian position has been stated by Doyle CJ in Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd [1977] SASC 6391 to be more stringent than that in England. 5. Lord Reid in Steadman v Steadman [1976] AC 536 at 541; [1974] 2 All ER 977; [1974] 3 WLR 56 (HL) stated: I am aware that it has often been said that the acts relied on must necessarily or unequivocally indicate the existence of a contract. It may well be that we should consider whether any prudent reasonable man would have done those acts if there had not been a contract but many people are neither prudent nor reasonable and they might often spend money or prejudice their position not in reliance on a contract but in the optimistic expectation that a contract would follow. So if there were a rule that acts relied on as part 982 [14.50]

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performance must of their own nature unequivocally show that there was a contract, it would be only in the rarest use that all other possible explanations could be excluded. In my view, unless the law is to be divorced from reason and principle the rule must be that you take the whole circumstances, leaving aside evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not.

6. In the context of leases, part performance may be constituted by the handing over of keys, the payment of a security deposit, the making of mortgage payments or the entry into possession and the payment of rent; see Van Schaik Organic Soils & Bark Supplies Pty Ltd v Woakwine Industries Pty Ltd (2001) 215 LSJS 278; [2001] SASC 297; Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62; McMahon v Ambrose [1987] VR 817; Colman v Golder [1957] VR 196. In Kaufman v Michael (1892) 18 VLR 375, the alleged agreement for a lease contained a clause requiring the tenant to make certain alterations to the premises including wallpapering. The tenant carried out the alterations, but did not enter into possession or pay rent. The tenant later sought to escape from the agreement and argued that it was unenforceable in equity. What result? 7. It is sometimes said that an agreement for a lease is as good as a lease (see, for example, Re Maughan (1885) 14 QBD 956 at 958). Do you agree? If not, why not? 8. For recent applications of the rule in Walsh v Lonsdale (1882) LR 21 Ch D 9, see Azkanaad Pty Ltd v Galanos Bros Pty Ltd (No 2) [2008] NSWSC 476; upheld in [2008] NSWCA 185; Fiver Trading Pty Ltd v Spajak Pty Ltd [2005] NSWSC 532; Vella v Wah Lai Investment (Aust) Pty Ltd [2004] NSWSC 748 and Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121. The rule was not applied in Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 (Fed Ct) on the basis that the rule has no application in relation to third parties. Periodic leases

Turner v York Motors Pty Ltd [14.55] Turner v York Motors Pty Ltd (1951) 85 CLR 55 High Court of Australia DIXON J: The land consisted of five and a quarter acres at the intersection of Bourke Street and Botany Road, Waterloo, occupied by the defendants as a site for the storing or parking of motor bodies, motor vehicles, caravans, machinery, goods to be carried or transhipped, and junk generally. The defendants were let into possession of the land by the predecessor in title of the claimant as lessees or intending lessees. On 23rd March 1949 the claimant gave the defendants a notice in writing dated 21st March 1949 requiring the defendants on 25th April 1949 to quit the land and deliver up possession thereof to the claimant and stating that the claimant was owner and that the defendants held the land from the claimant as tenants at will. The defendants did not comply with the notice to quit and the claimant issued a writ in ejectment on 2nd May 1949. The defendants claimed to have become lessees of the land and denied that the notice to quit sufficed to determine the tenancy … It appeared that the defendants formed a firm of seven members carrying on a business described in the registration of the firm as that of motor car and truck selling. On 16th April 1946 one George Harold Sears became registered proprietor of the land by transfer. The land had been occupied by the Commonwealth for some purpose arising out of the war and upon it there had been erected a number of temporary buildings but these were to be removed or were in course of removal. At a time fixed as about 9th October 1946 the defendant EHS Turner communicated with Sears and sought a lease of the land for the defendants’ business. The upshot of the conversation, according to [14.55]

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Turner v York Motors Pty Ltd cont. Sears’ version, was that he was agreeable to lease a portion of the land to the defendants at a rent of £6 a week for two years with immediate possession but that a lease must be drawn up by Sears’ solicitor. According to Sears he said to Turner “You can sign the lease and you can take possession”. On Turner saying that it would take him three or four days to move Sears added “You can take possession straight away”. An undated letter from Turner to Sears, said to have been written on 10th October 1946, was put in evidence. The letter began “Enclosed cheque for £24 being rent for 4 weeks for block of land fenced”, describing it. The letter stated that the land would be used for a junk yard for storing repossessed vehicles that would cost more to do up than they were worth and for storing caravans and trailers and garaging and servicing them. Turner’s letter proceeded to say that he understood from Sears that the lease of the land would be subject to six months’ notice if certain other premises of Sears should be resumed and subject to three months’ notice if Sears should require the use of the land the subject of the lease. In cross-examination Sears in effect agreed that something to this effect was said, though he was indefinite about the periods of notice. Turner gave an account which differed in two respects from Sears’ version. In the first place, according to Turner no mention of a formal lease was made. In the second place, in one part of his evidence Turner made the provision as to six months’ or three months’ notice operative not during, but after the expiry of, the term of two years. His evidence was that Sears said: “‘The place is going to be resumed’, or ‘likely to be resumed at any time’, as he had received notice from the hospitals or something to do with the hospital at Camperdown, and they may resume it at any time, but he would get two years’ notice from the authorities, and he could give me two years. But after that it would be subject to six months’ notice, if he received notice from the hospitals or whoever was buying for the hospitals.” A little later he deposed that Sears said that he would get six months’ notice if the council resumed and he would get three months’ notice if Sears wanted to build on the land: that was after the first two years. But in his cross-examination Turner said “He gave me a two years’ lease, a two years’ lease subject to six months’ notice if the hospitals wanted to build on his land where the factory is or three months’ if he wanted to use the land himself”. That Sears intended to reserve a power by notice to abridge the fixed term, not to provide for a notice terminating a tenancy after the fixed term, is shown by a draft lease which Sears’ solicitors prepared and forwarded to Turner on 24th October 1946. The draft lease was expressed to grant a term of two years and it contained a provision enabling the lessor to terminate the lease by three months’ notice in writing if the lessor required to use the land for his own purposes. The area of the portion of the land of which the defendants were to become tenants was about one and a quarter acres. They went into possession at once, according to Sears, without his consent, that is, I understand it, on 10th October 1946. For some time they carried on their business on the land. They brought two caravans upon the land and connected them by a platform and a covering roof. Turner used the connected caravans as an office and a habitation. Indeed he was prosecuted and convicted for erecting a building without the approval of the municipal council. Though in answer to the defendants’ letter attributed to the date 10th October 1946 enclosing a cheque for £24 Sears’ solicitors said they would hold the cheque until some appropriate agreement was prepared embodying the conditions of tenancy, the defendants regularly paid rent to Sears at the rate of £26 a calendar month and Sears accepted it. As time went on the defendants began to extend the area they used beyond the one and a quarter acres which they were to occupy. In the meantime, although Turner had received a draft lease neither he nor his partners had executed a lease nor had they agreed upon the terms of such a document. Sears put forward various proposals or requests as to the precise portion of the block which the defendants should occupy. The defendants actually used a greater area than that for which they had originally arranged but eventually Sears and Turner appear to have agreed that the defendants should occupy the whole area at a rent of £52 a month. There is some doubt when this took place. Turner said 984 [14.55]

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Turner v York Motors Pty Ltd cont. it was in October or November 1947. At the trial a letter was referred to dated 15th March 1948 from Sears’ solicitors to the defendants suggesting that the lease of the whole area should commence on 1st April 1948, mentioning the rent of £52 a month and the necessity of a lease being drawn up which should contain proper conditions. When the defendants’ holding of the entire area began is not important. What is important is that the defendants entered into occupation of the whole area and paid a periodical rent for it of £52 a month in advance which was accepted by Sears. In or about September 1948 some discussions appear to have taken place concerning the possibility of the defendants purchasing the land or some of it. The land was however sold by Sears to York Motors Pty Ltd, which is the claimant company. A transfer to the claimant company dated 14th October 1948 was executed and it became the registered proprietor of the land. The company accepted payments of rent from the defendants, for three months, up to 14th January 1949 it was said, but after that the tenders of rent by the defendants were refused. Whatever may be the proper conclusion as to the duration of the tenancy upon which the defendants held the land, it is clear enough that a tenancy subsisted between Sears and the defendants, even if it amounted to a tenancy at will only. It was of course a tenancy for less than three years and at the time of the transfer of land by Sears to the claimant company the defendants were in possession. The land was under the Real Property Act 1900-1940 (NSW) and it follows that under s 42(d) of that Act the claimant company’s title was subject to the defendants’ tenancy, whatever its character should be held to be. The question whether the notice to quit sufficed to determine the tenancy depends upon the character of the tenancy upon which the defendants held at the time the notice to quit was given. No less than five possible conclusions as to the duration or character of the tenancy at that time may be said to be open upon the circumstances which I have described. It is important to keep steadily in view the fact that what matters is the nature of the tenancy at the time when the notice to quit was given and not at the time when the defendants first entered upon the land. And that is so for two reasons. The first is that the two years’ term that was contemplated in the first instance, if calculated from 10th October 1946, expired on 9th or 10th October 1948 and at best the defendants must have been holding under some periodical tenancy on 23rd March 1949 the date of the notice to quit. The second is that when the defendants became tenants of the entire area of five or five and a quarter acres that necessarily involved or implied a surrender of their tenancy of the smaller area contained within the larger. The five possible views which, as it is or may be suggested, it is open to take of the character of the tenancy then subsisting are these. First, the defendants may have been tenants at will only. Secondly, they may have been governed by s 127(1) of the Conveyancing Act 1919-1943 (NSW) so that the tenancy is to 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. Upon either of these two views the notice to quit would suffice. Thirdly, the tenancy may have been terminable by three months’ notice only. Fourthly, the defendants may have been tenants from month to month. Fifthly, they may have held on a tenancy from year to year falling outside s 127(1) of the Conveyancing Act 1919-1943. Upon either the third, the fourth or the fifth view the notice to quit would not suffice, in the fourth case because, although the currency of the notice is a month, it does not expire at the end of a periodical month from the commencement of the tenancy and in the third and fifth cases because three or six months’ notice would be required. The first of these five views is based upon the notion that the defendants went into possession of the premises provisionally pending agreement upon and the execution of a lease and that from beginning to end the defendants’ possession remained of this character so that no fixed or periodical term arose and the defendants held as tenants at will only. If an intending lessor lets the intending lessee into occupation of the premises in anticipation of an agreement for a lease or of a lease, simply so that he may temporarily occupy while they proceed to negotiate concerning the conditions upon [14.55]

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Turner v York Motors Pty Ltd cont. which the intending tenant shall hold, it is of course true that in the meantime the intending lessee holds as a tenant at will only. It is not inconsistent with the intending lessee’s continuing so to hold that he pays the landowner some compensation for the use of the land and indeed if it is not intended that his occupation of the land shall be gratuitous the owner may recover from him upon a quantum valebat for use and occupation. But the reservation and receipt of a periodical rent as such affords strong evidence of the creation of a periodical term. “Where parties enter under a mere agreement for a future lease they are tenants at will; and if rent is paid under the agreement, they become tenants from year to year, determinable on the execution of the lease contracted for, that being the primary contract”: per Littledale J in Hammerton v Stead (1824) 3 B & C 478 at 483; 107 ER 811 at 813). The case where the parties have not actually reached an agreement for a future lease depends upon the same principle, that is upon the implication from the receipt of a compensation for the use of the land, but the inference to be drawn from the circumstances may be less certain. In the present case the possession and the regular payment of rent went on for a long time; what is of great importance, the rent was paid in advance and further payment of rent had been going on for a considerable time when the occupation was extended to the entire premises and then a rent was fixed for what amounted to a new occupation and was paid in advance in respect of each succeeding month. Rent in advance is compensation for the land in respect of an ensuing period and necessarily implies a title to occupy throughout the period for which it is paid in advance. Nothing but an express reservation of the right nevertheless to terminate the tenancy at volition during the currency of a period for which rent in advance has been paid would seem enough to justify an inference that a common intention persisted that the tenancy should remain at will only. There is evidence of a desire on the part of Sears’ solicitors to preserve him from the inference that a periodical tenancy had been created but their efforts could not but be ineffectual in face of his own acts in letting the defendants into possession of the larger area of land at an increased monthly rent payable in advance and his regular acceptance of the rent. It seems to me to be impossible to suppose that for two and a half years the parties proceeded on the basis that the defendants were in possession provisionally pending negotiations and liable to be turned out at any moment. The very term contemplated had expired: a new tenancy of a larger area had been created and the rent was fixed and paid as a compensation for successive periods of future enjoyment … As I have said the long continued occupation, the agreement that the defendants should take definite possession of the entire area, the expiry of the term of two years, the fixing of a new monthly rent payable in advance, its repeated payment in advance and the receipt thereof by Sears, are facts of very great importance. There is no sufficient evidence of a continuing common intention that notwithstanding these facts the occupation of the land should be provisional and the tenancy be a tenancy at will only. I think that the claimant company fails in its contention that the defendants held as tenants at will only so that at the end of the period fixed by the notice to quit the tenancy ended. It is therefore necessary to consider the second of the suggested possible views of the character of the defendants’ tenancy, namely that it was governed by s 127(1) of the Conveyancing Act 1919-1943 (NSW). This sub-section provides that 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. The second part of this provision, if detached from the first, would govern every case where the character of the tenancy was implied from the payment of rent and where there was no agreement as to its duration. Thus, on that hypothesis, payment of rent by the week, the month, the quarter or the year assuming no agreement as to duration would all alike result in a tenancy at will terminable by a month’s notice expiring at any time. It might govern the present case if the second 986 [14.55]

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Turner v York Motors Pty Ltd cont. part were thus read, independently of the first part. For if the jury’s finding that the agreement was for a tenancy for two years and thereafter until terminated on three months’ notice were set aside or disregarded there would be a tenancy and no agreement as to its duration. The two years were ended. Disregarding that finding the defendants held the land without any further agreement as to duration than would be implied from the payment of a monthly rent. Doubtless on a literal reading of s 127(1) there is much to be said for treating the second part as laying down a general rule to be applied universally wherever there is a tenancy and no agreement as to duration. But unfortunately for the claimant that is not the way the provision has been read. The whole sub-section has been interpreted as applying only to cases where at common law a tenancy from year to year would be implied from the payment of rent. In Burnham v Carroll Musgrove Theatres Ltd (1927) 28 SR (NSW) 169; 45 WN 23, in a judgment in which Harvey CJ in Eq and Campbell J concurred, Ferguson J dealt with the case of the continuance of a tenant in possession after a weekly tenancy had expired and the acceptance of a weekly rent from the tenant so continuing in possession. Ferguson J said: “Section 127 of the Conveyancing Act, in my opinion, has no application to the case. That section was intended to prevent the implication of a tenancy from year to year from the payment of rent, and to substitute for such implied tenancy a tenancy determinable by a month’s notice. It was never intended to apply to cases where before the Act no implication of a tenancy from year to year would have arisen” (1927) 28 SR (NSW), 180; 45 WN, 26. In this Court the reasons of Ferguson J were “substantially adopted” by Knox CJ, Gavan Duffy J and Powers J (1928) 41 CLR 540 at 548 and the view of s 127(1) expressed by Ferguson J obtained the express approval of Higgins J (1928) 41 CLR 540 at 563. Isaacs J however appears to have thought that the provision should be literally construed (1928) 41 CLR 540 at 556. I think we must treat Burnham’s Case (1927) 28 SR (NSW) 169; 45 WN 23; (1928) 41 CLR 540 as having placed upon s 127(1) a construction which limits its application to states of facts in which a tenancy from year to year would at common law be implied from the payment of rent. The payment of rent in the present case was not referable in any way to a year. The rent was fixed at a monthly rate as compensation for monthly periods. Accordingly a yearly tenancy would not have been implied at common law from the payment of rent. The third possible view of the character of the tenancy is that, whether from year to year or month to month or at will, it is by express agreement liable to determination only by three months’ notice in writing expiring at any time. This view depends entirely on the finding of the jury. It seems to have been assumed at the trial that if such an agreement were made as to the original occupation of the one and a quarter acres it was necessarily carried over to the occupation of the five acres. But that inference of fact is not self-evident. Yet there stands a finding of the jury which, if it is not set aside and if the assumption made at the trial is adhered to, appears certainly to entitle the defendants to succeed. On the evidence I should think that the finding embodied an erroneous conclusion of fact and one upon which the jury had been insufficiently directed with regard to the material considerations affecting the issue. But it is not easy to say that there is no evidence to submit to a jury upon the question. This finding might perhaps be set aside as against evidence or, departing from what I understand to be the assumption at the trial, it might be treated as insufficient because it does not relate to the material tenancy or to the material time, that of the entire parcel as at the time of the notice to quit. To set it aside as against evidence does not necessarily mean that the Court can ignore the issue or refuse to submit it to another jury. For myself I cannot avoid the feeling that the jury intended their findings upon the first and second questions to be findings in favour of the defendants; and that in truth is their legal tendency so far as they go. It seems to me to be strange that notwithstanding these findings a verdict should have been entered for the claimant. However it is not a matter that it is necessary to pursue: for, as I think, upon [14.55]

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Turner v York Motors Pty Ltd cont. the real facts a tenancy from month to month arose and for that reason the notice to quit is insufficient. This means that independently of the foregoing findings of the jury I adopt the view that the fourth suggested possible view of the tenancy is well-founded. This view is based on very simple facts, namely that the defendants were in occupation of the whole land at a monthly rent payable in advance and that the rent was paid by the defendants and received by Sears and afterwards by the claimant as and for rent. These facts raise a strong prima facie case in favour of a monthly tenure. There is no sufficient evidence of an agreement between Sears and the defendants that they were to be considered throughout the whole period tenants at will only and such a position would be incongruous with the repeated receipt of rent in advance for successive future monthly periods of tenancy. I assume of course for this purpose that there was no express agreement for three months’ notice. No case can be found in which a party let into possession pending the agreeing of the terms of tenancy has paid periodical rent, still less rent in advance, and has yet been considered a tenant at will only. It appears to me to be unreasonable to suppose that for two and a half years the parties proceeded on a provisional basis intending that there should be no tenancy except at will notwithstanding the payment of rent, rent moreover for future monthly periods and not merely for past enjoyment and notwithstanding that the defendants, by a new transaction, were placed in occupation of the whole premises as tenants. As I see the matter the strong presumptive conclusion from the facts is that the defendants held as tenants from month to month and upon the whole evidence any contrary conclusion would be unreasonable. A tenancy from month to month means that the notice to quit should expire on the day before, or perhaps on (see Quartermaine v McCleery [1947] VLR 412, and cases there cited) a periodical monthly date corresponding with that as upon which the tenancy from month to month commenced. As the evidence stands there is some difficulty in fixing the date of the commencement of the monthly tenancy of the five acres. Originally the defendants seem to have entered into possession of the one and a quarter acres on 10th October 1946 in pursuance of the conversation of the previous day. I do not think that that conversation should be taken to include an oral demise and possibly 10th October 1946 was the commencing day of the original tenancy. But it does not follow that a corresponding monthly date afforded the commencing day of the tenancy of the whole area. For what exact monthly period rent was paid in advance does not appear. But, if the claimants experienced a real difficulty in ascertaining the correct date, it was open to them to adopt the course of specifying the date in the notice to quit as best they could and then giving as an alternative the expiration of the month of the tenancy which should expire next after one month from the service of the notice (Doe d Campbell v Scott (1830) 6 Bing 362; 130 ER 1319); Hirst v Horn (1840) 6 M & W 393; 151 ER 464; Sidebotham v Holland [1895] 1 QB 378 at 389). The possible view of the nature of the tenancy fifthly suggested would of course also make the notice to quit insufficient, that is to say the view that it was a tenancy from year to year outside s 127(1) of the Conveyancing Act. But that view appears to me to be ill-founded. It is based upon the idea that an agreement for two years having been made originally and the monthly rent having been fixed as periodical part payment of compensation for the entire period, the correct conclusion is that a tenancy from year to year was established and went on. This reasoning treats s 127(1) as excluded because the tenancy from year to year is the result of more than the payment of rent. I think that the view is ill-founded because it leaves out of account some most important factors. In the first place, assuming such a tenancy from year to year had arisen in this manner, it would end with the expiration of the two years (Moore v Dimond (1929) 43 CLR 105 at 113; Dockrill v Cavanagh (1944) 45 SR (NSW) 78; 62 WN 94). In the second place the question relates to the tenancy of the whole land and not that of the original one and a quarter acres. In the third place the question is of the inference to be drawn or the implication to be made from the fact of a tenant holding after the expiration of the two years and paying a monthly rent in advance without reference to a year. 988 [14.55]

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Turner v York Motors Pty Ltd cont. It follows however from the conclusion that the tenancy was from month to month that the notice to quit was bad and ineffectual to bring the tenancy to an end. Webb and Kitto JJ delivered concurring judgments. Williams J dissented. Appeal allowed

[14.60]

Notes and Questions

1. The court refers to s 42(1)(d) of the Real Property Act 1900 (NSW) as authority for the proposition that the tenancy continued to exist at law despite the fact that there was a change of ownership after the time that the tenancy was created. This subsection grants a statutory exception in favour of leases in the following limited terms: 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.

A form of statutory exception to indefeasibility is granted in the Torrens legislation of each jurisdiction, but its terms vary: see [14.285]-[14.295]. 2. In the above judgment it was stated that: “It is important to keep steadily in view the fact that what matters is the nature of the tenancy at the time when the notice to quit was given and not at the time when the defendants first entered upon the land.” What is the significance of this for the determination of this case, and also more generally where disputes arise as to the nature of the tenancy? How do you reconcile this dictum with the proposition that when determining what type of lease the parties created, you examine the intention at the time of the creation of the agreement? 3. In its judgment, the court states five possible views as to the character of the lease. What is the practical difference between a finding that the lease was governed by s 127(1) of the Conveyancing Act 1919 (NSW), creating a tenancy determinable at the will of either of the parties by one month’s notice in writing expiring at any time, and a finding that the defendants may have been tenants from month to month? See Amad v Grant (1947) 74 CLR 327; Lemon v Lardeur [1946] 1 KB 613 (CA). 4. As the court notes, a finding that the parties had created a lease from year to year falling outside s 127(1) of the Conveyancing Act 1919 (NSW) would involve the giving of six months’ notice by either party. This is an old common law rule, see, Sidebotham v Holland [1895] 1 QB 378 (CA); Landale v Menzies (1909) 9 CLR 89. This rule is an exception to the normal common law requirement that a notice to quit must be commensurate with the length of the period of the lease. Thus, one week’s notice is necessary for a weekly tenancy (Gleeson v Richey [1959] VR 258; Amad v Grant (1947) 74 CLR 327) and a month’s notice is necessary for a monthly tenancy (Willshire v Dalton (1948) 65 WN (NSW) 54). Why do you think that common law did not insist on one full period’s notice in the case of a yearly periodic lease? [14.60]

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5. Similar legislation to s 127(1) of the Conveyancing Act 1919 (NSW) exists in Queensland (Property Law Act 1974, s 129(1)), Western Australia (Property Law Act 1969, s 71 – 72) and the Northern Territory (Law of Property Act, s 144). In these jurisdictions, no yearly periodic lease shall be implied by payment of rent. What is the rationale for this? Is the effect of this legislation to abolish yearly periodic leases entirely, or is there still scope for the implication of this type of lease? 6. The first of the five possible views proposed by the court as to the character of the tenancy was that the defendants may have been tenants at will only. In the following paragraph of their judgment, the court stated: “But the reservation and receipt of a periodical rent as such affords strong evidence of the creation of a periodical term”. In light of the whole of the judgment, can you think of any circumstances where the payment of consideration by the occupier to the owner in return for the use of premises, where there was no express agreement between the parties as to the legal nature of the occupancy, might not give rise to the creation of a periodic lease? 7. The court states that “the fact that the rent is paid by reference to a year, or aliquot part of a year, affords evidence of a tenancy from year to year”. This suggests that an informal situation where the landlord demands a monthly rental of $3000 may be treated differently at law from a situation where the landlord demands a rent of $36,000 per annum payable at the rate of $3000 per month. In both cases, the quantum of rent is identical, but the legal result will be different – in the first case, a monthly periodic lease will be held to come into existence. What is the justification for this very fine, but seemingly important distinction? Does it make sense? How else could the courts distinguish between the various categories of periodic lease on the facts of any case?

Moore v Dimond [14.65] Moore v Dimond (1929) 43 CLR 105 High Court of Australia [The respondent held a shop in Adelaide at a weekly rent under a lease from March 1922 to November 1927. Before the lease expired, the respondent and appellant agreed in writing to enter into a new lease for a further five years. After November 1927 the respondent remained in occupation and paid rent weekly until 17 November 1928. However, the terms of the formal lease could not be agreed and the respondent abandoned possession of the premises. The appellant sought payment of the rent due to 24 November, either as rent under an agreement for a lease, or under a tenancy from year to year.] KNOX CJ, RICH AND DIXON JJ: As the agreement for a lease was not a demise, but an executory contract to grant a lease, it could not operate to create an interesse termini and, immediately upon the effluxion of the prior term, the respondent became at law (although of course not in equity) a tenant at will only. Upon the first payment of rent he became entitled at law to a term, but the question is whether the term was from week to week or from year to year. In Hamerton v Stead (1824) 3 B & C 478 at 483; 107 ER 811 at 813, Littledale J said: “Where parties enter under a mere agreement for a future lease they are tenants at well; and if rent is paid under the agreement, they become tenants from year to year, determinable on the execution of the lease contracted for, that being the primary contract.” This statement was approved by Hill J in Anderson v Midland Railway Co (1861) 3 E & E 614 at 622; 121 ER 573 at 576. It was well settled at law that the terms and conditions of the agreement, save in so far as they are inconsistent with a tenancy from year to year, apply to the tenancy. It was further settled that the tenancy from year to year continued only during the term contracted for, and expired at the end of that term by effluxion of time without notice to quit, being in the meantime liable to a sooner 990 [14.65]

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Moore v Dimond cont. determination by notice to quit. In Doe d Davenish v Moffatt (1850) 15 QB 257 at 265; 117 ER 455 at 458, Lord Campbell CJ says: “According to Doe d Bromfield v Smith (1805) 6 East 530; 102 ER 1390, and other cases cited on the argument, this would be the effect of a holding under an agreement to grant a lease for a term certain. At the expiration of that term, no notice to quit is necessary: and it would be strange if the tenant had a more extended interest under an agreement to grant a lease than he would have had under the lease had it actually been granted. In Doe d Till v Stratton (1828) 4 Bing 446; 130 ER 839 a reason is given for the judgment, which would not apply here, that the agreement for a term certain was a notice to quit at the end of the term. Here the lease, turned into an agreement, contemplated a probability of the tenancy continuing after the expiration of the three years. But, instead of considering the agreement a notice to quit, we think the better view of the subject is that possession under the agreement creates a tenancy from year to year, which may be determined by a notice to quit during the time specified in the agreement for the duration of the lease, but which expires at the end of that time without any notice to quit.” (See Doe d Oldershaw v Breach (1807) 6 Esp 106; 170 ER 844.) These principles applied whenever the tenant held under an agreement for a lease whether the agreement was expressed as an executory contract or consisted of an intended demise for more than three years void, because not under seal. In such cases the contractual intention of the parties is completely expressed in a binding manner, but is formally inefficacious to create a legal interest of the intended duration. There is little resemblance between such a case and the very many instances in which a person has been let into, or has retained, possession of land without any express contract, and the question is whether he is a tenant, and if so, for a term of what duration. Such cases occur when a tenant overholds: when a tenant for life has granted a lease in excess of his power and dies before its determination, and the remainderman allows the lessee to retain possession; when a mortgagor has granted a lease without statutory or other power; and when the terms of entry are too vague or uncertain to be ascertainable. In such cases payment or acknowledgment of rent constitutes evidence of the establishment of a tenancy, and the fact that the rent is paid by reference to a year or aliquot part of a year, affords evidence of a tenancy from year to year. The existence and duration of the tenancy in such a case were, however, question of fact. On the other hand, in Doe d Thomson v Amey (1840) LR 12 A & E 475; 113 ER 892, in deciding that a proviso for re-entry formed a condition of a tenancy from year to year, implied from entry and payment of rent pursuant to an agreement for a lease containing such a condition, Patteson J said (1840) LR 12 A & E, 480; 113 ER, 893-894: “The terms upon which the tenant holds are in truth a conclusion of law from the facts of the case, and the terms of the articles of agreement.” In the one case the question is what common intention should be attributed to the parties, in the other the question is what duration of tenancy replaces that upon which they have expressly agreed? In the latter case it is difficult to see why the period in respect of which rent is paid should afford a criterion of or determine the term. Nevertheless, in Braythwayte v Hitchcock (1842) 10 M & W 494 at 497; 152 ER 565 at 567, Parke B said: “Although the law is clearly settled, that where there has been an agreement for a lease, and an occupation without payment of rent, the occupier is a mere tenant at will; yet it has been held that if he subsequently pays rent under that agreement, he thereby becomes tenant from year to year. Payment of rent, indeed, must be understood to mean a payment with reference to a yearly holding: for in Richardson v Langridge (1811) 4 Taunt 128; 13 RR 570; 128 ER 277 a party who has paid rent under an agreement of this description, but had not paid it with reference to a year or any aliquot part of a year, was held nevertheless to be a tenant at will only.” In point of fact Parke B was mistaken in his reference to Richardson v Langridge, because there the land was let to the carrier “without any reference to time” (1811) 4 Taunt, 129; 13 RR, 571; 128 ER, 277, and Mansfield CJ said (1811) 4 Taunt, 131; 13 RR 573; 128 ER 278: “Here you speak, all along, of an indefinite agreement. If there were a general letting at a yearly rent, though payable half-yearly, or [14.65]

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Australian Property Law: Cases and Materials

Moore v Dimond cont. quarterly, and though nothing were said about the duration of the term, it is an implied letting from year to year. But if two parties agree that the one shall let, and the other shall hold, so long as both parties please, that is a holding at will.” In the later case of Lee v Smith (1854) 9 Ex 662; 156 ER 284, Parke B relied upon payment of a quarterly rent as proof of a tenancy from year to year, and Martin B said his impression was that the party would have succeeded without the receipts … and that he would have been entitled to refer to the instrument for the purpose of seeing what the terms of the tenancy were: whereupon Parke B said (1854) 9 Ex, 666; 156 ER, 285: “I do not say that I dissent from that proposition, but here the proof of that fact appeared more strongly without it.” In the many cases at law in which it was decided that a tenant entering or holding under an agreement for a lease became on payment of rent a tenant from year to year, the rent or the render has been annual: and apparently no case has before come for decision in which the rent was not calculated by reference to a year or a part of a year. But, save for these observations of Parke B, no case of an agreement for a term of years has been found in which the character of the rent has been relied upon as determining the duration of the tenancy. At an early stage of the history of tenancies from year to year a presumption arose in favour of that tenure. In his History of English Law, vol VII, p 245, Sir WS Holdsworth says that the ruling of Holt CJ that the tenancy could only be terminated at the end of each year “shows that opinion was beginning to lean in favour of construing a tenancy, when no certain term was mentioned, as a tenancy from year to year. In the latter part of the eighteenth century this leaning became so pronounced that, on one occasion, Lord Mansfield even went so far as to say that, ‘in the country, leases at will … being found extremely inconvenient exist only notionally; and were succeeded by another species of contract which was less inconvenient’. This, of course, was an exaggeration. Tenancies at will still exist; and the presumption of the existence of a tenancy from year to year, arising from the payment of rent, can always be rebutted. But the presumption had undoubtedly come to be very strong in the eighteenth century-so strong that it was held that, though the Statute of Frauds had enacted that a parol lease should operate only as a lease at will, such a parol lease will operate as a lease from year to year if rent has been paid thereunder.” This presumption has continued and still prevails. This was recognised by Cozens-Hardy J in Low v Adams (1901) 2 Ch 598 at 601: “A general occupation of land was, as long ago as the Year Books, held to be an occupation from year to year.” In principle there appears to be no reason why the circumstance that the rent paid under an agreement for a term of five years is weekly should displace this presumption in favour of the yearly tenancy. The doctrine which justifies reference to the period of the rent in order to ascertain the term no doubt is that the rent is a compensation for the land, and the parties have so understood it. A quarterly payment thus implies a yearly tenancy because it is part of the compensation for a year’s holding. When the parties agree for a five years’ holding with weekly payments of the compensatory rent, their intention is not that each week’s rent shall represent a distinct and therefore terminable holding of a week. The weekly rent is part of the compensation for the entire period. Where the intention of the parties is to hold for a greater duration than a yearly tenancy would give them, and this intention fails because of its want of appropriate expression or of formal demise, the presumption or assumption that a general holding is from year to year supplies the term. It follows that at law, whatever may be the position in equity, the respondent would be considered a tenant from year to year. The appeal is allowed with costs.

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Moore v Dimond cont.

[14.70]

Notes and Questions

1. This case raises the issue of the tenancy created where the tenant overholds, with the consent of the landlord, at the end of a fixed-term lease. Is there any justification for treating the rules for the creation of periodic leases differently in this situation than when the periodic lease is create